10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-20957

SUN BANCORP, INC.

(Exact name of registrant as specified in its charter)

New Jersey	52-1382541
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

350 Fellowship Road, Suite 101, Mount Laurel, New Jersey 08054

(Address of principal executive offices)

(Zip Code)

(856) 691-7700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).    Yes  ¨    No  x

Common Stock, $1.00 Par Value – 87,214,891 Shares Outstanding at August 5, 2014

TABLE OF CONTENTS

	Page Number
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Financial Condition at June 30, 2014 and December  31, 2013		3
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June  30, 2014 and 2013		4
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2014 and 2013		5
Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended June  30, 2014 and 2013		6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013		7
Notes to Unaudited Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Item 3. Quantitative and Qualitative Disclosures about Market Risk		59
Item 4. Controls and Procedures		60
PART II—OTHER INFORMATION
Item 1. Legal Proceedings		61
Item 1A. Risk Factors		61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		61
Item 3. Defaults Upon Senior Securities		61
Item 4. Mine Safety Disclosures		61
Item 5. Other Information		61
Item 6. Exhibits		62
Signatures		62
Exhibits:

Exhibit 3.1 Amended and Restated Certificate of Incorporation of Sun Bancorp, Inc.

Exhibit 3.2 Amended and Restated Bylaws of Sun Bancorp, Inc.

Exhibit 4.1 Common Security Specimen

Exhibit 31(a) Section 302 Certification of CEO

Exhibit 31(b) Section 302 Certification of Chief Financial Officer

Exhibit 32 Section 906 Certifications

Exhibit 101. INS XBRL Instance Document

Exhibit 101. SCH XBRL Taxonomy Extension Schema Document

Exhibit 101. CAL XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101. LAB XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101. PRE XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 101. DEF XBRL Taxonomy Definition Linkbase Document

2

SUN BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except par value amounts)

	June 30, 2014			December 31, 2013
ASSETS
Cash and due from banks	$	49,384		$	38,075
Interest-earning bank balances		281,056			229,687
Cash and cash equivalents		330,440			267,762
Restricted cash		26,000			26,000
Investment securities available for sale (amortized cost of $437,558 and $452,023 at June 30, 2014 and December 31, 2013, respectively)		437,027			440,097
Investment securities held to maturity (estimated fair value of $645 and $692 at June 30, 2014 and December 31, 2013, respectively)		636			681
Loans receivable (net of allowance for loan losses of $28,392 and $35,537 at June 30, 2014 and December 31, 2013, respectively)		1,827,724			2,102,167
Loans held-for-sale, at fair value		9,410			20,662
Loans held-for-sale, at lower of cost or market		19,761			—
Branch assets held-for-sale		34,058			—
Restricted equity investments, at cost		16,388			17,019
Bank properties and equipment, net		42,359			49,095
Real estate owned, net		1,327			2,503
Accrued interest receivable		6,276			7,112
Goodwill		38,188			38,188
Intangible assets, net		238			805
Deferred taxes, net		—			4,575
Bank owned life insurance (BOLI)		78,166			77,236
Other assets		26,660			33,651
Total assets	$	2,894,658		$	3,087,553
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	2,272,765		$	2,621,571
Deposits held-for-sale		160,769			—
Securities sold under agreements to repurchase—customers		670			478
Advances from the Federal Home Loan Bank of New York (FHLBNY)		60,873			60,956
Obligations under capital lease		7,191			7,331
Junior subordinated debentures		92,786			92,786
Deferred taxes, net		796			—
Other liabilities		71,152			59,094
Total liabilities		2,667,002			2,842,216
Commitments and contingencies (see Note 11)
Shareholders’ equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued		—			—
Common stock, $1 par value, 200,000,000 shares authorized; 88,761,735 shares issued and 87,192,007 shares outstanding at June 30, 2014; 88,711,035 shares issued and 86,714,414 shares outstanding at December 31, 2013		88,757			88,711
Additional paid-in capital		502,104			506,719
Retained deficit		(344,108	)		(317,954	)
Accumulated other comprehensive loss		(315	)		(7,055	)
Deferred compensation plan trust		(599	)		(522	)
Treasury stock at cost, 1,569,728 shares at June 30, 2014; and 1,996,621 shares at December 31, 2013		(18,183	)		(24,562	)
Total shareholders’ equity		227,656			245,337
Total liabilities and shareholders’ equity	$	2,894,658		$	3,087,553

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

SUN BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
INTEREST INCOME
Interest and fees on loans	$	21,067		$	23,945		$	42,916		$	48,844
Interest on taxable investment securities		2,193			1,225			4,443			2,769
Interest on non-taxable investment securities		308			324			617			718
Dividends on restricted equity investments		209			217			441			463
Total interest income		23,777			25,711			48,417			52,794
INTEREST EXPENSE
Interest on deposits		2,188			2,945			4,469			5,960
Interest on funds borrowed		443			444			879			887
Interest on junior subordinated debentures		534			546			1,065			1,093
Total interest expense		3,165			3,935			6,413			7,940
Net interest income		20,612			21,776			42,004			44,854
PROVISION FOR LOAN LOSSES		14,803			(1,883	)		14,803			(1,712	)
Net Interest income after provision for loan losses		5,809			23,659			27,201			46,566
NON-INTEREST INCOME
Service charges on deposit accounts		2,215			2,250			4,366			4,479
Mortgage banking revenue, net		529			5,601			1,164			9,005
Gain on sale of investment securities		50			—			50			3,487
Investment products income		715			728			1,332			1,407
BOLI income		469			486			930			934
Derivative credit valuation adjustment		(1,162	)		6			(1,200	)		(498	)
Other		1,161			1,187			2,284			2,326
Total non-interest income		3,977			10,258			8,926			21,140
NON-INTEREST EXPENSE
Salaries and employee benefits		15,992			13,019			28,876			27,311
Commission expense		811			2,556			1,708			4,597
Occupancy expense		3,552			3,081			7,818			6,657
Equipment expense		2,356			1,830			4,105			3,689
Data processing expense		1,281			1,027			2,478			2,026
Amortization of intangible assets		283			541			567			1,462
Insurance expense		1,358			1,542			2,825			2,972
Professional fees		2,353			4,761			3,839			7,408
Advertising expense		523			698			1,109			1,251
Problem loan expense		566			1,023			1,198			1,822
Real estate owned expense, net		702			1,255			846			1,489
Office supplies expense		285			191			536			420
Other		3,615			1,715			5,660			3,471
Total non-interest expense		33,677			33,239			61,565			64,575
(LOSS) INCOME BEFORE INCOME TAXES		(23,891	)		678			(25,438	)		3,131
INCOME TAX EXPENSE		357			—			716			—
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(24,248	)	$	678		$	(26,154	)	$	3,131
Basic (loss) earnings per share	$	(0.28	)	$	0.01		$	(0.30	)	$	0.04
Diluted (loss) earnings per share	$	(0.28	)	$	0.01		$	(0.30	)	$	0.04
Weighted average shares—basic		87,089,147			86,323,099			86,915,959			86,284,325
Weighted average shares—diluted		87,089,147			86,356,796			86,915,959			86,357,968

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

SUN BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(24,248	)	$	678		$	(26,154	)	$	3,131
Other Comprehensive Income, net of tax
Unrealized (losses) gains on securities:
Unrealized holding gains (losses) arising during period	$	1,593		$	(4,084	)	$	6,710		$	(3,033	)
Less: reclassification adjustment for gains included in net income		30			(5	)		30			(2,042	)
Other comprehensive (loss) income		1,623			(4,089	)		6,740			(5.075	)
COMPREHENSIVE (LOSS) INCOME	$	(22,625	)	$	(3,411	)	$	(32,894	)	$	(1,944	)

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

SUN BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in thousands)

	Preferred Stock		Common Stock		Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Deferred Compensation			Treasury Stock			Total
BALANCE, JANUARY 1, 2013	$	—	$	88,301	$	506,537		$	(308,011	)	$	2,186		$	(256	)	$	(26,162	)	$	262,595
Net income		—		—		—			3,131			—			—			—			3,131
Other comprehensive loss		—		—		—			—			(5,075	)		—			—			(5,075	)
Issuance of common stock		—		227		519			—			—			(86	)		—			660
Stock-based compensation		—		44		309			—			—			—			—			353
BALANCE, June 30, 2013	$	—	$	88,572	$	507,365		$	(304,880	)	$	(2,889	)	$	(342	)	$	(26,162	)	$	261,664
BALANCE, JANUARY 1, 2014	$	—	$	88,711	$	506,719		$	(317,954	)	$	(7,055	)	$	(522	)	$	(24,562	)	$	245,337
Net loss		—		—		—			(26,154	)		—			—			—			(26,154	)
Other comprehensive income		—		—		—			—			6,740			—			—			6,740
Issuance of common stock		—		46		(4,949	)		—			—			(77	)		6,481			1,501
Stock-based compensation		—		—		(115	)		—			—			—			347			232
BALANCE, June 30, 2014	$	—	$	88,757	$	501,655		$	(344,108	)	$	(315	)	$	(599	)	$	(17,734	)	$	227,656

See Notes to Unaudited Condensed Consolidated Financial Statements.

6

SUN BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	For the Six Months Ended June 30,
	2014			2013
OPERATING ACTIVITIES
Net (loss) income	$	(26,154	)	$	3,131
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		14,803			(1,712	)
Decrease in reserve for unfunded commitments		(24	)		(125	)
Depreciation, amortization and accretion		3,428			5,759
Impairment of bank properties and equipment and real estate owned		511			369
Loss on sale of real estate owned		323			564
Net gain on sales and calls of investment securities available-for-sale		(50	)		(3,498	)
Gain on sale of mortgage loans		(958	)		(7,724	)
Gain on bulk sale of jumbo residential mortgage loans, net		(134	)		(2,363	)
Change in fair value of residential mortgage loans held-for-sale		34			1,039
(Increase) decrease in fair value of interest rate lock commitments		(106	)		43
Derivative credit valuation adjustments		(113	)		524
Increase in cash surrender value of BOLI		(930	)		(934	)
Deferred income taxes		716			—
Stock-based compensation		232			352
Shares contributed to employee benefit plans		1,578			746
Mortgage loans originated for sale		(50,288	)		(306,636	)
Proceeds from the sale of mortgage loans		55,931			370,441
Change in assets and liabilities which provided (used) cash:
Accrued interest receivable		836			1,237
Other assets		713			3,438
Other liabilities		8,698			(10,591	)
Net cash provided by operating activities		9,046			54,060
INVESTING ACTIVITIES
Purchases of available-for-sale securities		(22,363	)		(94,250	)
Net redemption of restricted equity securities		631			644
Proceeds from maturities, prepayments or calls of investment securities available for sale		28,325			62,674
Proceeds from maturities, prepayments or calls of investment securities held to maturity		44			56
Proceeds from the sale of investment securities available-for-sale		18,276			125,355
Proceeds from sale of commercial real estate loans		57,147			20,771
Proceeds from sale of repossessed assets		80			152
Proceeds from bulk sale of jumbo residential mortgage loans		46,729			99,837
Cash transferred to branch assets held-for-sale		(1,507	)		—
Return of surrender value of BOLI		—			1,504
Net decrease (increase) in loans		114,058			(6,249	)
Purchases of bank properties and equipment		(769	)		(943	)
Proceeds from sale of real estate owned		1,155			2,119
Net cash provided by investing activities		241,806			211,670
FINANCING ACTIVITIES
Net (decrease) increase in deposits		(188,143	)		8,814
Net issuances (redemptions) of securities sold under agreements to repurchase—customer		192			(1,406	)
Repayments of advances from FHLBNY		(83	)		(378	)
Repayment of obligations under capital leases		(140	)		(137	)
Net cash (used in) provided by financing activities		(188,174	)		6,893
NET INCREASE IN CASH AND CASH EQUIVALENTS		62,678			272,623
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		267,762			143,616
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	330,440		$	416,239
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	6,629		$	7,561
Income taxes paid		—			—
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Trade date liability from purchase of investment securities		9,975			94,509
Obligations to purchase investment securities		—			10,500
Transfer of loans and bank property to real estate owned		567			2,070

See Notes to Unaudited Condensed Consolidated Financial Statements.

7

SUN BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts presented in the tables, except share and per share amounts, are in thousands)

(1) Summary of Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”).

All normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Annual Report on Form 10-K of Sun Bancorp, Inc. (the “Company”) for the year ended December 31, 2013. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other period. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The significant estimates include the allowance for loan losses, other-than-temporary impairment on investment securities, goodwill, intangible assets, income taxes, stock-based compensation and the fair value of financial instruments. Actual results may differ from these estimates under different assumptions or conditions.

Prior Period Revision. Previously, the Company presented restricted cash, with respect to amounts held as collateral against letters of credit, in “Cash and due from banks” on the consolidated statements of financial condition. During the fourth quarter of 2013, the Company identified that certain of these balances should be classified as restricted cash. The table below reports the impact of these revisions to the consolidated statements of cash flows for the six months ended June 30, 2013:

Six Months Ended June 30,	Revised 2013		As reported 2013
Cash and cash equivalents, beginning of year	$	143,616	$	169,616
Cash and cash equivalents, end of period		416,239		442,239

Basis of Consolidation. The unaudited condensed consolidated financial statements include, after all intercompany balances and transactions have been eliminated, the accounts of the Company, its principal wholly-owned subsidiary, Sun National Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Sun Financial Services, L.L.C., 2020 Properties, L.L.C., and 4040 Properties, L.L.C. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 810-10, Consolidation, Sun Capital Trust V, Sun Capital Trust VI, Sun Capital Trust VII, Sun Statutory Trust VII, and Sun Capital Trust VIII, collectively, the “Issuing Trusts”, are presented on a deconsolidated basis.

Segment Information. As defined in accordance with FASB ASC 280, Segment Reporting, the Company has one reportable and operating segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, lending is dependent upon the ability of the Company to fund itself with deposits and other borrowings and manage interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

8

Loans Held-For-Sale. Loans held-for-sale totaled $29.2 million and $20.7 million at June 30, 2014 and December 31, 2013, respectively. The balance at June 30, 2014 and December 31, 2013 includes $9.4 million and $20.7 million, respectively, of residential mortgages originated with the intent to sell which were recorded at fair value. At June 30, 2014, loans held-for-sale also includes $19.8 million of consumer loans identified for sale out of the portfolio and recorded at lower of cost or market.

Allowance for Loan Losses. The allowance for loan losses is determined by management based upon past experience, evaluation of estimated loss and impairment in the loan portfolio, current economic conditions and other pertinent factors. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

The provision for loan losses is based upon historical loan loss experience, a series of qualitative factors and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC 310, Receivables (“FASB ASC 310”). Values assigned to the qualitative factors and those developed from historic loss experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans that continue to perform. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. For this purpose, delays of less than 90 days are considered to be insignificant. Impairment losses are included in the provision for loan losses. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historic loss experience and qualitative factors. Included in these qualitative factors are:

• Levels of past due, classified and non-accrual loans, and troubled debt restructurings;

• Nature, volume, and concentration of loans;

• Historical loss trends;

• Changes in lending policies and procedures, underwriting standards, collections, and for commercial loans, the level of loans being approved with exceptions to policy;

• Experience, ability and depth of management and staff;

• National and local economic and business conditions, including various market segments;

• Quality of the Company’s loan review system and degree of Board oversight; and

• Effect of external factors, including the deterioration of collateral values, on the level of estimated credit losses in the current portfolio.

Commercial loans, including commercial real estate loans, are placed on non-accrual status at the time the loan has been delinquent for 90 days unless the loan is well secured and in the process of collection. Generally, commercial loans and commercial real estate loans are charged-off no later than 180 days after becoming delinquent unless the loan is well secured and in the process of collection, or other extenuating circumstances support collection. Residential real estate loans are typically placed on non-accrual status at the time the loan has been delinquent for 90 days. Other consumer loans are typically charged-off at 180 days delinquent. In all cases, loans must be placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Goodwill and Intangible Assets. Goodwill is the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tests goodwill for impairment annually as of December 31, unless circumstances indicate that a test is required at an earlier date. The Company elected to not apply the qualitative evaluation option permitted under Accounting Standards Update (“ASU”) 2011-8, Intangibles – Goodwill and Other (Topic 35): Testing Goodwill for Impairment issued in September 2011. Therefore, the Company utilizes the two-step goodwill impairment test outlined in FASB ASC 350, Intangibles – Goodwill and Other (“FASB ASC 350”). Step one, which is used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. A reporting unit is an operating segment, or one level below an operating segment, as defined in FASB ASC 280. If the fair value of a reporting unit exceeds its

9

carrying value, goodwill of the reporting unit is not considered impaired and step two is therefore unnecessary. If the carrying amount of the reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment loss, if any. At December 31, 2013, the Company performed its annual goodwill impairment test, and step one of the analysis indicated that the Company’s fair value was greater than its carrying value; therefore, the Company’s goodwill was not impaired at December 31, 2013. Nothing has occurred since that time to suggest that an impairment exists at June 30, 2014. The carrying amount of goodwill totaled $38.2 million at June 30, 2014 and December 31, 2013.

