Non-Interest Expense. for Sun

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Sun Bancorp (SNBC)

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SNBC » Topics » Non-Interest Expense.

This excerpt taken from the SNBC 10-Q filed May 11, 2009.

Non-Interest Expense. Non-interest expense decreased $148,000, or 0.6%, for the three months ended March 31, 2009 as compared to the same period in 2008. The decrease was primarily due to a decrease in salaries and benefits of $457,000 due to a reduction in expected annual incentives, a decrease in professional fees of $187,000 and advertising expense of $154,000. These decreases were offset by an increase in Federal Deposit Insurance Corporation (“FDIC”) insurance of $729,000 as a result of an increase in assessment rates during the first quarter 2009, additional coverage under the Temporary Liquidity Guarantee Program (“TLGP”) and an overall increase in assessable deposits.

These excerpts taken from the SNBC 10-K filed Mar 16, 2009.

Non-Interest Expense. Non-interest expense increased $3.7 million, or 4.1%, to $92.6 million for 2008 as compared to $89.0 million and $89.4 million for 2007 and 2006, respectively. Salaries and benefits increased $2.2 million primarily due to an increase in sales commissions of $1.5 million and stock compensation expense of $662,000. The increase in sales commissions was attributable to the internalization of the Company’s investment products sale force as previously discussed above. Insurance expense increased $924,000 over prior year 2007 primarily as a result of the recognition of a full-year of deposit insurance with the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insurance increased during 2008 as a result of growth in assessable deposits and an increase in assessment rates. In addition, 2007 included a one-time assessment credit of $526,000 as a result of the Federal Deposit Insurance Reform Act of 2005.

As a result of the Company’s participation in the TLGP, the increase in assessment rates to be applied during 2009 and the recent proposal of a one-time emergency special assessment of 20 bps (and possible additional special assessments of up to 10 bps thereafter) by the FDIC, the Company anticipates a considerable increase in FDIC deposit insurance during 2009.

Non-interest expense decreased $430,000, or 0.5%, to $89.0 million for 2007 as compared to $89.4 million for 2006. Non-interest expense for 2007 includes severance and other related charges of $2.4 million, $185,000 of branch rationalization charges, and a $124,000 prepayment penalty recognized as a result of the early extinguishment of an FHLBNY borrowing. In addition, non-interest expense for 2006 included severance and other related charges of $740,000 and $495,000 in branch rationalization charges. The $1.9 million decrease was primarily a result of a $956,000 decrease in salaries and employee benefits which was primarily due to the staff reductions that were initiated in the second quarter of 2006 and a decrease in occupancy and equipment expense of $1.1 million. In addition, insurance with the FDIC increased $971,000, net of one-time assessment credit of $526,000, as a result of the Federal Deposit Insurance Reform Act of 2005.

Non-Interest
Expense. Non-interest expense increased $3.7 million, or 4.1%, to $92.6
million for 2008 as compared to $89.0 million and $89.4 million for 2007 and
2006, respectively. Salaries and benefits increased $2.2 million primarily due
to an increase in sales commissions of $1.5 million and stock compensation
expense of $662,000.  The increase in sales commissions was
attributable to the internalization of the Company’s investment products sale
force as previously discussed above.  Insurance expense increased
$924,000 over prior year 2007 primarily as a result of the recognition of a
full-year of deposit insurance with the Federal Deposit Insurance Corporation
(“FDIC”). The FDIC insurance increased during 2008 as a result of growth in
assessable deposits and an increase in assessment rates.  In addition,
2007 included a one-time assessment credit of $526,000 as a result of the
Federal Deposit Insurance Reform Act of 2005.

As a
result of the Company’s participation in the TLGP, the increase in assessment
rates to be applied during 2009 and the recent proposal of a one-time emergency
special assessment of 20 bps (and possible additional special assessments of up
to 10 bps thereafter) by the FDIC, the Company anticipates a considerable
increase in FDIC deposit insurance during 2009.

Non-interest
expense decreased $430,000, or 0.5%, to $89.0 million for 2007 as compared to
$89.4 million for 2006. Non-interest expense for 2007 includes severance
and other related charges of $2.4 million, $185,000 of branch rationalization
charges, and a $124,000 prepayment penalty recognized as a result of the early
extinguishment of an FHLBNY borrowing. In addition, non-interest expense for
2006 included severance and other related charges of $740,000 and $495,000 in
branch rationalization charges. The $1.9 million decrease was
primarily a result of a $956,000 decrease in salaries and employee benefits
which was primarily due to the staff reductions that were initiated in the
second quarter of 2006 and a decrease in occupancy and equipment expense of $1.1
million. In addition, insurance with the FDIC increased $971,000, net of
one-time assessment credit of $526,000, as a result of the Federal Deposit
Insurance Reform Act of 2005.

