Sun Bancorp, Inc. (SNBC)
Q4 2008 Earnings Call Transcript
January 28, 2009 11:30 am ET
Dan Chila – EVP, Cashier & CFO
Tom Geisel – President & CEO
Bruce Dansbury – EVP & COO
Ed Malandro – SVP, Retail Banking
Matthew Kelley – Sterne Agee & Leach Inc
Rick Weiss – Janney Montgomery Scott
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Good morning. This is Dan Chila, I am the Chief Financial Officer of Sun Bancorp. Joining me here is our CEO, Tom Geisel and Bruce Dansbury, our Chief Operating Officer and Chief Credit Officer. Tom and Bruce will have some brief remarks and then we will take questions. First let me read the Safe Harbor statement. Following discussions may contain forward-looking statements concerning the financial condition, results of operations and business of Sun Bancorp. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore you should not place undue reliance on any forward-looking statements we make today. We are not under any obligation to and may not publicly release results of any revisions that may be made to any forward-looking statements we make to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Now I will turn it over to Tom Geisel.
Thank you Dan. This is Tom Geisel, good morning everyone and thanks for joining us today. I have a few comments about our performance over the past three months and then I will turn it over to Bruce for an update on the lending side of the business and then we will entertain some questions.
As you know yesterday we issued a release which reported a fourth quarter net profit of $4.3 million or $0.19 per share compared to $4.1 million or $0.18 per share for the linked third quarter, and compared to $3.9 million or $0.16 per share for the fourth quarter of 2007. On a consolidated basis, net income for the full year was $14.9 million or $0.65 per share compared to net income of $19.4 million or $0.82 per share for the previous year 2007. As we reported in the release, we realized a pretax one-time gain of $11.5 million during the fourth quarter from the sale of our six Delaware branches. This was a development that had been planned for as part of our overall network optimization strategy to divest our network in an area where we do not have a dominant retail presence.
It was a major first step to focus our retail efforts and resources on New Jersey, which is our predominant market with a great footprint in selective counties. On the other side of the coin, we took a rate down pretax charge of $7.5 million attributable to fair value accounting standards and mark to market for two trust preferred securities held in the investment portfolio. For those of you listening who may not be familiar with what trust preferred securities are, these are very common type of investment grade securities that have declined in value as a result of what is going on in the external marketplace.
The third major factor behind the fourth quarter results is that we substantially increased the level of our loan loss provision for the quarter to $7.6 million. This compares to $3.7 million for the third quarter of 2008 and $5.4 million for the fourth quarter a year ago. I would like to switch gears for a moment and give you some additional color about the economy and how it relates to our markets. Here in New Jersey our markets still have, and I believe will always have, better than average underlying quality, this is because of the benefits of our density, economic diversity, close proximity to major metropolitan MSAs to our north, west and south and the coastal communities to the east.
Our footprint covers a solid, mature marketplace and we are now the second largest independent commercial bank headquartered in the State of New Jersey. That said, it has become increasingly clear over the past six months that as the national downturn is persisting, New Jersey is mirroring [ph] the overall economy. So it has essentially gone from where we were moderately outperforming the overall economy to a declining pace that is in step with what is unfolding across the US and that is about the same story coming from just about all of the stronger metropolitan areas across the country. No area is exempt from the downturn.
While we are hopeful for a rapid recovery, the reality as you would expect is New Jersey and the country will have a very challenging 2009. Looking forward, our net interest margin during the coming year is likely to continue to struggle. The net interest margin for the fourth quarter ended at 3.26% and for the full year at 3.30%. A year ago, the full year margin for 2007 was 3.37%. Now as an asset sensitive institution we have been experiencing margin pressure all year and given the current historic low interest rates and continued low rate forecast for 2009, we will continue to experience margin pressure. Despite that pressure, a focus of ours in 2009 will be to maximize margin even if that means balancing loan growth.