Intangible assets, net on the consolidated statements of financial condition, consist of core deposit intangibles, net of accumulated amortization from the Bank’s previous acquisitions. Core deposit intangibles are amortized using the straight-line method based on the characteristics of the particular deposit type and are evaluated annually for impairment.

Bank Owned Life Insurance (“BOLI”). The Company has purchased life insurance policies on certain key employees. These policies are recorded at their cash surrender value, or the amount that can be realized in accordance with FASB ASC 325-30, Investments in Insurance Contracts. At June 30, 2014, the Company had $26.6 million invested in a general account and $51.6 million in a separate account, for a total BOLI cash surrender value of $78.2 million. The BOLI separate account is invested in a mortgage-backed securities fund, which is managed by an independent investment firm. Pricing volatility of these underlying instruments may have an impact on investment income; however, the fluctuations would be partially mitigated by a stable value wrap agreement which is a component of the separate account. Income from these policies and changes in the cash surrender value are recorded in BOLI income of the unaudited condensed consolidated statements of operations.

Income Taxes. The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management exercises significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based upon changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the unaudited condensed consolidated statements of operations. Assessment of uncertain tax positions under FASB ASC 740 requires careful consideration of the technical merits of a position based on management’s analysis of tax regulations and interpretations. Significant judgment is applied when addressing the requirements of FASB ASC 740. At June 30, 2014, the Company had a valuation allowance of $131.0 million against its gross deferred tax asset. As the Company remained in a cumulative loss position, the deferred tax valuation allowance is still appropriate at June 30, 2014. The net deferred tax liability of $796 thousand in the unaudited condensed consolidated statements of financial condition at June 30, 2014 primarily represents the tax liability created from the goodwill amortization recorded for tax purposes and not for book. For those securities in an unrealized loss position, the Company intends to hold these securities until maturity or until such time that they are in an unrealized gain position and therefore, the deferred tax asset is considered appropriate.

Mortgage Banking Revenue, Net. Mortgage banking revenue, net includes revenues associated with the sale of residential mortgage loans originated with the intent to sell, net of recourse liability provision as well as gain on bulk sales of jumbo residential mortgage loans. The components of this line item are as follows:

	For the Six Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	1,418		$	7,924
Gain on bulk sale of jumbo residential mortgage loans		134			2,363
Market value adjustment on loans held-for-sale		(34	)		(1,039	)
Fair value adjustment on interest rate lock commitments		106			(43	)
Recourse liability provision		(460	)		(200	)
Mortgage banking revenue, net	$	1,164		$	9,005
	For the Three Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	649		$	3,818
Gain on bulk sale of jumbo residential mortgage loans		131			1,507
Market value adjustment on loans held-for-sale		70			205
Fair value adjustment on interest rate lock commitments		110			171
Recourse liability provision		(430	)		(100	)
Mortgage banking revenue, net	$	530		$	5,601

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Accumulated Other Comprehensive Income. The Company classifies items of accumulated comprehensive income by their nature and displays the details of other comprehensive income in the unaudited condensed consolidated statements of comprehensive income. Amounts categorized as comprehensive loss/income represent net unrealized gains or losses on investment securities available for sale, net of tax and the non-credit portion of any other-than-temporary impairment (“OTTI”) loss not recorded in earnings. Reclassifications are made to avoid double counting items which are displayed as part of net income (loss) for the period. These reclassifications for the three and six months ended June 30, 2014 and 2013 were as follows:

	For the Three Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	2,695	$	(1,102	)	$	1,593	$	(6,904	)	$	2,820	$	(4,084	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(9	)		4		(5	)
Net unrealized gain on securities available for sale	$	2,745	$	(1,122	)	$	1,623	$	(6,913	)	$	2,824	$	(4,089	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

	For the Six Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	11,345	$	(4,635	)	$	6,710	$	(5,127	)	$	2,094	$	(3,033	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(3,452	)		1,410		(2,042	)
Net unrealized gain on securities available for sale	$	11,395	$	(4,655	)	$	6,740	$	(8,579	)	$	3,504	$	(5,075	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

Recent Accounting Principles.

In June 2014, the FASB issued ASU 2014-11: Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The accounting changes in the amendment affect all entities that enter into repurchase-to-maturity transactions or repurchase financings. The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting and for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty which will result in secured borrowing accounting for the repurchase agreement. All entities are subject to new disclosure requirements for certain transactions that involve a transfer of a financial asset accounted for as a sale. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In May 2014, the FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606): Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40), Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables, Background Information and Basis for Conclusions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the considerations to which the entity expects to be entitled in exchange for those goods or services. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

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In January 2014, the FASB issued ASU 2014-4, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For public entities, the amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In July 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this update seek to eliminate the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists by presenting the unrecognized tax benefit, or a portion of the unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset. To the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward are not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. The Company has evaluated the impact of the adoption of this accounting standards update on its financial statements and determined that there currently is no impact to the Company’s presentation.

(2) Branch Sale

On July 2, 2014 the Company entered into a Purchase and Assumption Agreement (the “Purchase Agreement”) with Sturdy Savings Bank, pursuant to which the Bank agreed to sell certain assets and assume certain liabilities relating to seven branch offices in and around Cape May County, New Jersey. The Purchase Agreement provides for a purchase price equal to the sum of a deposit premium of 8.765% of the average daily closing balance of deposits for the 31 days prior to the closing date, the Company’s carrying amount of loans identified and approved by both parties, the aggregate amount of cash on hand and accrued interest on the loans acquired.

The Purchase Agreement contains certain customary representations, warranties, indemnities and covenants of the parties, and is subject to termination in certain circumstances. The transaction is expected to be completed during the first quarter of 2015, subject to regulatory approvals and customary closing conditions.

The following summarizes the branch assets and liabilities classified as held-for-sale at June 30, 2014 related to the Purchase Agreement:

Assets:
Cash	$	1,507
Loans held-for-sale		28,543
Properties and equipment, net		4,008
Total branch assets held-for-sale	$	34,058
Liabilities:
Deposits held-for-sale	$	160,769

(3) Stock-Based Compensation

The Company accounts for stock-based compensation issued to employees, and when appropriate, non-employees, in accordance with the fair value recognition provisions of FASB ASC 718, Compensation – Stock Compensation, (“FASB ASC 718”). Under the fair value provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and it is recognized as expense over the appropriate vesting period using the straight-line method. However, consistent with FASB ASC 718, the amount of stock-based compensation cost recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date and, as a result, it may be necessary to recognize the expense using a ratable method. Although the provisions of FASB ASC 718 should generally be applied to non-employees, FASB ASC 505-50, Equity-Based Payments to Non-Employees, is used in determining the measurement date of the compensation expense for non-employees.

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Determining the fair value of stock-based awards at measurement date requires judgment, including estimating the expected term of the stock options and the expected volatility of the Company’s stock. In addition, judgment is required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates or different key assumptions were used, it could have a material effect on the Company’s unaudited condensed consolidated financial statements.

The Company’s stock-based incentive plans authorize the issuance of shares of common stock pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”). The purpose of the Company’s stock-based incentive plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, advisory directors, employees and other persons to promote the success of the Company. Under the Company’s stock-based incentive plans, Options generally expire ten years after the date of grant, unless terminated earlier under the Option’s terms. A committee of non-employee directors has the authority to determine the conditions upon which the Options granted will vest. Options are granted at the then fair market value of the Company’s stock. All or a portion of any Stock Awards earned as compensation by a director may be deferred under the Company’s Directors’ Deferred Fee Plan.

Activity in the stock option plans for the six months ended June 30, 2014 and June 30, 2013 was as follows:

Summary of Options Activity

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2014		1,491,538		$	7.36		1,249,267
Granted		215,972			3.35		—
Exercised		(617	)		3.10		—
Forfeited		(70,570	)		3.40		—
Expired		(439,436	)		8.78		—
June 30, 2014		1,196,887		$	6.35		855,308
Options vested or expected to vest(1)		1,130,575		$	6.52		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2013		1,785,157		$	7.35		1,178,775
Granted		83,610			3.57		—
Exercised		—			—		—
Forfeited		(13,698	)		3.64		—
Expired		—			—		—
June 30, 2013		1,855,069		$	7.21		1,336,893
Options vested or expected to vest(1)		1,814,294		$	7.28		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

The weighted average remaining contractual term was approximately 6.1 years for Options outstanding and 5.0 years for Options exercisable as of June 30, 2014.

At June 30, 2014, the aggregate intrinsic value was $278 thousand for Options outstanding and $64 thousand for Options exercisable.

During the six months ended June 30, 2014 and 2013, the Company granted 215,972 Options and 83,610 Options, respectively. In accordance with FASB ASC 718, the fair value of the Options granted are estimated on the date of grant using the Black-Scholes option pricing model which uses the assumptions in the table below. The expected term of an Option is estimated using historical exercise behavior of employees at a particular level of management who were granted Options with a comparable term. The Options have historically been granted with a 10 year term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility is based on the historical volatility of the Company’s stock price.

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Significant weighted average assumptions used to calculate the fair value of the Options for the six months ended June 30, 2014 and 2013 are as follows:

	For the Six Months Ended June 30,
	2014			2013
Weighted average fair value of Options granted	$	1.45		$	1.84
Weighted average risk-free rate of return		1.16	%		0.76	%
Weighted average expected option life in months		49			59
Weighted average expected volatility		55	%		62	%
Expected dividends(1)	$	—		$	—

(1) To date, the Company has not paid cash dividends on its common stock.

A summary of the Company’s nonvested Stock Award activity during the six months ended June 30, 2014 and June 30, 2013 are presented in the following tables:

Summary of Nonvested Stock Award Activity

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2014		431,834		$	3.13
Issued		112,180			3.43
Vested		(20,643	)		3.39
Forfeited		(47,188	)		3.06
Nonvested Stock Awards outstanding, June 30, 2014		476,183		$	3.19
	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2013		639,037		$	3.30
Issued		20,643			3.39
Vested		(73,336	)		4.60
Forfeited		(28,733	)		3.03
Nonvested Stock Awards outstanding, June 30, 2013		557,611		$	3.14

There were 112,180 shares of nonvested Stock Awards issued during the six months ended June 30, 2014 and 20,643 nonvested Stock Awards issued during the six months ended June 30, 2013. The value of these shares is based upon the closing price of the common stock on the date of grant. Compensation expense is recognized on a straight-line basis over the service period for all of the nonvested Stock Awards issued.

Total compensation expense recognized related to Options and nonvested Stock Awards, including that for non-employee directors, during the three and six months ended June 30, 2014 was $102 thousand and $232 thousand, respectively, as compared to $218 thousand and $456 thousand, respectively, for the three and six months ended June 30, 2013. As of June 30, 2014, there was approximately $387 thousand and $1.1 million of total unrecognized compensation cost related to Options and nonvested Stock Awards, respectively. The cost of the Options and Stock Awards is expected to be recognized over a weighted average period of 3.7 years and 2.5 years, respectively.

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(4) Investment Securities

The amortized cost of investment securities and the approximate fair value at June 30, 2014 and December 31, 2013 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
June 30, 2014
Available for sale:
U.S. Treasury securities	$	2,497	$	5	$	—		$	2,502
U.S. Government agency securities		4,971		—		(242	)		4,729
U.S. Government agency mortgage-backed securities		296,732		2,834		(1,574	)		297,992
Other mortgage-backed securities		271		2		—			273
State and municipal securities		28,976		2,036		—			31,012
Trust preferred securities		12,627		—		(3,154	)		9,473
Collateralized loan obligations		71,922		21		(459	)		71,484
Other securities		19,562		—		—			19,562
Total available for sale		437,558		4,898		(5,429	)		437,027
Held to maturity:
U.S. Government agency mortgage-backed securities		386		9		—			395
Other securities		250		—		—			250
Total held to maturity		636		9		—			645
Total investment securities	$	438,194	$	4,907	$	(5,429	)	$	437,672
December 31, 2013
Available for sale:
U.S. Treasury securities	$	2,496	$	4	$	—		$	2,500
U.S. Government agency securities		4,969		—		(562	)		4,407
U.S. Government agency mortgage-backed securities		325,316		1,043		(8,295	)		318,064
Other mortgage-backed securities		277		16		—			293
State and municipal obligations		29,240		1,213		—			30,453
Trust preferred securities		12,626		—		(4,659	)		7,967
Collateralized loan obligations		73,915		—		(686	)		73,229
Other securities		3,184		—		—			3,184
Total available for sale		452,023		2,276		(14,202	)		440,097
Held to maturity:
U.S. Government agency mortgage-backed securities		431		11		—			442
Other securities		250		—		—			250
Total held to maturity		681		11		—			692
Total investment securities	$	452,704	$	2,287	$	(14,202	)	$	440,789

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013:

Gross Unrealized Losses by Investment Category

	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2014
U.S. Government agency securities	$	—	$	—		$	4,729	$	(242	)	$	4,729	$	(242	)
U.S. Government agency mortgage-backed securities		60,464		(267	)		40,226		(1,307	)		100,690		(1,574	)
Trust preferred securities		—		—			9,473		(3,154	)		9,473		(3,154	)
Collateralized loan obligations		17,301		(149	)		22,190		(310	)		39,491		(459	)
Total	$	77,765	$	(416	)	$	76,618	$	(5,013	)	$	154,383	$	(5,429	)
December 31, 2013
U.S. Government agency securities	$	—	$	—		$	4,407	$	(562	)	$	4,407	$	(562	)

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U.S. Government agency mortgage-backed securities		246,348		(7,374	)		7,961		(921	)		254,309		(8,295	)
Trust preferred securities		—		—			7,967		(4,659	)		7,967		(4,659	)
Collateralized Loan Obligations		45,729		(686	)							45,729		(686	)
Total	$	292,077	$	(8,060	)	$	20,335	$	(6,142	)	$	312,412	$	(14,202	)

The Company determines whether unrealized losses are temporary in accordance with FASB ASC 325-40, Investments – Other, when applicable, and FASB ASC 320-10, Investments – Overall, (“FASB ASC 320-10”). The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of an OTTI condition. These include, but are not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer.

FASB ASC 320-10 requires the Company to assess if an OTTI exists by considering whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If either of these situations applies, the guidance requires the Company to record an OTTI charge to earnings for the difference between the amortized cost basis of the security and the fair value of the security. If neither of these situations applies, the Company is required to assess whether it is expected to recover the entire amortized cost basis of the security. If the Company is not expected to recover the entire amortized cost basis of the security, the guidance requires the Company to bifurcate the identified OTTI into a credit loss component and a component representing loss related to other factors. A discount rate is applied which equals the effective yield of the security. The difference between the present value of the expected cash flows and the amortized book value is considered a credit loss. When a market price is not readily available, the market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from open market and other sources as appropriate for the security. The difference between the market value and the present value of cash flows expected to be collected is recognized in accumulated other comprehensive loss on the consolidated statements of financial condition. Application of this guidance resulted in no OTTI charges during the six months ended June 30, 2014 and 2013.

The following is a roll-forward for the three and six months ended June 30, 2014 and 2013 of OTTI charges recognized in earnings as a result of credit losses on investments:

	For the Three Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

	For the Six Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

On December 10, 2013, the Board of Governors of the Federal Reserve System (“FRB”), the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC’) issued final rules to implement the Volcker Rule contained in section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) generally to become effective on July 21, 2015. The Volcker Rule prohibits an insured depository institution and its affiliates (referred to as “banking entities”) from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (“covered funds”) subject to certain limited exceptions. These prohibitions impact the ability of U.S.