This excerpt taken from the SNBC 10-Q filed Nov 10, 2008.

Non-Interest Expense. Non-interest expense decreased $2.5 million for the nine months ended September 30, 2008, compared to the same period in 2007. While the employee count has remained essentially flat over the last 12 months, salaries and benefits increased $2.6 million over the same period in 2007. The increase in salaries and benefits included an increase in sales commissions of $1.1 million and an increase in stock compensation expense of $570,000. The increase in sales commissions during the nine months ended September 30, 2008 was primarily attributable to the internalization of the Company’s investment products sales force, which previously operated under an agreement with the independent third-party broker-dealer. In addition, insurance premiums assessed by the FDIC increased $686,000, as compared to the same period in 2007 which included a one-time assessment credit of $526,000. Recent actions by the U.S. Government under the EESA have temporarily raised the limit on federal deposit insurance for all deposits to $250,000 from $100,000 until December 31, 2009. The Company is also participating in the unlimited federal deposit insurance coverage on all non-interest-bearing deposit transaction accounts which will result in an additional 10 basis points surcharge (annually) until the program’s expiration in December 2009. Furthermore, the FDIC has recently proposed amending the method for assessing risk for purposes of calculating deposit insurance premiums. This proposal is in the comment period. If approved, the amendment could result in an increase of approximately 7 basis points to the Company’s deposit insurance premium. These increases during the nine months ended September 30, 2008 were offset by a net gain on sale of other real estate properties of $589,000.

This excerpt taken from the SNBC 10-Q filed Aug 11, 2008.

Non-Interest Expense. Non-interest expense decreased $1.3 million for the six months ended June 30, 2008, compared to the same period in 2007. While the employee count has remained essentially flat over the last 12 months, salaries and benefits increased $1.1 million over the same period in 2007. The increase in salaries and benefits includes an increase in sales commissions of $918,000 and an increase in stock compensation expense of $311,000. The increase in sales commissions during the six months ended June 30, 2008 was primarily attributable to the internalization of the Company’s investment products sales force, which previously operated under an agreement with the independent third-party broker-dealer. In addition, non-interest expense increased as a result of an increase in insurance from the Federal Deposit Insurance Corporation (“FDIC”) of $615,000, which was primarily the result of the one-time FDIC assessment credit recognized in 2007. These increases were offset by a net gain on sale of other real estate properties of $577,000.

Liquidity and Capital Resources

Liquidity management is a daily and long-term business function. The Company’s liquidity, represented in part by cash and cash equivalents, is a product of its operating, investing and financing activities. Proceeds from the repayment and maturities of loans, maturities or calls of investment securities, net income and increases in deposits and borrowings are the primary source of liquidity for the Company.

The major source of the Company's funding is deposits, which management believes will be sufficient to meet the Company’s daily and long-term operating liquidity needs. The ability of the Company to retain and attract new deposits is dependent upon the variety and effectiveness of its customer account products, customer service and convenience, and rates paid to customers. The Company also obtains funds from the repayment and maturities of loans, as well as maturities or calls of investment securities, while additional funds can be obtained from a variety of sources including brokered deposits, federal funds purchased, FHLB advances, securities sold under agreements to repurchase, loan sales or participations, and other secured and unsecured borrowings. In a continued effort to balance deposit growth and net interest margin, especially in the current interest rate environment and highly competitive local deposit pricing, the Company continually evaluates these other funding sources for funding cost efficiencies.

Management has a capital plan for the Company and the Bank that should allow the Company and the Bank to grow capital internally at levels sufficient for achieving its internal growth projections while managing its operating and financial risks. The Company has also considered a plan for contingency capital needs, and when appropriate, the Company’s Board of Directors may consider various capital raising alternatives. The principle components of the capital plan are to generate additional capital through retained earnings from internal growth, access the capital markets for external sources of capital, such as common equity and capital securities, when necessary or appropriate, redeem existing capital instruments and refinance such instruments at lower rates when conditions permit and maintain sufficient capital for safe and sound operations.

In July 2007, the Board of Directors of the Company authorized the initiation of a stock repurchase plan covering up to 5%, or approximately 1,000,000 shares, of the Company’s outstanding common stock. During 2007, the Company repurchased 1,010,523 shares of outstanding common stock thus completing in late December the initial repurchase plan. The Board subsequently authorized a new stock repurchase plan covering up to approximately 5%, or 1,100,000 additional shares, of common stock to be repurchased in the open market or in privately negotiated transactions. As of June 30, 2008, the Company had repurchased 365,800 shares under the new plan.

The Company is subject to risk-based capital guidelines adopted by the Federal Reserve Board for bank holding companies. The Bank is also subject to similar capital requirements adopted by the Office of the Comptroller of the Currency. It is the Company’s intention to maintain “well-capitalized” risk-based capital levels.