16

banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

U.S. Government Agency Securities. At June 30, 2014, the gross unrealized loss in the category of 12 months or longer of $242 thousand consisted of one agency security with an estimated fair value of $4.7 million issued and guaranteed by a U.S. Government sponsored agency. The Company monitors certain factors such as market rates and possible credit deterioration to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on the aforementioned security based upon its assessment. Management also concluded that it does not intend to sell the security, and that it is not more likely than not it will be required to sell the security, before its recovery, which may be maturity, and management expects to recover the entire amortized cost basis of this security.

U.S. Government Agency Mortgage-Backed Securities. At June 30, 2014, the gross unrealized loss in the category of less than 12 months of $267 thousand consisted of eight mortgage-backed securities with an estimated fair value of $60.5 million, the gross unrealized loss in the category of 12 months or longer of $1.3 million consisted of seven mortgage-backed securities with an estimated fair value of $40.2 million issued and guaranteed by a U.S. Government sponsored agency. The Company monitors certain factors such as market rates and possible credit deterioration to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities, before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

Collateralized Loan Obligation Securities. At June 30, 2014, the gross unrealized loss in the category of less than 12 months of $149 thousand consisted of five AA rated collateralized loan obligation securities with an estimated fair value of $17.3 million, the gross unrealized loss in the category of 12 months or longer of $310 thousand consisted of one AA and two AAA rated collateralized loan obligation securities with an estimated fair value of $22.2 million The Company monitors key credit metrics such as delinquencies, defaults, cumulative losses and credit support levels to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities, before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

At June 30, 2014, the Company had 12 collateralized loan obligation securities with an amortized cost of $71.9 million and an estimated fair value of $71.5 million. These securities are subject to the provisions of the Volcker Rule. However, a final determination has yet to be made whether banks will be required to divest these investments. Discussion has been ongoing among the regulators, Congress and the investors in the collateralized loan obligations. Based on the current status of these discussions and through the Company’s communication with its investment advisors, the Company believes it will either be able to hold these collateralized loan obligation investments in its portfolio or have them modified such that the perceived risk will be adequately eliminated. As such, the Company believes it will not be required to sell these securities prior to recovery and therefore would not be required to record an OTTI charge on these securities. To ensure compliance, in the three months ended June 30, 2014, the Company began proactively transitioning its collateralized loan obligation investments into similar securities which are structured such that they satisfy the provisions of the Volcker Rule.

Trust Preferred Securities. At June 30, 2014, the gross unrealized loss in the category of 12 months or longer of $3.2 million consisted of two trust preferred securities. The trust preferred securities are comprised of one non-rated single issuer security with an amortized cost of $3.8 million and an estimated fair value of $2.7 million, and one investment grade rated pooled security with an amortized cost of $8.8 million and an estimated fair value of $6.7 million. As this security recently received ratings upgrades from multiple agencies, it is no longer deemed non-investment grade.

For the pooled security, the Company monitors each issuer in the collateral pool with respect to financial performance using data from the issuer’s most recent regulatory reports as well as information on issuer deferrals and defaults. Also, the security structure is monitored with respect to collateral coverage and current levels of subordination. Expected future cash flows are projected assuming additional defaults and deferrals based on the performance of the collateral pool. The pooled security is in a senior position in the capital structure. The security had a 2.9 times principal coverage. As of the most recent reporting date, interest has been paid in accordance with the terms of the security. The Company reviews projected cash flow analysis for adverse changes in the present value of projected future cash flows that may result in an other-than-temporary credit impairment to be recognized through earnings. The most recent valuations assumed no recovery on any defaulted collateral, no recovery on any deferring collateral and an additional 3.6% of defaults or deferrals’

17

every three years with no recovery rate. As of June 30, 2014, management concluded that an OTTI did not exist on the aforementioned security based upon its assessment. Management also concluded that it does not intend to sell the security, and that it is not more likely than not it will be required to sell the security, before its recovery, which may be maturity, and management expects to recover the entire amortized cost basis of this security.

The financial performance of the non-rated single issuer trust preferred security is monitored on a quarterly basis using data from the issuer’s most recent regulatory reports to assess the probability of cash flow impairment. Expected future cash flows are projected by incorporating the contractual cash flow of the security adjusted, if necessary, for potential changes in the amount or timing of cash flows due to the underlying creditworthiness of the issuer and covenants in the security.

In August 2009, the issuer of the non-rated single issuer trust preferred security elected to defer its normal quarterly dividend payment. As contractually permitted, the issuer may defer dividend payments up to five years with accumulated dividends, and interest on those deferred dividends, payable upon the resumption of its scheduled dividend payments. The issuer is currently operating under an agreement with its regulators. The agreement stipulates that the issuer must receive permission from its regulators prior to resuming its scheduled dividend payments. The Company anticipates that the deferred dividends will be paid by the issuer by September 1, 2014, which is the date the contractual deferred period for the issuer ends.

During the six months ended June 30, 2014, the Company did not record an OTTI credit-related charge related to this deferring single issuer trust preferred security. Based on the Company’s most recent evaluation, the Company does not expect the issuer to default on the security based primarily on the issuer’s subsidiary bank reporting that it meets the minimum regulatory requirements to be considered a “well capitalized” institution. The Company recognizes that the length of time the issuer has been in deferral, the difficult economic environment and some weakened performance measures, while recently improving, increased the probability that a full recovery of principal and anticipated dividends may not be realized. The cumulative OTTI on this security as of June 30, 2014 was $1.2 million. Based upon the current capital position of the issuer and recent improvements in the financial performance of the issuer, the Company concluded that an additional impairment charge was not warranted at June 30, 2014.

The pooled security was included in the non-exclusive list of issuers that meet the requirements of the interim final rule release by the agencies and therefore will not be required to be sold by the Company. The single issuer security is not subject to the provisions of the Volcker rule.

The amortized cost and estimated fair value of the investment securities, by contractual maturity, at June 30, 2014 and December 31, 2013 are shown below. Actual maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
June 30, 2014
Due in one year or less	$	19,314	$	19,314	$	—	$	—
Due after one year through five years		3,809		3,884		250		250
Due after five years through ten years		63,240		63,655		—		—
Due after ten years		54,192		51,909		—		—
Total investment securities, excluding mortgage-backed securities		140,555		138,762		250		250
U.S. Government agency mortgage-backed securities		296,732		297,992		386		395
Other mortgage-backed securities		271		273		—		—
Total investment securities	$	437,558	$	437,027	$	636	$	645
December 31, 2013
Due in one year or less	$	3,184	$	3,184	$	—	$	—
Due after one year through five years		3,430		3,490		250		250
Due after five years through ten years		35,452		35,460		—		—
Due after ten years		84,364		79,606		—		—
Total investment securities, excluding mortgage-backed securities		126,430		121,740		250		250
U.S. Government agency mortgage-backed securities		325,316		318,064		431		442
Other mortgage-backed securities		277		293		—		—
Total investment securities	$	452,023	$	440,097	$	681	$	692

18

At June 30, 2014, the Company had $44.2 million, amortized cost, and $46.2 million, estimated fair value, of investment securities pledged to secure public deposits. As of June 30, 2014, the Company had $175.6 million, amortized cost, and $177.1 million, estimated fair value, of investment securities pledged as collateral on secured borrowings.

(5) Loans

The components of loans as of June 30, 2014 and December 31, 2013 were as follows:

Loan Components

	June 30, 2014			December 31, 2013
Commercial:
Commercial and industrial	$	373,241		$	478,734
CRE owner occupied		366,185			468,442
CRE non-owner occupied		555,829			576,084
Land and development		68,645			64,306
Consumer:
Home equity lines of credit		165,671			188,478
Home equity term loans		21,282			25,279
Residential real estate		298,063			305,552
Other		7,200			30,829
Total gross loans held-for-investment		1,856,116			2,137,704
Allowance for loan losses		(28,392	)		(35,537	)
Net loans held-for-investment	$	1,827,724		$	2,102,167

Loans on Non-Accrual Status

	June 30, 2014		December 31, 2013
Commercial:
Commercial & industrial	$	2,773	$	2,358
CRE owner occupied		2,373		14,408
CRE non-owner occupied		—		1,969
Land and development		—		2,158
Consumer:
Home equity lines of credit		2,327		3,749
Home equity lines of credit, held-for-sale		1,947
Home equity term loans		580		1,240
Home equity term loans, held-for-sale		354
Residential real estate		5,406		3,341
Residential real estate, held-for-sale		1,322
Other		11		591
Other, held-for-sale		463
Total non-accrual loans	$	17,556	$	29,814
Troubled debt restructuring, non-accrual	$	583	$	8,163

Many of the Company’s commercial and industrial loans have a real estate component as part of the collateral securing the loan. Additionally, the Company makes commercial real estate loans for the acquisition, refinance, improvement and construction of real property. Loans secured by owner-occupied properties are dependent upon the successful operation of the borrower’s business. If the operating company experiences difficulties in terms of sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Loans secured by properties where repayment is dependent upon payment of rent by third-party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit.

19

As of June 30, 2014, the Company had $55.4 million outstanding on 13 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. As of December 31, 2013, the Company had $54.5 million outstanding on 17 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. The total amount available in those reserves to fund interest payments was $2.9 million and $4.3 million at June 30, 2014 and December 31, 2013, respectively. There were no relationships with interest reserves which were on non-accrual status at June 30, 2014 and December 31, 2013. Construction projects are monitored throughout their lives by professional inspectors engaged by the Company. The budgets for loan advances and borrower equity injections are developed at the time of underwriting in conjunction with the review of the plans and specifications for the project being financed. Advances of the Company’s funds are based on the prepared budgets and will not be made unless the project has been inspected by the Company’s professional inspector who must certify that the work related to the advance is in place and properly complete. As it relates to construction project financing, the Company does not extend, renew or restructure terms unless its borrower posts cash collateral in an interest reserve.

Included in the Company’s loan portfolio are modified commercial loans. Per FASB ASC 310-40, Troubled Debt Restructuring, (“FASB ASC 310-40”), a modification is one in which the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider, such as providing a below market interest rate and/or forgiving principal or previously accrued interest; this modification may stem from an agreement or be imposed by law or a court, and may involve a multiple note structure. Generally, prior to the modification, the loans which are modified as a troubled debt restructuring (“TDR”) are already classified as non-performing. These loans may only be returned to performing (i.e. accrual status) after considering the borrower’s sustained repayment performance for a reasonable amount of time, generally six months; this sustained repayment performance may include the period of time just prior to the restructuring.

(6) Allowance for Loan Losses

Changes in the allowance for loan losses were as follows:

Allowance for Loan Losses and Recorded Investment in Financing Receivables

	For the Six Months Ended June 30, 2014
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	27,828		$	3,375		$	2,898		$	1,436		$	35,537
Charge-offs		(16,300	)		(2,319	)		(1,425	)		(3,260	)		(23,304	)
Recoveries		1,078			144			6			128			1,356
Net charge-offs		(15,222	)		(2,175	)		(1,419	)		(3,132	)		(21,948	)
Provision for loan losses		8,410			2,321			1,922			2,150			14,803
Ending balance	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Financing Receivables:
Ending balance	$	1,363,900		$	186,953		$	298,063		$	7,200		$	1,856,116
Ending balance: individually evaluated for impairment	$	5,447		$	2,905		$	5,609		$	10		$	13,971
Ending balance: collectively evaluated for impairment	$	1,358,453		$	184,048		$	292,454		$	7,190		$	1,842,145

(1) Amount includes both home equity lines of credit and term loans.

(2) Includes the unallocated portion of the allowance for loan losses.

20

	For the Six Months Ended June 30, 2013
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	33,197		$	2,734		$	3,333		$	6,609		$	45,873
Charge-offs		(4,294	)		(989	)		(81	)		(422	)		(5,786	)
Recoveries		9,195			305			7			125			9,632
Net charge-offs		4,901			(684	)		(74	)		(297	)		3,846
Provision for loan losses		1,168			2,530			(752	)		(4,658	)		(1,712	)
Ending balance	$	39,266		$	4,580		$	2,507		$	1,654		$	48,007
Ending balance: individually evaluated for impairment	$	3,086		$	38		$	98		$	35		$	3,257
Ending balance: collectively evaluated for impairment	$	36,180		$	4,542		$	2,409		$	1,619		$	44,750
Financing Receivables:
Ending balance	$	1,676,133		$	223,214		$	225,147		$	34,298		$	2,158,792
Ending balance: individually evaluated for impairment	$	60,825		$	4,825		$	5,309		$	656		$	71,615
Ending balance: collectively evaluated for impairment	$	1,615,308		$	218,389		$	219,838		$	33,642		$	2,087,177

(1) Amount includes both home equity lines of credit and term loans

(2) Includes the unallocated portion of the allowance for loan losses.

Risk Characteristics

Commercial Loans. Included in this segment is commercial and industrial, commercial real estate owner occupied, commercial real estate non-owner occupied, and land and development. Many of the Company’s commercial and industrial loans have a real estate component as part of the collateral securing the accommodation. Commercial real estate owner occupied loans rely on the cash flow from the successful operation of the borrower’s business to make repayment. If the operating company experiences difficulties in terms of sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Commercial real estate non-owner occupied loans rely on the payment of rent by third-party tenants. The borrower’s ability to repay the loan or sell the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit. Commercial and industrial loans are primarily secured by assets of the business, such as accounts receivable and inventory. Due to the nature of the collateral securing these loans, the liquidation of these assets may be problematic and costly. Commercial real estate owner occupied and non-owner occupied loans are secured by the underlying properties. The local economy and real estate market affect the appraised value of these properties which may impact the ultimate repayment of these loans. Land and development loans are primarily repaid by the sale of the developed properties or by conversion to a permanent term loan. These loans are dependent upon the completion of the project on time and within budget, which may be impacted by general economic conditions. The Company requires cash collateral in an interest reserve in order to extend credit on construction projects to mitigate the credit risk.

Home Equity Loans. This segment consists of both home equity lines of credit and home equity term loans on single family residences. These loans rely on the personal income of the borrower for repayment which may be impacted by economic conditions, such as unemployment levels, interest rates and the housing market. These loans are primarily secured by second liens on properties. The secondary source of repayment may be impaired by the real estate market and local regulations.

Residential Real Estate Loans. Included in this segment are residential mortgages on single family residences. These loans rely on the personal income of the borrower for repayment which may be impacted by economic conditions, such as unemployment levels, interest rates and the housing market. These loans are primarily secured by liens on the underlying properties. The secondary source of repayment may be impaired by the real estate market and local regulations.

Other Loans. Other loans consist of personal credit lines, mobile home loans and consumer installment loans. These loans rely on the borrowers’ personal income for repayment and are either unsecured or secured by personal use assets and mobile homes. These loans may be impacted by economic conditions such as unemployment levels. The liquidation of the assets securing these loans may be difficult and costly.

The allowance for loan losses was $28.4 million and $35.5 million at June 30, 2014 and December 31, 2013, respectively. The ratio of allowance for loan losses to gross loans held-for-investment was 1.53% at June 30, 2014 and 1.66% at December 31, 2013.

The provision for loan losses charged to expense is based upon historical loan loss and recovery experience, a series of qualitative factors and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC 310, Receivables (“FASB ASC 310”). Values assigned to the qualitative factors and those developed from historic loss and recovery experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans that continue to perform.

21

A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in a loan being identified as impaired. For this purpose, delays less than 90 days are considered to be insignificant. Impairment losses are included in the provision for loan losses in the unaudited condensed consolidated statements of operations. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historical loss and recovery experience and qualitative factors. Such loans generally include consumer loans, residential real estate loans and small business loans. In determining the appropriate level of the general pooled allowance, management makes estimates based on internal risk ratings, which take into account such factors as debt service coverage, loan-to-value ratios, management’s abilities and external factors.

The following table presents the Company’s components of impaired loans receivable, segregated by class of loans. Commercial and consumer loans that were collectively evaluated for impairment are not included in the data that follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Accrued Interest Income Recognized		Cash Interest Income Recognized
For the Six Months Ended June 30, 2014
With no related allowance:
Commercial:
Commercial & industrial	$	2,761	$	3,264	$	—	$	180	$	19	$	—
CRE owner occupied		2,502		3,127		—		2,068		—		—
CRE non-owner occupied		—		—		—		—		—		—
Land and development		184		223		—		364		—		—
Consumer:
Home equity lines of credit		2,325		3,255		—		2,166		—		—
Home equity lines of credit, held-for-sale		1,947		3,428		—		2,154		—		—
Home equity term loans		578		649		—		518		—		—
Home equity term loans, held-for-sale		354		610		—		497		—		—
Residential real estate		5,609		6,388		—		4,262		—		45
Residential real estate, held-for-sale		1,322		2,334		—		1,041		—		—
Other		10		14		—		10		—		—
Other, held-for-sale		463		1,752		—		460		—		—
Total commercial	$	5,447	$	6,614	$	—	$	2,612	$	19	$	—
Total consumer	$	12,608	$	18,430	$	—	$	11,108	$	—	$	45
For the Year Ended December 31, 2013
With no related allowance:
Commercial:
Commercial & industrial	$	3,206	$	3,281	$	—	$	1,884	$	—	$	—
CRE owner occupied		18,503		27,367		—		13,528		—		—
CRE non-owner occupied		1,969		2,251		—		66		—		—
Land and development		2,512		2,549		—		2,669		—		—
Consumer:
Residential real estate		2,569		3,135		—		1,689		—		—
Home Equity Lines of Credit		3,749		5,051		—		3,132		—		—
Home Equity Term Loans		1,238		1,456		—		918		—		—
Other		560		1,567		—		481		—		—
With an allowance recorded:
Commercial:
Commercial & industrial	$	423	$	425	$	423	$	73	$	—	$	—
CRE owner occupied		2,164		2,164		494		47		—		—
Consumer:
Other		26		27		17		16		—		—
Total commercial	$	28,777	$	38,037	$	917	$	18,267	$	—	$	—
Total consumer	$	8,142	$	11,236	$	17	$	6,236	$	—	$	—

22

In accordance with FASB ASC 310, those impaired loans which are collateral dependent do not result in a specific allowance for loan losses. Included in impaired loans at June 30, 2014 were three TDRs, all of which were collateral dependent. In addition, one of the TDRs at June 30, 2014 included a commitment to lend additional funds of $35 thousand as of June 30, 2014.

There were no new TDR agreements entered into during the six months ended June 30, 2014. The following table presents an analysis of the Company’s TDR agreements entered into during the three and six months ended June 30, 2013.

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
Residential real estate	1		199		197

The following tables present information regarding the types of concessions granted on loans that were restructured during the three and six months ended June 30, 2013:

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Commercial and industrial	1	Modified principal repayment terms.
CRE Owner occupied	1	Interest rate concession.
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Residential real estate	1	Modified term debt to interest only for six month period.

During the three and six months ended June 30, 2014 and June 30, 2013, the Company did not have any TDR agreements that had subsequently defaulted that were entered into within the respective preceding twelve months. All TDRs are currently on non-accrual status.

23

The following table presents the Company’s distribution of risk ratings within the held-for-investment loan portfolio, segregated by class, as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators by Internally Assigned Grade

	Commercial & industrial		CRE owner occupied		CRE non-owner occupied		Land and development		Home Equity Lines of Credit		Home Equity Term Loans		Residential Real Estate		Other
As of June 30, 2014
Grade:
Pass	$	362,498	$	346,899	$	547,951	$	67,950	$	161,572	$	20,684	$	292,454	$	7,187
Special Mention		5,556		10,519		3,532		483		—		—		—		—
Substandard		5,187		8,767		4,346		212		4,099		598		5,609		13
Doubtful		—		—		—		—		—		—		—		—
Total	$	373,241	$	366,185	$	555,829	$	68,645	$	165,671	$	21,282	$	298,063	$	7,200
As of December 31, 2013
Grade:
Pass	$	415,875	$	407,486	$	550,426	$	61,303	$	181,796	$	24,016	$	299,625	$	29,994
Special Mention		37,064		17,741		9,464		494		—		—		—		—
Substandard		25,372		41,051		16,194		2,509		6,682		1,263		5,927		809
Doubtful		423		2,164		—		—		—		—		—		26
Total	$	478,734	$	468,442	$	576,084	$	64,306	$	188,478	$	25,279	$	305,552	$	30,829

The Company’s primary tool for assessing risk when evaluating a loan in terms of its underwriting, structure, documentation and eventual collectability is a risk rating system where the loan is assigned a numeric value. Behind each numeric category is a defined set of characteristics reflective of the particular level of risk.

The risk rating system is based on a fourteen point grade using a two-digit scale. The upper seven grades are for “pass” categories, the middle grade is for the “criticized” category, while the lower six grades represent “classified” categories which are equivalent to the guidelines utilized by the OCC.

The portfolio manager is responsible for assigning, maintaining, and documenting accurate risk ratings for all commercial loans and commercial real estate loans. The portfolio manager assigns a risk rating at the inception of the loan, reaffirms it annually, and adjusts the rating based on the performance of the loan. As part of the loan review process, a regional credit officer will review risk ratings for accuracy. The portfolio manager’s risk rating will also be reviewed periodically by the loan review department and the Bank’s regulators.

To calculate risk ratings in a consistent fashion, the Company uses a Risk Rating Methodology that assesses quantitative and qualitative components which include elements of its financial condition, abilities of management, position in the market, collateral and guarantor support and the impact of changing conditions. When combined with professional judgment, an overall risk rating is assigned.

Aging of Receivables

	30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Total Past Due		Current		Total Financing Receivables		Loans 90 Days Past Due and Accruing
As of June 30, 2014
Commercial:
Commercial & industrial	$	232	$	3	$	270	$	505	$	372,736	$	373,241	$	—
CRE owner occupied		528		29		1,626		2,183		364,002		366,185		—
CRE non-owner occupied		59		352		—		411		555,418		555,829		—
Land and development		—		—		184		184		68,461		68,645		—
Consumer:														—
Home equity lines of credit		1,742		702		1,357		3,801		161,870		165,671
Home equity term loans		392		172		136		700		20,582		21,282		—
Residential real estate		4,643		1,608		3,417		9,668		288,395		298,063		—

24

Other		42		6		11		59		7,141		7,200		—
Total	$	7,638	$	2,872	$	7,001	$	17,511	$	1,838,605	$	1,856,116	$	—
As of December 31, 2013
Commercial:
Commercial & industrial	$	9,149	$	2,726	$	3,452	$	15,327	$	463,407	$	478,734	$	—
CRE owner occupied		4,901		5,865		3,753		14,519		453,923		468,442		—
CRE non-owner occupied		899		4,661		1,070		6,630		569,454		576,084		—
Land and development		—		—		2,512		2,512		61,794		64,306		—
Consumer:
Home equity lines of credit		3,030		1,457		2,324		6,811		181,667		188,478		—
Home equity term loans		1,032		223		825		2,080		23,199		25,279		—
Residential real estate		12,776		1.927		1,086		15,789		289,763		305,552		—
Other		340		202		378		920		29,909		30,829		—
Total	$	32,127	$	17,061	$	15,400	$	64,588	$	2,073,116	$	2,137,704	$	—

(7) Real Estate Owned

Real estate owned at June 30, 2014 and December 31, 2013 was as follows:

	June 30, 2014		December 31, 2013
Commercial properties	$	1,030	$	1,227
Residential properties		297		1,276
Bank properties		—		—
Total	$	1,327	$	2,503

Summary of Real Estate Owned Activity

	Commercial Properties			Residential Properties			Bank Properties		Total
Beginning balance, January 1, 2014	$	1,227		$	1,276		$	—	$	2,503
Transfers into real estate owned		—			567			—		567
Sale of real estate owned		—			(1,478	)		—		(1,478	)
Reserve for losses in real estate owned		(197	)		(68	)		—		(265	)
Ending balance, June 30, 2014	$	1,030			297			—		1,327

(8) Derivative Financial Instruments and Hedging Activities

The Company is exposed, to varying degrees, to interest rate, market and credit risk through the use of derivative financial instruments. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures. The Company seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. In general, the derivative transactions entered into by the Company fall into one of two types: a fair value hedge of a specific fixed-rate loan agreement and an economic hedge of a derivative offering to a Bank customer. The Company does not use derivative financial instruments for trading purposes.

Fair Value Hedges – Interest Rate Swaps. The Company utilizes interest rate swap agreements to hedge interest rate risk. The designated hedged items are subordinated notes related to commercial loans that provide a fixed interest receipt for the Company. The interest rate risk is the uncertainty of future interest rate levels and the impact of changes in rates on the fair value of the loans. The hedging of interest rate risk is intended to reduce the volatility of the fair value of the loans due to changes in the interest rate market.

The Company previously entered into interest rate swaps with a counterparty whereby the Company makes payments based on a fixed interest rate and receives payments from the counterparty based on a floating interest rate, both calculated based on the principal amount of the underlying subordinated note, without the exchange of the underlying principal. The Company no longer enters into these interest rate swap transactions, the last of which occurred in August 2007. The interest rate swaps are designated as fair value hedges under FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”). The critical terms assessed by the

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Company for each hedge of subordinated notes include the notional amounts of the swap compared to the principal amount of the notes, expiration/maturity dates, benchmark interest rate, prepayment terms and cash payment dates. At June 30, 2014 and December 31, 2013, the total outstanding notional amount of these swaps was $16.6 million and $21.2 million, respectively. For each of these swap agreements, the floating rate is based on the one-month London Interbank Offered Rate (“LIBOR”) paid on the first day of the month which matches the interest payment date on each subordinated note. The expiration dates for these swap agreements range from August 1, 2014 to August 1, 2022 and are consistent with the underlying subordinated note maturities and the swaps had a fair value of $0 at inception. At hedge inception and on an ongoing basis, conditions supporting hedge effectiveness are evaluated. The Company believes that all conditions required in paragraph ASC 815-20-25-104 have been met, as all terms of the subordinated note and the interest rate swap match. Because the Company’s evaluations have concluded that the critical terms of the subordinated notes and the interest rate swaps meet the criteria outlined in ASC 815-20-25-104, the “short-cut” method of accounting is applied, which assumes there is no ineffectiveness of a hedging arrangement’s ability to hedge risk as changes in the interest rate component of the swaps’ fair value are expected to exactly offset the corresponding changes in the fair value of the underlying subordinated notes, as described above. Because the hedging arrangement is considered perfectly effective, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in a net impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”). The fair value adjustments related to credit quality were not material as of June 30, 2014 and December 31, 2013.

The following tables provide information pertaining to interest rate swaps designated as fair value hedges under FASB ASC 815 at June 30, 2014 and December 31, 2013:

Summary of Interest Rate Swaps Designated As Fair Value Hedges

	June 30, 2014					December 31, 2013
Balance Sheet Location	Notional		Fair Value			Notional		Fair Value
Other liabilities	$	16,644	$	(1,137	)	$	21,172	$	(1,632	)

Summary of Interest Rate Swap Components

	June 30, 2014			December 31, 2013
Weighted average pay rate		6.96	%		6.94	%
Weighted average receive rate		2.01	%		2.04	%
Weighted average maturity in years		1.66			1.9

Customer Derivatives – Interest Rate Swaps/Floors. The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure on the variable and fixed components of the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. The Company recognized $113 thousand and $419 thousand in fair value adjustment charges during the six months ended June 30, 2014 and 2013, respectively, which were included in the derivative credit valuation adjustment in the unaudited condensed consolidated statements of operations as a reduction to other income.

	June 30, 2014						December 31, 2013
Balance Sheet Location	Notional			Fair Value			Notional		Fair Value
Other assets	$	213,619		$	16,994		$	251,207	$	23,299
Other liabilities		(213,619	)		(17,144	)		251,207		(23,526	)

In addition, the Company has entered into an interest rate floor sale transaction with one commercial customer. The Company entered into corresponding interest rate floor purchase transactions with a third party in order to offset its exposure on the variable and fixed components of the customer agreements. As the interest rate floors with both the customer and the third party are not designated as hedges under FASB ASC 815, the instruments are marked to market through earnings. As the interest rate floors are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in a net

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impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There were no fair value adjustments for the interest rate floor transactions for the three and six months ended June 30, 2014 and 2013. The combined notional amount of the two interest rate floors was $14.8 million and $15.2 million at June 30, 2014 and December 31, 2013, respectively. These transactions are recorded in other assets in the unaudited condensed consolidated statements of financial condition.

Interest rate lock commitments on residential mortgages. As a part of its normal residential mortgage operations, the Bank will enter into an interest rate lock commitment with a potential borrower. The Bank enters into a corresponding commitment to an investor to sell that loan at a specific price shortly after origination. In accordance with FASB ASC 820, adjustments are recorded through earnings in mortgage banking revenue, net in the unaudited condensed consolidated statements of operations to account for the net change in fair value of these transactions. For the three and six months ended June 30, 2014, the Company recognized an increase of $110 thousand and $106 thousand, respectively, compared to an increase $171 thousand and a decrease of $43 thousand for the three and six months ended June 30, 2013, respectively, in fair value adjustments. The interest rate lock commitments are recorded at fair value in other assets in the unaudited condensed consolidated statements of financial condition. The fair value of the interest rate lock commitments was $225 thousand and $119 thousand at June 30, 2014 and December 31, 2013, respectively. The interest rate lock commitments had a total notional amount of $26.9 million for the held-for-sale pipeline at June 30, 2014.

(9) Deposits

Deposits consist of the following major classifications:

	June 30, 2014		December 31, 2013
Interest-bearing demand deposits	$	977,549	$	1,179,292
Non-interest-bearing demand deposits		537,023		561,006
Savings deposits		232,018		266,573
Time certificates under $100,000		250,066		300,309
Time certificates $100,000 or more		172,568		206,461
Brokered time deposits		103,541		107,930
Total	$	2,272,765	$	2,621,571

(10) (Loss) Earnings Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, during the period. Diluted earnings per share is calculated by dividing net (loss) income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents, based upon the treasury stock method using an average market price for the period.

(Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Average common shares outstanding		87,089,147			86,323,099
Net effect of dilutive common stock equivalents		—			33,697
Adjusted average shares outstanding—dilutive		87,089,147			86,356,796
Basic (loss) earnings per share	$	(0.28	)	$	0.01
Diluted (loss) earnings per share	$	(0.28	)	$	0.01

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	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Average common shares outstanding		86,915,959			86,284,325
Net effect of dilutive common stock equivalents		—			73,643
Adjusted average shares outstanding—dilutive		86,915,959			86,357,968
Basic (loss) earnings per share	$	(0.30	)	$	0.04
Diluted (loss) earnings per share	$	(0.30	)	$	0.04

The Company declared a 1 for 5 reverse stock split effective August 11, 2014 for shareholders of record as of August 8, 2014. The following tables present the Companies pro-forma (Loss) Earnings Per Share Computation.

Pro-forma (Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Pro-forma average common shares outstanding		17,417,829			17,264,620
Pro-forma net effect of dilutive common stock equivalents		—			6,739
Pro-forma adjusted average shares outstanding—dilutive		17,417,829			17,271,359
Pro-forma basic (loss) earnings per share	$	(1.39	)	$	0.04
Pro-forma diluted (loss) earnings per share	$	(1.39	)	$	0.04

	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Pro-forma average common shares outstanding		17,383,192			17,256,865
Pro-forma net effect of dilutive common stock equivalents		—			14,729
Pro-forma adjusted average shares outstanding—dilutive		17,383,192			17,271,594
Pro-forma basic (loss) earnings per share	$	(1.50	)	$	0.18
Pro-forma diluted (loss) earnings per share	$	(1.50	)	$	0.18

(11) Commitments and Contingent Liabilities

Letters of Credit

In the normal course of business, the Company has various commitments and contingent liabilities, such as customers’ letters of credit (including standby letters of credit of $28.2 million and $34.6 million at June 30, 2014 and December 31, 2013, respectively) which are not reflected in the accompanying unaudited condensed consolidated financial statements. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Reserve for Unfunded Commitments

The Company maintains a reserve for unfunded loan commitments and letters of credit which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition consistent with FASB ASC 825, Financial Instruments. As of June 30, 2014, the Company recorded estimated losses inherent with unfunded loan commitments in accordance with FASB ASC 450, Contingencies, and estimated future obligations under letters of credit in accordance with FASB ASC 460, Guarantees. The methodology used to determine the adequacy of this reserve is integrated in the Company’s process for establishing the allowance for loan losses and considers the probability of future losses and obligations that may be incurred under these

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off-balance sheet agreements. The reserve for unfunded loan commitments and letters of credit at June 30, 2014 and December 31, 2013 was $431 thousand and $454 thousand, respectively. Management believes this reserve level is sufficient to absorb estimated probable losses related to these commitments.