On July 28, 2008, the Company entered into an agreement to sell its six-branch Delaware retail network to Wilmington Savings Fund Society, FSB (“WSFS”). The transaction with WSFS includes a 12% premium on the sale of all the retail deposits, or approximately $110 million in deposits, of the Company’s entire Delaware branch network. No loans are being sold in connection with this transaction and the Company anticipates supplementing its funding with wholesale borrowings. The transaction is expected to close during the fourth quarter of 2008, subject to regulatory approvals and other customary conditions. The Company’s and Bank’s capital is expected to increase as a result of the recognition of the sale premium.

While the capital securities are deconsolidated in accordance with GAAP, they continue to qualify as Tier 1 capital under federal regulatory guidelines. In March 2005, the Federal Reserve amended its risk-based capital standards to expressly allow the continued limited inclusion of outstanding and prospective issuances of capital securities in a bank holding company’s Tier 1 capital, subject to tightened quantitative limits. The Federal Reserve’s amended rule, effective March 31, 2009, will limit capital securities and other restricted core capital elements to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. The Company does not anticipate that this amended rule will have a material impact on its capital ratios.

As part of its capital plan, the Company, through its deconsolidated trust subsidiaries, issued capital securities that qualify as Tier 1 or core capital of the Company. These securities are subject to a 25% capital limitation under risk-based capital guidelines developed by the Federal Reserve Board. The portion that exceeds the 25% capital limitation qualifies as Tier 2, or supplementary capital of the Company. At June 30, 2008, the Company’s $90.0 million in capital securities qualify as Tier 1.

Disclosures about Commitments

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. The guarantees are primarily issued to support private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In the event of a draw by the beneficiary that complies with the terms of the letter of credit, the Company would be required to honor the commitment. The Company takes various forms of collateral, such as real estate assets and customer business assets to secure the commitment. Additionally, all letters of credit are supported by indemnification agreements executed by the customer. The maximum undiscounted exposure related to these commitments at June 30, 2008 was $62.7 million, and the portion of the exposure not covered by collateral was approximately $1.6 million

This excerpt taken from the SNBC 10-Q filed May 12, 2008.

Non-Interest Expense. Non-interest expense increased $394,000, or 1.7%, for the three months ended March 31, 2008 as compared to the same period in 2007. Non-interest expense, excluding severance and other related charges of $2.3 million incurred in the first quarter 2007, increased $2.7 million, or 12.8%. While the current employee count has remained essentially flat over the last 12 months, salaries and benefits increased $1.8 million over the same period in 2007. The increase in salaries and benefits includes an increase in salaries of $908,000, an increase in sales commissions of $601,000, an increase in stock compensation expense of $178,000 and an increase in employer payroll taxes of $109,000. Salaries and benefits for the first quarter 2008 include a one-time executive sign-on incentive of $250,000 relating to the recent hiring of the Company’s new president and CEO. The increase in sales commissions during the first quarter 2008 was primarily attributable to the internalization of the Company’s investment products sales force, which previously operated under an agreement with the independent third-party broker-dealer. In addition, non-interest expense increased as a result of an increase in insurance with the Federal Deposit Insurance Corporation (“FDIC”) of $396,000 and an increase in advertising expense of $213,000 resulting from of a recent sales campaign aimed at increasing new account relationships.

Liquidity and Capital Resources

The major source of the Company's funding is deposits, which management believes will be sufficient to meet the Company’s daily and long-term operating liquidity needs. The ability of the Company to retain and attract new deposits is dependent upon the variety and effectiveness of its customer account products, customer service and convenience, and rates paid to customers. The Company also obtains funds from the repayment and maturities of loans, as well as maturities or calls of investment securities, while additional funds can be obtained from a variety of sources including brokered deposits, federal funds purchased, FHLB advances, securities sold under agreements to repurchase, loan sales or participations, and other secured and unsecured borrowings. In a continued effort to balance deposit growth and net interest margin, especially in the current interest rate environment and highly competitive local deposit pricing, the Company anticipates that these other funding sources may be more cost efficient.

In July 2007, the Board of Directors of the Company authorized the initiation of a stock repurchase plan covering up to 5%, or approximately 1,000,000 shares, of the Company’s outstanding common stock. During 2007, the Company repurchased 1,010,523 shares of outstanding common stock thus completing in late December the initial repurchase plan. The Board subsequently authorized a new stock repurchase plan covering up to approximately 5%, or 1,100,000 additional shares, of common stock to be repurchased in the open market or in privately negotiated transactions. As of March 31, 2008, the Company had repurchased 61,400 shares under the new plan.