Reserve for Residential Mortgage Loans Sold with Recourse

The Company maintains a reserve for residential mortgage loans sold with recourse to third-party purchasers which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition. The Company records estimated losses inherent with residential mortgage loans sold with recourse in accordance with FASB ASC 450, Contingencies. This reserve is determined based upon the probability of future losses which is calculated using historical Company and industry loss data. The reserve for residential mortgage loan recourse as of June 30, 2014 and December 31, 2013 was $1.0 million and $647 thousand, respectively. Management believes this reserve level is sufficient to address potential recourse exposure.

(12) Fair Value of Financial Instruments

The Company accounts for fair value measurement in accordance with FASB ASC 820. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. FASB ASC 820 clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement and also clarifies the application of fair value measurement in a market that is not active.

FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

FASB ASC 820 requires the Company to disclose the fair value for financial assets on both a recurring and non-recurring basis. The assets and liabilities measured at fair value on a recurring basis are as follows:

			Category Used for Fair Value Measurement
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,502	$	2,502	$	—	$	—
U.S. Government agency securities		4,729		—		4,729		—
U.S. Government agency mortgage-backed securities		297,992		—		297,992		—
Other mortgage-backed securities		273		—		273		—
State and municipal securities		31,012		—		31,012		—
Trust preferred securities		9,473		—		—		9,473
Collateralized loan obligations		71,484		—		71,484		—
Other securities		19,562		19,562		—		—
Hedged commercial loans		17,838		—		17,838		—
Residential mortgage loans held-for-sale		9,410		—		9,410		—
Interest rate lock commitments on residential mortgages		225		—		—		225
Interest rate swaps		16,994		—		16,994		—

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Interest rate floor		62		—		62		—
Liabilities:
Fair value interest rate swaps		1,137		—		1,137		—
Interest rate swaps		17,082		—		17,082		—
Interest rate floor		62		—		62		—
December 31, 2013
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,500	$	2,500	$	—	$	—
U.S. Government agency securities		4,407		—		4,407		—
U.S. Government agency mortgage-backed securities		318,064		—		318,064		—
Other mortgage-backed securities		293		—		293		—
State and municipal obligations		30,453		—		30,453		—
Trust preferred securities		7,967		—		—		7,967
Collateralized loan obligations		73,229		—		73,229		—
Other securities		3,184		3,184		—		—
Hedged commercial loans		22,435		—		22,435		—
Residential loans held-for-sale		20,662		—		20,662		—
Interest rate lock commitments on residential mortgages		119		—		—		119
Interest rate swaps		23,299		—		23,299		—
Interest rate floor		132		—		132		—
Liabilities:
Fair value interest rate swaps		1,635		—		1,635		—
Interest rate swaps		23,526		—		23,526		—
Interest rate floor		132		—		132		—

Level 1 Valuation Techniques and Inputs

U.S. Treasury securities. The Company reports U.S. Treasury securities at fair value utilizing Level 1 inputs. These securities are priced using observable quotations for the indicated security.

Other securities. The other securities category is comprised of money market mutual funds. Given the short maturity structure and the expectation that the investment can be redeemed at par value, the fair value of these investments is assumed to be the book value.

Level 2 Valuation Techniques and Inputs

The majority of the Company’s investment securities are reported at fair value utilizing Level 2 inputs. Prices of these securities are obtained through independent, third-party pricing services. Prices obtained through these sources include market derived quotations and matrix pricing and may include both observable and unobservable inputs. Fair market values take into consideration data such as dealer quotes, new issue pricing, trade prices for similar issues, prepayment estimates, cash flows, market credit spreads and other factors. The Company reviews the output from the third-party providers for reasonableness by the pricing consistency among securities with similar characteristics, where available, and by comparing values with other pricing sources available to the Company.

In general, the Level 2 valuation process uses the following significant inputs in determining the fair value of the Company’s different classes of investments:

U.S. Government agency securities. These securities are evaluated based on either a nominal spread basis for non-callable securities or on an option adjusted spread (“OAS”) basis for callable securities. The nominal spread and OAS levels are based on observations of identical or comparable securities actively trading in the markets.

U.S. Government agency mortgage-backed securities. The Company’s agency mortgage-backed securities generally fall into one of two categories, fixed-rate agency mortgage-backed pools or adjustable-rate agency mortgage-backed pools.

Fixed-rate agency mortgage-backed pools are valued based on spreads to actively traded To-Be-Announced (“TBA”) and seasoned securities, the pricing of which is provided by inter-dealer brokers, broker dealers and other contributing firms active in trading the security class. Further delineation is made by weighted average coupon (“WAC”) and weighted average maturity (“WAM”) with spreads on individual securities relative to actively traded securities as determined and quality controlled using OAS valuations.

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Adjustable-rate agency mortgage-backed pools are valued on a bond equivalent effective margin (“BEEM”) basis obtained from broker-dealers and other contributing firms active in the market. BEEM levels are established for key sectors using characteristics such as month-to-roll, index, periodic and life caps and index margins and convertibility. Individual securities are then evaluated based on how their characteristics map to the sectors established.

Other mortgage-backed securities. The Company’s other mortgage-backed securities consist of whole loan, non-agency collateralized mortgage obligations (“CMOs,” individually, each a “CMO”). These securities are valued based on generic tranches and generic prepayment speed estimates of various types of collateral from contributing firms and broker/dealers in the whole loan CMO market.

State and municipal obligations. These securities are valued using information on identical or similar securities provided by market makers, broker/dealers and buy-side firms, new issue sales and bid-wanted lists. The individual securities are then priced based on mapping the characteristics of the security such as obligation type (general obligation, revenue, etc.), maturity, state discount and premiums, call features, taxability and other considerations.

Collateralized loan obligations. The fair value measurements for collateralized loan obligations are obtained through quotes obtained from broker/dealers based on similar actively traded securities. Those valuations are classified as Level 2.

Hedged commercial loans. The hedged commercial loans are one component of a declared hedging relationship as defined under FASB ASC 815. The interest rate swap component of the declared hedging relationship is carried at its fair value and the carrying value of the commercial loans included a similar change in fair values. The fair value of these loans is estimated through discounted cash flow analysis which utilizes available credit and interest rate market data on performance of similar loans. This is considered a Level 2 input.

Residential mortgage loans held-for-sale. The Company’s residential mortgage loans held-for-sale are recorded at fair value utilizing Level 2 measurements. This fair value measurement is determined based upon third party quotes obtained on similar loans. The Company believes the fair value measurement of such loans reduces certain timing differences between related revenue and expense recognition in the Company’s financial statements and better aligns with the management of the portfolio from a business perspective. The fair value option allows the Company to record the mortgage loans held-for-sale portfolio at fair market value as opposed to the lower of cost or market. The Company economically hedges its residential loans held for sale portfolio with forward sale agreements which are reported at fair value. A lower of cost or market accounting treatment would not allow the Company to record the excess of the fair market value over book value but would require the Company to record the corresponding reduction in value on the hedges. Both the loans and related hedges are carried at fair value which reduces earnings volatility. For loans held-for-sale for which the fair value option has been elected, the aggregate fair value exceeded the aggregate principal balance by $278 thousand as of June 30, 2014. Interest income on these loans is recognized in interest and fees on loans in the unaudited condensed consolidated statements of operations. There were no residential mortgage loans held-for-sale that were nonaccrual or 90 or more days past due as of June 30, 2014 or December 31, 2013.

Interest rate swaps. The Company’s interest rate swaps, including fair value interest rate swaps and small exposures in interest rate caps and floors, are reported at fair value utilizing models provided by an independent, third-party and observable market data. When entering into an interest rate swap agreement, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of our contract counterparty. Interest rate swaps are evaluated based on a zero coupon LIBOR curve created from readily observable data on LIBOR, interest rate futures and the interest rate swap markets. The zero coupon curve is used to discount the projected cash flows on each individual interest rate swap. In addition, the Company has developed a methodology to value the nonperformance risk based on internal credit risk metrics and the unique characteristic of derivative instruments, which include notional exposure rather than principal at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk. Interest rate caps and floors are evaluated using industry standard options pricing models and observed market data on LIBOR and Eurodollar option and cap/floor volatilities.

Level 3 Valuation Techniques and Inputs

Trust preferred securities. The trust preferred securities are evaluated on a quarterly basis based on whether the security is an obligation of a single issuer or part of a securitization pool. For single issuer obligations, the Company uses discounted cash flow models which incorporate the contractual cash flow for each issue adjusted as necessary for any potential changes in amount or timing of cash flows. The cash flow model of a

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pooled issue incorporates anticipated loss rates and severities of the underlying collateral as well as credit support provided within the securitization. At least quarterly, the Company’s Treasury personnel reviews the modeling assumptions which include default assumptions, discount and forward rates. Changes in those assumptions could potentially have a significant impact on the fair value of the trust preferred securities.

The cash flow model for the pooled issue owned by the Company at June 30, 2014 assumes no recovery on defaulted collateral, no recovery on securities in deferral and an additional 3.6% future default rate assumption on the remaining performing collateral every three years with no recovery rate.

For trust preferred securities, projected cash flows are discounted at a rate based on a trading group of similar securities quoted on the New York Stock Exchange (“NYSE”) or over-the-counter markets which is reviewed for market data points such as credit rating, maturity, price and liquidity. The Company indexes the securities to a comparable maturity interest rate swap to determine the market spread, which is then used as the discount rate in the cash flow models. As of the reporting date, the market spreads were 3.0% for the pooled security and 7.50% for the single issuer that is currently deferring interest payments. An increase or decrease of 3% in the discount rate on the pooled issue would result in a decrease of $1.9 million or an increase of $2.9 million in the security fair value, respectively. An increase or decrease of 3% in the discount on the single issuer would result in a decrease of $569 thousand or an increase of $910 thousand in the security fair value, respectively.

The following provides details of the Level 3 fair value measurement activity for the three and six months ended June 30, 2014 and 2013:

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Investment Securities

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	8,616	$	16,803
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		857		1,372
Purchases		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers out of Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675
	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	7,967	$	5,882
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		1,506		1,793
Purchases		—		10,500
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675

There were no transfers between the three levels for the three months ended June 30, 2014. There was a transfer between Level 3 and Level 2 of the fair value hierarchy during the six months ended June 30, 2013 for a change in valuation method of collateralized loan obligation investment securities. The valuation method used as of March 31, 2013 was a third party pricing service that utilized model-based valuations, whereby the inputs could change based on changes in market indices, selling prices of similar securities, management’s assumptions related to the credit rating of the security, prepayment assumptions and other factors such as credit loss assumptions and management’s assertion of the current market conditions. The transfer occurred on April 1, 2013 and the fair value valuation method was changed as of that same date to utilize market-based broker quotes, which is deemed a Level 2 input. The Company evaluates its hierarchy on a quarterly basis to ensure proper classification.

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Interest rate lock commitments on residential mortgages. The determination of the fair value of interest rate lock commitments is based on agreed upon pricing with the respective investor on each loan and includes a pull through percentage. The pull through percentage represents an estimate of loans in the pipeline to be delivered to an investor versus the total loans committed for delivery. Significant changes in this input could result in a significantly higher or lower fair value measurement. As the pull through percentage is a significant unobservable input, this is deemed a Level 3 valuation input. The pull through percentage, which is based upon historical experience, was 75% as of June 30, 2014 and December 31, 2013, respectively. An increase or decrease of 20% in the pull through assumption would result in a positive or negative change of $60 thousand in the fair value of interest rate lock commitments at June 30, 2014. The fair value of interest rate lock commitments was $225 thousand at June 30, 2014 and $119 thousand at December 31, 2013.

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Interest Rate Lock Commitments on Residential Mortgages

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	115	$	633
Total gains, realized/unrealized:
Included in earnings(1)		110		171
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

(1) Amount included in mortgage banking revenue, net on the consolidated statements of operations.

	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	119	$	847
Total gains, realized/unrealized:
Included in earnings(1)		106		(43	)
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures impaired loans, Small Business Administration (“SBA”) servicing assets, restricted equity investments, goodwill, loans held-for-sale, and loans or bank properties transferred into other real estate owned at fair value on a non-recurring basis. At June 30, 2014 and 2013, these assets were valued in accordance with GAAP and, except for impaired loans, loans held-for-sale, and real estate owned included in the following table, did not require fair value disclosure under the provisions of FASB ASC 820. The related changes in fair value for the six months ended June 30, 2014 and 2013 are as follows:

			Category Used for Fair Value Measurement						Total Losses Or Changes in Net Assets / Liabilities
	Total		Level 1		Level 2		Level 3
June 30, 2014
Assets:
Impaired loans	$	2,962	$	—	$	—	$	2,962	$	(3,961	)
Loans held-for-sale		6,355				6,355				(4,685	)

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Real estate owned		294		—		—		294		(265	)
June 30, 2013
Assets:
Impaired loans	$	63,093	$	—	$	—	$	63,093	$	(7,127	)
Real estate owned		347		—		—		347		(380	)

Under FASB ASC 310, the fair value of collateral dependent impaired loans is based on the fair value of the underlying collateral, typically real estate, which is based on valuations. It is the policy of the Company to obtain a current appraisal or evaluation when a loan has been identified as non-performing. The type of appraisal obtained will be commensurate with the size and complexity of the loan. The resulting value will be adjusted for the potential cost of liquidation and decline of values in the market. New appraisals will be obtained on an annual basis until the loan is repaid in full, liquidated, or returns to performing status.

While the loan policy dictates that a loan be assigned to the special assets department when it is placed on non-accrual status, there is a need for loan officers to consistently and accurately determine collateral values when a loan is initially designated as criticized or classified. The most effective means of determining the fair value of real estate collateral at a point in time is by obtaining a current appraisal or evaluation of the property. In anticipation of the receipt of a current appraisal or evaluation, the Company has provided for an alternative and interim means of determining the fair value of the real estate collateral.

The most recent appraisal or reported value of the collateral securing a loan, net of a discount for the estimated cost of liquidation, is the Company’s basis for determining fair value.

The following table summarizes the Company’s appraisal approach based upon loan category.

Loan Category Used for Impairment Review	Method of Determining the Value
Loans less than $1 million	Evaluation report or restricted use appraisal
Loans $1 million or greater
Existing appraisal 18 months or less	Restricted use appraisal
Existing appraisal greater than 18 months	Summary form appraisal
Commercial loans secured primarily by residential real estate
Loans less than $1 million	Automated valuation model
Loans $1 million or greater	Summary form appraisal
Non-commercial loans secured primarily by residential real estate
Loans less than $250 thousand	Automated valuation model or summary form appraisal
Loans $250 thousand or greater	Summary form appraisal

An evaluation report, as defined by the OCC, is a written report prepared by an appraiser that describes the real estate collateral, its condition, current and projected uses and sources of information used in the analysis, and provides an estimate of value in situations when an appraisal is not required.

A restricted use appraisal is defined as a written report prepared under the Uniform Standards of Professional Appraisal Practice (“USPAP”). A restricted use appraisal is for the Company’s use only and should contain a brief statement of information significant to the determination of the value of the collateral under review. This report can be used for ongoing collateral monitoring.

A summary form appraisal is defined as a written report prepared under the USPAP which contains a detailed summary of all information significant to the determination of the collateral valuation. This report is more detailed than a restricted use report and provides sufficient information to enable the user to understand the rationale for the opinions and conclusions in the report.

An automated valuation model is an internal computer program that estimates a property’s market value based on market, economic, and demographic factors.

On a quarterly basis, or more frequently as necessary, the Company will review the circumstances of each collateral dependent loan and real estate owned property. A collateral dependent loan is defined as one that relies solely on the operation or the sale of the collateral for repayment. Adjustments to any specific reserve relating to a collateral shortfall, as compared to the outstanding loan balance, will be made if justified by appraisals, market conditions or current events concerning the loan.

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All appraisals received which are utilized to determine valuations for criticized and classified loans or properties placed in real estate owned are provided under an “as is” value. Partially charged off loans are measured for impairment upon receipt of an updated appraisal based on the relationship between the remaining balance of the charged down loan and the discounted appraised value. Such loans will remain on non-accrual status unless performance by the borrower warrants a return to accrual status. Recognition of non-accrual status occurs at the time a loan can no longer support principal and interest payments in accordance with the original terms and conditions of the loan documents. When impairment is determined, a specific reserve reflecting any calculated shortfall between the value of the collateral and the outstanding balance of the loan is recorded. Subsequent adjustments, prior to receipt of a new appraisal, to any related specific reserve will be made if justified by market conditions or current events concerning the loan. If an internal discount-based evaluation is being used, the discount percentage may be adjusted to reflect market changes, changes to the collateral value of similar loans or circumstances of the individual loan itself. The amount of the charge-off is determined by calculating the difference between the current loan balance and the current collateral valuation, plus estimated cost to liquidate.

Impaired loan fair value measurements are based upon unobservable inputs, and therefore, are categorized as a Level 3 measurement. There were no impaired loans with specific reserves at June 30, 2014. Impaired loans with an aggregate gross carrying amount of $9.2 million at June 30, 2013, included specific reserves in the allowance for loan losses of $3.3 million as the collateral underlying these loans had a fair value of $6.0 million. There were no charge-offs recorded on impaired loans with a specific reserve during the six months ended June 30, 2014, and June 30, 2013. Impaired loans held-for-investment with an aggregate carrying amount of $3.0 million and $57.1 million at June 30, 2014 and 2013, respectively, did not include specific reserves as the value of the underlying collateral was not below the carrying amount. However, these loans did include charge-offs of $4.0 million, of which $3.7 million related to loans that were fully charged off at June 30, 2014 and $3.9 million, of which $670 thousand related to loans which were fully charged off at June 30, 2013.

Loans held-for-sale with an aggregate carrying amount of $6.4 million at June 30, 2014, included charge-offs of $4.7 million to reduce the balance of the loans to fair value. The fair value of these loans was determined through the use of broker quotes based on market data; therefore, this is a level 2 input.

Once a loan is determined to be uncollectible, the underlying collateral is repossessed and reclassified as other real estate owned. The balance of other real estate owned also includes bank properties transferred from operations. These assets are carried at lower of cost or fair value of the collateral, less cost to sell. In some cases, adjustments are made to the appraised values for various factors including age of the appraisal, age of comparable properties included in the appraisal, and known changes in the market and the collateral. During the three months ended June 30, 2014 and 2013, the Company recorded a decrease in fair value on commercial properties of $197 thousand and $58 thousand, respectively, $68 thousand and $0 on consumer properties, respectively, and $0 and $322 thousand on bank properties, respectively. These adjustments were based upon unobservable inputs, and therefore categorized as Level 3 measurements.

Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities

	June 30, 2014				December 31, 2013
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and due from banks	$	49,384	$	49,384	$	38,075	$	38,075
Interest-earning bank balances		281,056		281,056		229,687		229,687
Restricted cash		26,000		26,000		26,000		26,000
Investment securities available for sale		437,027		437,027		440,097		440,097
Investment securities held-to-maturity		636		645		681		692
Loans receivable, net		1,809,886		1,735,087		2,079,732		1,964,856
Loans held-for-sale, at fair value		9,410		9,410		20,662		20,662
Loans held-for-sale, at lower of cost or market		19,761		20,924		—		—
Hedged commercial loans(1)		17,838		17,838		22,435		22,435
Branch assets held-for-sale		34,058		34,058		—		—
Restricted equity investments		16,388		16,388		17,019		17,019
Interest rate lock commitments on residential mortgages		225		225		119		119

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Interest rate swaps	16,994	16,994	23,299	23,299
Interest rate floor	62	62	132	132
Liabilities:
Demand deposits	1,505,172	1,537,452	1,740,298	1,795,685
Savings deposits	241,420	245,147	266,573	272,264
Time deposits	526,173	525,890	614,700	615,735
Deposits held-for-sale	160,769	174,860	—	—
Securities sold under agreements to repurchase – customers	670	670	478	478
Advances from FHLBNY	60,873	60,971	60,956	61,072
Junior subordinated debentures	92,786	64,060	92,786	63,747
Fair value interest rate swaps	1,138	1,138	1,632	1,632
Interest rate swaps	17,082	17,082	23,526	23,526
Interest rate floor	62	62	132	132

(1) Includes positive market value adjustment of $1.1 million and $1.6 million at June 30, 2014 and December 31, 2013, respectively, which is equal to the change in value of related interest rate swaps designated as fair value hedges of these hedged loans in accordance with FASB ASC 815.

Cash and cash equivalents. For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value. This is a Level 1 fair value input.

Restricted cash. For restricted cash, the carrying amount is a reasonable estimate of fair value. This is a Level 1 fair value input.

Investment securities. For investment securities, fair values are based on a combination of quoted prices for identical assets in active markets, quoted prices for similar assets in markets that are either actively or not actively traded and price models, discounted cash flow methodologies, or similar techniques that may contain unobservable inputs that are supported by little or no market activity and require significant judgment. The fair value of available-for-sale securities is measured utilizing Level 1, Level 2, and Level 3 inputs. The fair value of held-to-maturity securities is measured utilizing Level 2 inputs.

Loans receivable. The fair value of loans receivable is estimated using discounted cash flow analysis. Projected future cash flows are calculated using loan characteristics, and assumptions of voluntary and involuntary prepayment speeds. For performing loans, Level 2 inputs are utilized as the cash flow analysis is performed using available market data on the performance of similar loans. Projected cash flows are prepared using discount rates believed to represent current market rates. For non-performing loans, the cash flow assumptions are considered Level 3 inputs as market data is not readily available.

Loans held-for-sale, at fair value. Loans held-for-sale, at fair value generally includes residential mortgage loans that are originated with the intent to sell. These loans are recorded at fair value under FASB ASC 825. The fair value of loans held-for-sale is valued using the quoted market price of such loans, which is a Level 2 input.

Loans held-for-sale, at lower of cost or market. Loans held-for-sale, at lower of cost or market includes consumer loans identified for sale out of the portfolio. These loans are recorded at lower of cost or market. The fair value of these loans is determined through the use of broker quotes based on market data; therefore, this is a level 2 input.

Hedged commercial loans. The hedged commercial loans are one component of a declared hedging relationship as defined under FASB ASC 815. The interest rate swap component of the declared hedging relationship is carried at its fair value and the carrying value of the commercial loans includes a similar change in fair values. The fair value of these loans is measured utilizing Level 2 inputs.

Branch assets held-for-sale. This category includes loans receivable, fixed assets and cash balances, identified (at certain branches) for sale. As these assets are under agreement of sale at net book value, the carrying value is deemed to equal fair value. This is a level 2 fair value input.

Restricted equity securities. Ownership in equity securities of Federal Reserve Bank of Philadelphia (the “Federal Reserve Bank”), FHLBNY and Atlantic Central Bankers Bank is restricted and there is no established market for their resale. The carrying amount is a reasonable estimate of fair value. The fair value is based on Level 2 inputs.

Interest rate lock commitments on residential mortgages. The fair value of interest rate lock commitments is estimated using pricing from existing purchase commitments on each loan in the pipeline. This value is adjusted for a pull through estimate which is determined based on historical experience with loan deliveries from the residential mortgage pipeline. As this estimate is unobservable and can result in significant fluctuation in the fair value determination, this is considered a Level 3 input under the fair value hierarchy.

Interest rate swaps/floors and fair value interest rate swaps. The Company’s derivative financial instruments are not exchange-traded and therefore are valued utilizing models with the primary input being readily observable market parameters, specifically the LIBOR swap curve. In addition, the Company incorporates a qualitative fair value adjustment related to credit quality variations between counterparties as required by FASB ASC 820. This is a level 2 input.

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Demand deposits, savings deposits and time deposits. The fair value of demand deposits and savings deposits is determined by projecting future cash flows using an estimated economic life based on account characteristics, a Level 2 input. The resulting cash flow is discounted using rates available on alternative funding sources. The fair value of time deposits is estimated using the rate and maturity characteristics of the deposits to estimate their cash flow. This cash flow is discounted at rates for similar term wholesale funding.

Deposits held-for-sale. The fair value is determined by applying the agreed upon deposit premium per a branch sale agreement. This is a level 2 input.

Securities sold under agreements to repurchase – customer. The fair value is estimated to be the amount payable at the reporting date. This is considered a Level 2 input.

Securities sold under agreements to repurchase – FHLBNY advances. The fair value is estimated through Level 2 inputs by determining the cost or benefit for early termination of the individual borrowing.

Junior subordinated debentures. The fair value was estimated by discounting approximate cash flows of the borrowings by yields estimating the fair value of similar issues. The valuation model considers current market spreads, known and anticipated credit issues of the underlying collateral, term and reinvestment period and market transactions of similar issues, if available. This is a Level 3 input under the fair value hierarchy.

The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2014 and December 31, 2013. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these condensed consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amount presented herein.

(13) Regulatory Matters

The Company is subject to risk-based capital guidelines adopted by the FRB for bank holding companies. The Bank is also subject to similar capital requirements adopted by the OCC. Under the requirements the federal bank regulatory agencies have established quantitative measures to ensure that minimum thresholds for Total Capital, Tier 1 Capital and Leverage (Tier 1 Capital divided by average assets) ratios (set forth in the table below) are maintained. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets and certain off-balance sheet items as calculated under regulatory practices.

The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the federal bank regulators about components, risk weightings and other factors. The Company’s and the Bank’s risk-based capital ratios have been computed in accordance with regulatory practices. The Company and the Bank were in compliance with these regulatory capital requirements of the FRB and the OCC as of June 30, 2014. As discussed below and elsewhere herein, additional capital requirements have been imposed on the Bank by the OCC, which the Bank was also in full compliance with as of June 30, 2014 and December 31, 2013.

On April 15, 2010, the Bank entered into a written agreement with the OCC (the “OCC Agreement”) which contained requirements to develop and implement a profitability and capital plan which provides for the maintenance of adequate capital to support the Bank’s risk profile in the current economic environment. The capital plan was also required to contain a dividend policy allowing dividends only if the Bank is in compliance with the capital plan, and obtains prior approval from the OCC. During the second quarter of 2010, the Company delivered its profit and capital plans to the OCC. Updated profit and capital plans were subsequently submitted as required.

The Bank also agreed to: (a) implement a program to protect the Bank’s interest in criticized or classified assets, (b) review and revise the Bank’s loan review program; (c) implement a program for the maintenance of an adequate allowance for loan losses; and (d) revise the Bank’s credit administration policies. During the second quarter of 2010, the Company revised and implemented changes to policies and procedures pursuant to the OCC Agreement. The Bank initially agreed that its brokered deposits would not exceed 3.5% of its total liabilities unless approved by the OCC. However, effective October 18, 2012, the OCC approved an increase to this limit to 6.0%. Management does not expect this restriction will limit its access to liquidity as the Bank does not rely on brokered deposits as a major source of funding. As of June 30, 2014, the Bank’s brokered deposits represented 3.9% of its total liabilities.

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In addition, the Company is required to seek the prior approval of the Federal Reserve Bank before paying interest, principal or other sums on trust preferred securities or any related subordinated debentures, declaring or paying cash dividends or taking dividends from the Bank, repurchasing outstanding stock or incurring indebtedness. The Company is also required to take certain remedial steps and submit plans and progress reports to the Federal Reserve Bank.

The Bank is also subject to individual minimum capital ratios established by the OCC requiring the Bank to continue to maintain a Leverage ratio at least equal to 8.50% of adjusted total assets, to continue to maintain Tier 1 Capital ratio at least equal to 9.50% of risk-weighted assets and to maintain a Total Capital ratio at least equal to 11.50% of risk-weighted assets. At June 30, 2014, the Bank met all of the three capital ratios established by the OCC as its Leverage ratio was 9.12%, its Tier 1 Capital ratio was 13.20%, and its Total Capital ratio was 14.45%.

The following table provides both the Company’s and the Bank’s risk-based capital ratios as of June 30, 2014 and December 31, 2013.

Regulatory Capital Levels

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective  Action Provision(1)
	Amount		Ratio			Amount		Ratio			Amount			Ratio
June 30, 2014
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	304,987		15.00	%	$	162,675		8.00	%			N/A
Sun National Bank		293,434		14.45			162,403		8.00		$	203,003			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		252,788		12.43			81,338		4.00				N/A
Sun National Bank		268,016		13.20			81,201		4.00			121,802			6.00
Leverage ratio:
Sun Bancorp, Inc.		252,788		8.59			117,764		4.00				N/A
Sun National Bank		268,016		9.12			117,571		4.00			146,964			5.00
December 31, 2013
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	332,295		14.41	%	$	184,494		8.00	%			N/A
Sun National Bank		314,107		13.65			184,070		8.00		$	230,088			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		284,781		12.34			92,247		4.00				N/A
Sun National Bank		285,257		12.40			92,035		4.00			138,053			6.00
Leverage ratio:
Sun Bancorp, Inc.		284,781		8.99			126,682		4.00				N/A
Sun National Bank		285,257		9.02			126,479		4.00			158,099			5.00

(1) Not applicable for bank holding companies.

On June 30, 2014, for regulatory capital purposes, the Company contributed $7.5 million in additional capital to the Bank.

At June 30, 2014 and December 31, 2013, although the Company and the Bank exceeded the regulatory minimum ratios for classification as “well capitalized,” due to the fact that it was subject to the OCC Agreement, it cannot be deemed “well capitalized.”

On July 2, 2013, the federal banking regulatory agencies, including the FRB and the OCC, approved the final Basel III capital rules for U.S. banking institutions.

The ability of the Bank to pay dividends to the Company is controlled by certain regulatory restrictions. Generally, dividends declared in a given year by a national bank are limited to its net profit, as defined by regulatory agencies, for that year, combined with its retained net income for the preceding two years, less any required transfer to surplus or to fund for the retirement of any preferred stock. In addition, a national bank may not pay any dividends in an amount greater than its undivided profits and a national bank may not declare any dividends if such declaration would leave the bank inadequately capitalized. Therefore, the ability of the Bank to

38

declare dividends will depend on its future net income and capital requirements. Also, banking regulators have indicated that national banks should generally pay dividends only out of current operating earnings. Following this guidance, the Bank would not be able to pay a dividend to the Company at June 30, 2014. Moreover, per the OCC Agreement and the Federal Reserve Bank requirements referenced above, a dividend may only be declared if it is in accordance with the approved capital plan, the Bank remains in compliance with the capital plan following the payment of the dividend and the dividend is approved by the OCC and the Federal Reserve Bank.

The Company’s capital securities qualify as Tier 1 capital under federal regulatory guidelines. These instruments are subject to a 25% capital limitation under risk-based capital guidelines developed by the FRB. Under FRB rules, restricted core capital elements, which are qualifying trust preferred securities, qualifying cumulative perpetual preferred stock (and related surplus) and certain minority interests in consolidated subsidiaries, are limited in the aggregate to no more than 25% of a bank holding company’s core capital elements (including restricted core capital elements), net of goodwill less any associated deferred tax liability. However, under the Dodd-Frank Act, bank holding companies are prohibited from including in their Tier 1 capital hybrid debt and equity securities, including trust preferred securities, issued on or after May 19, 2010. Any such instruments issued before May 19, 2010 by a bank holding company, such as the Company, with total consolidated assets of less than $15 billion as of December 31, 2009, may continue to be included as Tier 1 capital (subject to the 25% limitation). The portion that exceeds the 25 percent capital limitation qualifies as Tier 2, or supplementary capital of the Company. At June 30, 2014, $63.3 million of a total of $90.0 million in capital securities qualified as Tier 1 with $26.7 million qualifying as Tier 2.

On December 10, 2013, the FRB, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule, which prohibits an insured depository institution and its affiliates from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds. On January 14, 2014, these five federal agencies approved a related interim final rule pertaining to the ability of banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities.

The Bank’s deposits are insured to applicable limits by the FDIC. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Federal Deposit Insurance Act was amended to increase the maximum deposit insurance amount from $100,000 to $250,000.

FDIC assessment expense of $944 thousand and $1.1 million was recognized during the three months ended June 30, 2014 and 2013, respectively, and $2.0 million and $2.2 million during the six months ended June 30, 2014 and 2013, respectively.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q of the Company and the documents incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We are including this statement for the purpose of invoking those safe harbor provisions. Forward-looking statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These forward-looking statements may include, among other things:

• statements and assumptions relating to financial performance;

• statements relating to the anticipated effects on results of operations or financial condition from recent or future developments or events;

• statements relating to our business and growth strategies and our regulatory capital levels;

• statements relating to potential sales of our criticized and classified assets; and

• any other statements, projections or assumptions that are not historical facts.