As part of its capital plan, the Company, through its deconsolidated trust subsidiaries, issued capital securities that qualify as Tier 1 or core capital of the Company. These securities are subject to a 25% capital limitation under risk-based capital guidelines developed by the Federal Reserve Board. The portion that exceeds the 25% capital limitation qualifies as Tier 2, or supplementary capital of the Company. At March 31, 2008, the Company’s $90.0 million in capital securities qualify as Tier 1.

Disclosures about Commitments

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. The guarantees are primarily issued to support private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In the event of a draw by the beneficiary that complies with the terms of the letter of credit, the Company would be required to honor the commitment. The Company takes various forms of collateral, such as real estate assets and customer business assets to secure the commitment. Additionally, all letters of credit are supported by indemnification agreements executed by the customer. The maximum undiscounted exposure related to these commitments at March 31, 2007 was $59.4 million, and the portion of the exposure not covered by collateral was approximately $1.2 million

These excerpts taken from the SNBC 10-K filed Mar 17, 2008.

Non-Interest Expense. Non-interest expense decreased $430,000 or 0.5% to $89.0 million for 2007 as compared to $89.4 million and $84.7 million for 2006 and 2005, respectively. Non-interest expense for 2007 includes severance and other related charges of $2.4 million, $185,000 of branch rationalization charges, and a $124,000 prepayment penalty recognized as a result of the early extinguishment of an FHLB borrowing. Non-interest expense for 2006 includes severance and other related charges of $740,000 and $495,000 in branch rationalization charges. Excluding these charges, non-interest expense decreased $1.9 million or 2.2% from 2006. The $1.9 million decrease was primarily a result of a $956,000 decrease in salaries and employee benefits which was primarily due to the staff reductions that were initiated in the second quarter of 2006 and a decrease in occupancy and equipment expense of $1.1 million. In addition, insurance with the Federal Deposit Insurance Corporation (“FDIC”) increased $971,000, net of one-time assessment credit of $526,000, as a result of the Federal Deposit Insurance Reform Act of 2005.

- 12 -

Non-interest expense increased $4.7 million, or 5.6% to $89.4 million for 2006 as compared to $84.7 million for 2005. Of the increase for 2006, approximately $2.9 million is due to the incremental expenses resulting from the January 2006 Advantage acquisition. Non-interest expense, excluding the expenses of Advantage, increased $1.8 million or 2.1% for 2006 as compared to 2005. The increase was primarily a result of $740,000 in severance and other related charges and $495,000 of charges related to the consolidation of two branch offices. In addition, the Company recognized $170,000 in stock option expenses during 2006 which were directly related to the adoption of SFAS No. 123(R) on January 1, 2006.

Non-Interest
Expense. Non-interest expense decreased $430,000 or 0.5% to $89.0 million
for 2007 as compared to $89.4 million and $84.7 million for 2006 and 2005,
respectively. Non-interest expense for 2007 includes severance and other related
charges of $2.4 million, $185,000 of branch rationalization charges, and a
$124,000 prepayment penalty recognized as a result of the early extinguishment
of an FHLB borrowing. Non-interest expense for 2006 includes
severance and other related charges of $740,000 and $495,000 in branch
rationalization charges. Excluding these charges, non-interest expense decreased
$1.9 million or 2.2% from 2006. The $1.9 million decrease was primarily a result
of a $956,000 decrease in salaries and employee benefits which was primarily due
to the staff reductions that were initiated in the second quarter of 2006 and a
decrease in occupancy and equipment expense of $1.1 million. In addition,
insurance with the Federal Deposit Insurance Corporation (“FDIC”) increased
$971,000, net of one-time assessment credit of $526,000, as a result of the
Federal Deposit Insurance Reform Act of 2005.

- 12
- -

Non-interest
expense increased $4.7 million, or 5.6% to $89.4 million for 2006 as compared to
$84.7 million for 2005. Of the increase for 2006, approximately $2.9
million is due to the incremental expenses resulting from the January 2006
Advantage acquisition. Non-interest expense, excluding the expenses of
Advantage, increased $1.8 million or 2.1% for 2006 as compared to 2005. The
increase was primarily a result of $740,000 in severance and other related
charges and $495,000 of charges related to the consolidation of two branch
offices. In addition, the Company recognized $170,000 in stock option
expenses during 2006 which were directly related to the adoption of SFAS No.
123(R) on January 1, 2006.

EXCERPTS ON THIS PAGE:

10-Q	May 11, 2009

10-K (2 sections)	Mar 16, 2009

10-Q	Nov 10, 2008

10-Q	Aug 11, 2008

10-Q	May 12, 2008

10-K (2 sections)	Mar 17, 2008

Sun Bancorp (SNBC)

SNBC » Topics » Non-Interest Expense.

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