Actual future results may differ materially from our forward-looking statements, and we qualify all forward-looking statements by various risks and uncertainties we face, some of which are beyond our control, as well as the assumptions underlying the statements, including, among others, the following factors:

• the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

• market volatility;

• the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs;

• the overall quality of the composition of our loan and securities portfolios;

• the market for criticized and classified assets that we may sell;

• legislative and regulatory changes, including the Dodd-Frank Act and impending regulations, changes in banking, securities and tax laws and regulations and their application by our regulators and changes in the scope and cost of FDIC insurance and other coverages;

• the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the FRB;

• inflation, interest rate, market and monetary fluctuations;

• fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas;

• the effect of and our compliance with the terms of the OCC Agreement and the Federal Reserve Bank requirements as well as compliance with the individual minimum capital ratios established for the Bank by the OCC;

• the results of examinations of us by the Federal Reserve Bank and of the Bank by the OCC, including the possibility that the OCC may, among other things, require the Bank to increase its allowance for loan losses or to write-down assets;

• our ability to control operating costs and expenses;

40

• our ability to manage delinquency rates;

• our ability to retain key members of our senior management team;

• the costs of litigation, including settlements and judgments;

• the increased competitive pressures among financial services companies;

• the timely development of and acceptance of new products and services and the perceived overall value of these products and services by businesses and consumers, including the features, pricing and quality compared to our competitors’ products and services;

• technological changes;

• acquisitions;

• changes in consumer and business spending, borrowing and saving habits and demand for financial services in our market area;

• adverse changes in securities markets;

• the inability of key third-party providers to perform their obligations to us;

• changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Financial Accounting Standards Board;

• war or terrorist activities;

• other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere herein or in the documents incorporated by reference herein and our other filings with the SEC; and

• our success at managing the risks involved in the foregoing.

Some of these and other factors are discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and in this Quarterly Report on Form 10-Q, under “Item 1A Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as such sections may be amended or supplemented herein or in other filings pursuant to the Exchange Act. The development of any or all of these factors could have an adverse impact on our financial position and results of operations.

Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference herein or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, unless otherwise required to do so by law or regulation. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed herein or in the documents incorporated by reference herein might not occur, and you should not put undue reliance on any forward-looking statements.

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NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q of the Company contains financial information prepared pursuant to methods other than in accordance with GAAP. Management uses these “non-GAAP” measures in their analysis of the Company’s performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period. The Company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management uses these measures to evaluate the underlying performance and efficiency of operations. Management believes these measures reflect core trends of the business.

Tax Equivalent Net Interest Income:

This Quarterly Report on Form 10-Q references tax-equivalent interest income. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three and six months ended June 30, 2014 were $166 thousand and $333 thousand, respectively. The fully taxable equivalent adjustment for the three and six months ended June 30, 2013 were $175 thousand and $387 thousand, respectively, for June 30, 2013. Tax-equivalent net interest income is net interest income plus the taxes that would have been paid had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax liabilities. The following table provides a reconciliation of tax equivalent net interest income to GAAP net interest income using a 35% tax rate:

For the Three Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	20,612	$	21,776
Effect of tax-exempt income		166		175
Net interest income, tax equivalent	$	20,778	$	21,951

For the Six Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	42,004	$	44,854
Effect of tax-exempt income		333		387
Net interest income, tax equivalent	$	42,337	$	45,241

Core Deposits:

Core deposits is calculated by excluding time deposits and brokered deposits from total deposits. The following table provides a reconciliation of core deposits to GAAP total deposits at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Total deposits	$	2,272,765	$	2,621,571
Less: Time deposits		422,634		506,770
Less: Brokered deposits		103,541		107,930
Core deposits	$	1,746,590	$	2,006,871

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(All dollar amounts presented in the tables are in thousands)

Overview

The Company is a bank holding company with an executive office in Mt. Laurel, New Jersey. The Bank is the Company’s principal subsidiary. Through the Bank, the Company provides commercial and consumer banking services. The Company offers a comprehensive array of lending, depository and financial services to its commercial and consumer customers throughout the marketplace. The Company funds its lending activities primarily through retail and brokered deposits, the scheduled maturities of its investment portfolio and other wholesale funding sources. As a financial institution with a primary focus on traditional banking activities, the Company generates the majority of its revenue through net interest income, which is defined as the difference between interest income earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon the Company’s ability to prudently manage the balance sheet for growth, combined with how successfully it maintains or increases net interest margin. The Company has historically generated revenue through fees earned on the various services and products offered to its customers and through sales of loans, primarily residential mortgages. Offsetting these revenue sources are provisions for credit losses on loans, operating expenses and income taxes.

The Company is in the middle of a comprehensive strategic restructuring to refocus on serving commercial borrowers in the communities in which the Bank operates. As a part of this restructuring, the origination and sale of residential mortgages will no longer be a source of revenue for the Bank.

On June 30, 2014, the Board of Directors of the Company and the Bank approved a comprehensive restructuring plan, which includes, among other things, the Bank exiting Sun Home Loans, its retail, consumer mortgage banking origination business and exiting its healthcare and asset-based lending businesses; the sale of seven branch offices in the Cape May County area; significant classified asset and operating expense reductions and declaration of a 1-for-5 reverse stock split. The Company also announced the consolidation of four additional branch offices, which is expected to be completed by the fourth quarter of 2014.

On July 2, 2014 the Company entered into a Purchase and Assumption Agreement (the “Purchase Agreement”) with Sturdy Savings Bank, pursuant to which the Bank agreed to sell certain assets and assume certain liabilities relating to seven branch offices in and around Cape May County, New Jersey. The Purchase Agreement provides for a purchase price equal to the sum of a deposit premium of 8.765% of the average daily closing balance of deposits for the 31 days prior to the closing date, the Company’s carrying amount of loans identified and approved by both parties, the aggregate amount of cash on hand and accrued interest on the loans acquired. The Purchase Agreement contains certain customary representations, warranties, indemnities and covenants of the parties, and is subject to termination in certain circumstances. The transaction is expected to be completed during the first quarter of 2015, subject to regulatory approvals and customary closing conditions. At June 30, 2014, the Company reclassified approximately $28.5 million of loans and $160.8 million of deposits to held-for-sale. Upon settlement after all accounts are identified for sale, the transaction is anticipated to include approximately $65 million of loans and $180 million of deposits.

As a result of the restructuring plan, the Company recorded approximately $2.7 million in severance and related benefit expenses in the three and six months ended June 30, 2014. In future reporting periods, the Company expects to report reduced levels of non-interest expense as the restructuring plan is implemented and reduced non-interest income as a result of the exit from Sun Home Loans.

At June 30, 2014, the Company had total assets of $2.89 billion, total liabilities of $2.67 billion and total shareholders’ equity of $227.7 million. The Company reported a net loss available to common shareholders of $24.2 million, or a loss of $0.28 per diluted share, for the quarter ended June 30, 2014.

The economic recovery has been slower than anticipated. Although interest rates have begun to rise slightly, they remained near historical lows. The unemployment rate in the U.S. declined to 6.2% in July 2014 from 6.7% in December 2013. Based upon initial estimates, the U.S. gross domestic product for the second quarter of 2014 increased at an annual rate of 4.0% as compared to 2.1% decrease in the 1st quarter of 2014. The growth in the second quarter was mainly driven by exports and real nonresidential fixed investments, which increased 9.5% and 5.5%, respectively, during the quarter. These increases were tempered by modest growth in personal consumption of 2.5% and private inventories of only 1.66%. At the state level, according to the latest South Jersey Business Survey produced by the Federal Reserve Bank, growth in business activity rebounded in the second quarter of 2014 as the region recovered from a sluggish first quarter. Additionally, employment showed signs of improvement in the second quarter of 2014, and optimism remains about increased hiring in the future. In Northern New Jersey, business activity is expected to continue to increase at a modest pace. Overall, New Jersey’s unemployment rate remains one of the highest in the U.S. but has declined in the past year and a half to 6.6% as of June 2014 from 9.0% as of December 2012.

At its latest meeting in June 2014, the FRB decided to keep the Federal Funds target rate unchanged in a continued effort to help stimulate economic growth. Since December 2008, the FRB has kept the Federal Funds rate, a key indicator of short-term rates such as credit card rates and home equity line of credit rates, at a range of 0.00%-0.25% with the intent of encouraging consumers and businesses to borrow and spend to help jump start the economy. The FRB expects to maintain the current target range through late 2014. However, some FRB officials have discussed the possibility of increasing rates as soon as 2015. While the FRB had previously considered a reduction in unemployment to 6.5% to be a signal to increase rates, that viewpoint has changed because a significant amount of the decrease in unemployment is associated with individuals exiting the workforce. In June 2014, the FRB’s tapering of its quantitative easing continued as monthly securities purchases starting in July 2014 were reduced by $10 billion to $35 billion per month.

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The continued uncertainty with the economy, together with the challenging regulatory environment, will continue to affect the Company and the markets in which it does business and may adversely impact the Company’s results in the future. The following discussion provides further detail on the financial condition and results of operations of the Company at and for the quarter ended June 30, 2014.

Critical Accounting Policies, Judgments and Estimates

The discussion and analysis of the financial condition and results of operations are based on the unaudited condensed consolidated financial statements, which are prepared in conformity with GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Management evaluates these estimates and assumptions on an ongoing basis, including those related to the allowance for loan losses, goodwill, intangible assets, income taxes, stock-based compensation and the fair value of financial instruments. Management bases its estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Allowance for Loan Losses. Through the Bank, the Company originates loans that it intends to hold for the foreseeable future or until maturity or repayment. The Company may not be able to collect all principal and interest due on these loans. The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio as of the balance sheet date. The determination of the allowance for loan losses requires management to make significant estimates with respect to the amounts and timing of losses and market and economic conditions. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral or estimated net realizable value. A provision for loan losses is charged to operations based on management’s evaluation of the estimated losses that have been incurred in the Company’s loan portfolio. It is the policy of management to provide for losses on unidentified loans in its portfolio in addition to classified loans.

Management monitors its allowance for loan losses on a monthly basis and makes adjustments to the allowance through the provision for loan losses as economic conditions and other pertinent factors warrant. The quarterly review and adjustment of the qualitative factors employed in the allowance methodology and the updating of historic loss and recovery experience allow for timely reaction to emerging conditions and trends. In this context, a series of qualitative factors are used in a methodology as a measurement of how current circumstances are affecting the loan portfolio. Included in these qualitative factors are:

• Levels of past due, classified and non-accrual loans, troubled debt restructurings and modifications;

• Nature and volume of loans;

• Historical loss trends;

• Changes in lending policies and procedures, underwriting standards, collections, and for commercial loans, the level of loans being approved with exceptions to policy;

• Experience, ability and depth of management and staff;

• National and local economic and business conditions, including various market segments;

• Quality of the Company’s loan review system and degree of Board oversight; and

• Effect of external factors, including the deterioration of collateral values, on the level of estimated credit losses in the current portfolio.

Additionally, for the commercial loan portfolio, historic loss and recovery experience over a three-year horizon, based on a rolling 12-quarter migration analysis, is taken into account for the quantitative factor component. For the non-commercial loan quantitative component, the average historic loss and recovery experience over a 12-quarter time period is utilized for the allowance calculation. In determining the allowance for loan losses, management has established both specific and general pooled allowances. Values assigned to the qualitative factors and those developed from historic loss and recovery experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans and those criticized and classified loans through the use of both a general pooled allowance and a specific allowance. In determining the appropriate level of the general pooled allowance, management makes estimates based on internal risk ratings, which take into account such factors as debt service coverage, loan-to-value ratios and external factors. Estimates are periodically measured against actual loss experience. A specific allowance is calculated on individually identified impaired loans. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historic loss and recovery experience and the qualitative factors described above.

As changes in the Company’s operating environment occur and as recent loss experience fluctuates, the factors for each category of loan based on type and risk rating will change to reflect current circumstances and the quality of the loan portfolio. Given that the components of the allowance are based partially on historical losses, recoveries and on risk rating changes in response to recent events, required reserves may trail the emergence of any unforeseen deterioration in credit quality.

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Although the Company maintains its allowance for loan losses at levels considered adequate to provide for the inherent risk of loss in its loan portfolio, if economic conditions differ substantially from the assumptions used in making the evaluations, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods. Accordingly, the current state of the national economy and local economies of the areas in which the loans are concentrated and their slow recovery from a severe recession could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods. In addition, the Company’s determination as to the amount of its allowance for loan losses is subject to review by the Bank’s primary regulator, the OCC, as part of its examination process, which may result in the establishment of an additional allowance based upon the judgment of the OCC after a review of the information available at the time of the OCC examination.

Accounting for Income Taxes. The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. (“FASB ASC 740”). FASB ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management exercises significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based upon changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the unaudited condensed consolidated statements of operations. Assessment of uncertain tax positions under FASB ASC 740 requires careful consideration of the technical merits of a position based on management’s analysis of tax regulations and interpretations. Significant judgment may be involved in applying the requirements of FASB ASC 740.

Management expects that the Company’s adherence to FASB ASC 740 may result in increased volatility in quarterly and annual effective income tax rates, as FASB ASC 740 requires that any change in judgment or change in measurement of a tax position taken in a prior period be recognized as a discrete event in the period in which it occurs. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies.

Fair Value Measurement. The Company accounts for fair value measurement in accordance with FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 establishes a framework for measuring fair value. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, emphasizing that fair value is a market-based measurement and not an entity-specific measurement. FASB ASC 820 clarifies the application of fair value measurement in a market that is not active. FASB ASC 820 also includes additional factors for determining whether there has been a significant decrease in market activity, affirms the objective of fair value when a market is not active, eliminates the presumption that all transactions are not orderly unless proven otherwise, and requires an entity to disclose inputs and valuation techniques, and changes therein, used to measure fair value. FASB ASC 820 addresses the valuation techniques used to measure fair value. These valuation techniques include the market approach, income approach and cost approach. The market approach uses price or relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach involves converting future amounts to a single present value. The measurement is valued based on current market expectations about those future amounts. The cost approach is based on the amount that currently would be required to replace the service capacity of the asset.

FASB ASC 820 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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The Company’s policy is to recognize transfers that occur between the fair value hierarchy, Levels 1, 2 and 3, at the beginning of the quarter of when the transfer occurred.

Investment securities available for sale. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated using quoted prices of securities with similar characteristics or discounted cash flows based on observable market inputs and are classified within Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Level 3 market value measurements include an internally developed discounted cash flow model combined with using market data points of similar securities with comparable credit ratings in addition to market yield curves with similar maturities in determining the discount rate. In addition, significant estimates and unobservable inputs are required in the determination of Level 3 market value measurements. If actual results differ significantly from the estimates and inputs applied, it could have a material effect on the Company’s unaudited condensed consolidated financial statements.

Derivative financial instruments. The Company’s derivative financial instruments are not exchange-traded and therefore are valued utilizing models that use as their basis readily observable market parameters, specifically the LIBOR swap curve, and are classified within Level 2 of the valuation hierarchy.

Residential mortgage loans held-for-sale. The Company’s residential mortgage loans held-for-sale are recorded at fair value utilizing Level 2 measurements. This fair value measurement is determined based upon third party quotes obtained on similar loans.

The Company adopted the fair value option on these loans which allows the Company to record the mortgage loans held-for-sale portfolio at fair market value as opposed to the lower of cost or market. The Company economically hedges its residential loans held-for-sale portfolio with forward sale agreements which are reported at fair value. A lower of cost or market accounting treatment would not allow the Company to record the excess of the fair market value over book value but would require the Company to record the corresponding reduction in value on the hedges. Both the loans and related hedges are carried at fair value which reduces earnings volatility as the amounts more closely offset, particularly in environments in which interest rates are declining. For loans held-for-sale for which the fair value option has been elected, the aggregate fair value exceeded the aggregate principal balance by $278 thousand as of June 30, 2014 and $312 thousand at December 31, 2013.

Interest rate lock commitments on residential mortgages. The Company enters into interest rate lock commitments on its residential mortgage loans originated for sale. The determination of the fair value of interest rate lock commitments is based on agreed upon pricing with the respective investor on each loan and includes a pull through percentage. The pull through percentage represents an estimate of loans in the pipeline to be delivered to an investor versus the total loans committed for delivery. Significant changes in this input could result in a significantly higher or lower fair value measurement. As the pull through percentage is a significant unobservable input, this is deemed a Level 3 valuation input. The pull through percentage, which is based upon historical experience, was 75% as of June 30, 2014.

In addition, certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures loans held-for-sale, impaired loans, SBA servicing assets, restricted equity investments and loans or bank properties transferred in other real estate owned at fair value on a non-recurring basis.

Valuation techniques and models utilized for measuring financial assets and liabilities are reviewed and validated by the Company at least quarterly.

Goodwill. Goodwill is the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. FASB ASC 350-20-35, Intangibles – Goodwill and Other – Goodwill, outlines a two-step goodwill impairment test. Significant judgment is applied when goodwill is assessed for impairment. Step one, which is used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. As defined in FASB ASC 280, Segment Reporting, a reporting unit is an operating segment or one level below an operating segment. The Company has one reportable operating segment, “Community Banking”, as noted in Note 1 of the notes to the unaudited condensed consolidated financial statements. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired and step two is therefore unnecessary. If the carrying amount of the reporting unit exceeds it implied fair value, the second step is performed to measure the amount of the impairment loss, if any. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company typically evaluates its goodwill for impairment annually at December 31, unless circumstances indicate that a test is required at an earlier date.

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Recent Accounting Principles.

In June 2014, the FASB issued ASU 2014-11: Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The accounting changes in the amendment affect all entities that enter into repurchase-to-maturity transactions or repurchase financings. The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting and for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty which will result in secured borrowing accounting for the repurchase agreement. All entities are subject to new disclosure requirements for certain transactions that involve a transfer of a financial asset accounted for as a sale. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In May 2014, the FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606): Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40), Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables, Background Information and Basis for Conclusions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the considerations to which the entity expects to be entitled in exchange for those goods or services. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standards update of its financial statements.

In January 2014, the FASB issued ASU 2014-4, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For public entities, the amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In July 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this update seek to eliminate the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists by presenting the unrecognized tax benefit, or a portion of the unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset. To the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward are not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. The Company has evaluated the impact of the adoption of this accounting standards update on its financial statements and determined that there currently is no impact to the Company’s presentation.

Financial Condition

Total assets were $2.89 billion at June 30, 2014 as compared to $3.09 billion at December 31, 2013. Loans receivable, net of allowance for loan losses, decreased $274.4 million to $1.83 billion at June 30, 2014 as compared to $2.10 billion at December 31, 2013. This was driven by a decrease of $223.6 million in commercial loans due to the sale of $71.1 million of problem commercial loans combined with commercial loan payoffs. Also, there was a decrease of $23.6 million in consumer loans due to $24.4 million of problem consumer loans being moved to held-for-sale at lower of cost

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or market and a decrease of $22.8 million home equity loans. Commercial loan production has been slow due to a competitive environment and the Company maintaining a very selective approach to new loan relationships. The Company has positioned itself to take advantage of a rising interest rate environment with an asset sensitive balance sheet.

Total liabilities decreased $175.2 million, or 6.2%, to $2.67 billion at June 30, 2014, compared to $2.84 billion at December 31, 2013. The decrease in total liabilities is primarily attributable to a decrease of $188.0 million in total deposits. Shareholders’ equity decreased $17.7 million, or 7.2%, to $227.7 million at June 30, 2014, as compared to $245.3 million at December 31, 2013, with the decrease primarily attributable to a net loss for the six months ended June 30, 2014 of $26.2 million and a decrease in additional paid in capital of $5.1 million. These decreases were partially offset by decreases in comprehensive loss of $6.7 million and $6.8 million in treasury stock due to common stock issuances out of treasury.

As of June 30, 2014, the Company had $48.7 million outstanding on 13 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. As of December 31, 2013, the Company had $54.5 million outstanding on 17 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. The total amount available in those reserves to fund interest payments was $3.3 million and $4.3 million at June 30, 2014 and December 31, 2013, respectively. There were no relationships with interest reserves which were on non-accrual status at June 30, 2014 and December 31, 2013. Construction projects are monitored throughout their lives by professional inspectors engaged by the Company. The budgets for loan advances and borrower equity injections are developed at the time of underwriting in conjunction with the review of the plans and specifications for the project being financed. Advances of the Company’s funds are based on the prepared budgets and will not be made unless the project has been inspected by the Company’s professional inspector who must certify that the work related to the advance is in place and properly completed. As it relates to construction project financing, the Company does not extend, renew or restructure terms unless its borrower posts cash collateral in an interest reserve.

Table 1 provides detail regarding the Company’s non-performing assets and TDRs at June 30, 2014 and December 31, 2013.

Table 1: Summary of Non-performing Assets and TDRs

	June 30, 2014		December 31, 2013
Non-performing assets:
Non-accrual loans	$	13,470	$	29,814
Non-accrual loans held-for-sale		4,086
Troubled debt restructuring, non-accruing		583		8,163
Loans past due 90 days and accruing		—		—
Real estate owned, net		1,327		2,503
Total non-performing assets	$	19,466	$	40,480

The Company’s allowance for losses on loans decreased to $28.4 million, or 1.53% of gross loans held-for-investment, at June 30, 2014 from $35.5 million, or 1.66% of gross loans held-for-investment, at December 31, 2013. Provision expense of $14.8 million was recorded during the six months ended June 30, 2014 compared to negative provision of $1.7 million for the same period in 2013. The decrease in reserve balances is due to net charge-offs of $21.9 million and the $14.8 million provision expense for that period. The charge-offs were primarily driven by loan sales, which occurred during the quarter ended June 30, 2014. Across the commercial and consumer loan portfolio, the Company continues to closely monitor areas of weakness and take expedient and appropriate action as necessary to ensure adequate reserves are in place to absorb losses inherent in the loan portfolio.

Total non-performing loans held-for-investment decreased $23.9 million to $14.1 million at June 30, 2014 from $38.0 million at December 31, 2013. Total non-accruing TDRs at June 30, 2014 were $584 thousand, a decrease of $7.6 million from December 31, 2013.

Real estate owned, net decreased $1.2 million to $1.3 million at June 30, 2014 as compared to $2.5 million at December 31, 2013. During the six months ended June 30, 2014, the Company transferred four residential properties totaling $567 thousand from loans into real estate owned. During the same period, the Company recorded $265 thousand of write-downs of real estate owned, of which $68 thousand related to two residential properties and $197 thousand related to one commercial property. There were 13 residential properties with a total carrying amount of $1.5 million sold resulting in a net loss of $252 thousand. At June 30, 2014, the Company had six properties in the real estate owned portfolio.

The net deferred tax asset decreased $5.4 million from December 31, 2013 to a net deferred tax liability of $796 thousand at June 30, 2014 due to a decrease in the unrealized losses on investment securities. The Company maintains a valuation allowance of $131.0 million against the remaining portion of the gross deferred tax asset as the Company is a three-year cumulative loss company and it is more likely than not that the full deferred tax asset will not be realized.

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Investment securities available for sale decreased $3.1 million, or 0.7%, from $440.1 million at December 31, 2013 to $437.0 million at June 30, 2014 due primarily to investment sales and calls of $28.4 million, partially offset by purchases of $25.9 million. Investment securities held to maturity decreased $45 thousand, or 6.6%, from $681 thousand at December 31, 2013 to $636 thousand at June 30, 2014.

Other assets decreased $7.0 million, or 20.8%, to $26.7 million at June 30, 2014 from $33.7 million at December 31, 2013. This decrease was primarily the result of $6.5 million in market value adjustments on swap transactions recorded during the six months ended June 30, 2014. For more information on the Company’s financial derivative instruments, see Note 8 of the notes to unaudited condensed consolidated financial statements.

Total borrowings, excluding debentures held by trusts, decreased $31 thousand from $68.8 million at December 31, 2013 to $68.7 million at June 30, 2014.

Other liabilities increased $12.1 million, or 20.4%, to $71.2 million at June 30, 2014 from $59.1 million at December 31, 2013. The increase was primarily due to a trade date liability of $10.0 million recorded at June 30, 2014 for the purchase of an investment security and an increase of $3.4 million relating to normal cash settlements with the Federal Reserve Bank, partially offset by a decrease of $6.3 million in market value adjustments on swap transactions since December 31, 2013.

Comparison of Operating Results for the Three Months Ended June 30, 2014 and 2013

Overview. The Company’s net loss available to shareholders for the three months ended June 30, 2014 was $24.2 million, or a loss of $0.28 per common share, compared to net income of $678 thousand, or $0.01 per common share, for the same period in 2013. During the three months ended June 30, 2014, the Company had provision expense of $14.8 million, as compared to negative provision of $1.9 million in the same prior year period, primarily due to commercial loan sale losses in the 2014 period. During the three months ended June 30, 2014 and 2013, the Company recorded mortgage banking revenue of $529 thousand and $5.6 million, respectively. This decrease was due to lower production volume during the three months ended June 30, 2014, in a higher interest rate environment.

Net Interest Income. Net interest income is the most significant component of the Company’s income from operations. Net interest income is the difference between interest earned on total interest-earning assets (primarily loans and investment securities), on a fully taxable equivalent basis, where appropriate, and interest paid on total interest-bearing liabilities (primarily deposits and borrowed funds). Fully taxable equivalent basis represents income on total interest-earning assets that is either tax-exempt or taxed at a reduced rate, adjusted to give effect to the prevailing incremental federal tax rate, and adjusted for nondeductible carrying costs and state income taxes, where applicable. Yield calculations, where appropriate, include these adjustments. Net interest income depends on the volume and interest rate earned on interest-earning assets and the volume and interest rate paid on interest-bearing liabilities.

Net interest income, on a tax-equivalent basis, decreased $1.2 million to $20.8 million for the three months ended June 30, 2014, from $22.0 million for the same period in 2013.

Tax equivalent interest income decreased $1.9 million, or 7.5%, from $25.9 million for the three months ended June 30, 2013, to $23.9 million for the three months ended June 30, 2014. Compared to the comparable prior year quarter, average total loans receivable decreased $229.6 million, which resulted in a decrease in interest income on loans of $2.9 million and the yield on total loans decreased nine basis points. This decrease was partially offset by an increase of $972 thousand in interest income from investments which was primarily due to an increase of 53 basis points in yield from the three months ended June 30, 2013 to the three months ended June 30, 2014.

Interest expense decreased $772 thousand, or 19.6%, for the three months ended June 30, 2014, as compared to the same period in 2013. The decrease was primarily rate driven. The cost of interest-bearing deposit accounts decreased nine basis points compared to the prior year period resulting in a decrease in interest expense of $756 thousand.

The interest rate spread and net interest margin for the three months ended June 30, 2014 were 2.89% and 3.03%, respectively, compared to 2.83% and 2.96%, respectively, for the same period in 2013.

Table 2 provides detail regarding the Company’s average daily balances with corresponding interest income (on a tax-equivalent basis) and interest expense as well as yield and cost information for the three months ended June 30, 2014 and 2013. Average balances are derived from daily balances.

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Table 2: Average Balance Sheets

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)

	For the Three Months Ended June 30,
	2014							2013
	Average Balance		Income/ Expense		Yield/ Cost			Average Balance		Income/ Expense		Yield/ Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,480,491	$	15,385		4.16	%	$	1,719,278	$	18,622		4.33	%
Home equity		185,710		1,777		3.83			197,237		1,911		3.88
Second mortgage		24,358		326		5.35			28,679		432		6.03
Residential real estate		338,028		3,187		3.77			307,248		2,485		3.24
Other		23,196		391		6.74			28,929		495		6.84
Total loans receivable		2,051,783		21,066		4.11			2,281,371		23,945		4.20
Investment securities(3)		451,477		2,723		2.41			373,311		1,751		1.88
Interest-earning bank balances		243,052		154		0.25			307,348		192		0.25
Total interest-earning assets		2,746,312		23,943		3.49			2,962,030		25,888		3.50
Non-interest earning assets:
Cash and due from banks		41,196							44,968
Restricted Cash		26,000							26,000
Bank properties and equipment, net		47,586							49,192
Goodwill and intangible assets, net		38,568							40,256
Other assets		82,765							99,607
Total non-interest-earning assets		236,115							260,023
Total assets	$	2,982,427						$	3,222,053
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,099,385	$	790		0.29	%	$	1,244,074		1,094		0.35	%
Savings deposits		264,386		177		0.27			269,624		220		0.33
Time deposits		582,840		1,223		0.84			677,738		1,632		0.96
Total interest-bearing deposit accounts		1,946,611		2,190		0.45			2,191,436		2,946		0.54
Short-term borrowings:
Securities sold under agreements to repurchase—customers		598		—		0.09			2,304		1		0.17
Long-term borrowings:
FHLBNY advances (4)		60,887		315		2.07			61,051		318		2.08
Obligations under capital lease		7,221		127		7.04			7,504		125		6.66
Junior subordinated debentures		92,786		533		2.30			92,786		547		2.36
Total borrowings		161,492		975		2.41			163,645		991		2.42
Total interest-bearing liabilities		2,108,103		3,165		0.60			2,355,081		3,937		0.67
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		573,290							531,210
Other liabilities		46,918							72,654
Total non-interest bearing liabilities		620,208							603,864
Total liabilities		2,728,311							2,958,945
Shareholders’ equity		254,116							263,108
Total liabilities and shareholders’ equity	$	2,982,427						$	3,222,053
Net interest income			$	20,778						$	21,951
Interest rate spread (5)						2.89	%						2.83	%
Net interest margin (6)						3.03	%						2.96	%
Ratio of average interest-earning assets to average interest-bearing liabilities						130.27	%						125.77	%

(1) Average balances include non-accrual loans, loans held-for-sale, branch assets held-for-sale and deposits held-for-sale.

(2) Loan fees are included in interest income and the amount is not material for this analysis.

(3) Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended June 30, 2014 and 2013 were $166 thousand and $175 thousand, respectively.

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(4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase—FHLBNY.

(5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.

Table 3: Rate/Volume⁽¹⁾

	For the Three Months Ended June 30, 2014 vs. 2013
	Increase (Decrease) Due To
	Volume			Rate			Net
Interest income:
Loans receivable:
Commercial and industrial	$	(2,505	)	$	(732	)	$	(3,237	)
Home equity lines of credit		(111	)		(23	)		(134	)
Home equity term loan		(61	)		(45	)		(106	)
Residential real estate		264			438			702
Other		(97	)		(7	)		(104	)
Total loans receivable		(2,510	)		(369	)		(2,879	)
Investment securities		417			520			937
Interest-earning deposits with banks		(41	)		3			(38	)
Total interest-earning assets		(2,134	)		154			(1,980	)
Interest expense:
Interest-bearing deposit accounts:
Interest-bearing demand deposits		(118	)		(186	)		(304	)
Savings deposits		(4	)		(39	)		(43	)
Time deposits		(213	)		(196	)		(409	)
Total interest-bearing deposit accounts		(335	)		(421	)		(756	)
Short-term borrowings:
Securities sold under agreements to repurchase—customers		—			—			—
Long-term borrowings:
FHLBNY advances(2)		(1	)		(2	)		(3	)
Obligations under capital lease		—			(14	)		(14	)
Junior subordinated debentures		(5	)		7			2
Total borrowings		(6	)		(9	)		(15	)
Total interest-bearing liabilities		(341	)		(430	)		(771	)
Net change in net interest income	$	(1,793	)	$	584		$	(1,209	)

(1) For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in average volume multiplied by old rate) and (ii) changes in rate (changes in rate multiplied by old average volume). The combined effect of changes in both volume and rate has been allocated to volume or rate changes in proportion to the absolute dollar amounts of the change in each.

(2) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase – FHLBNY.

Provision for Loan Losses. The Company recorded a provision of $14.8 million for loan losses during the three months ended June 30, 2014, as compared to negative provision expense of $1.9 million for the same period in 2013. In the three months ended June 30, 2014, the Company recorded provision expense of $14.0 million related to commercial loan sales of $71.1 million and the transfer of $24.4 million in consumer loans to held-for-sale. Total non-performing loans held-for-investment decreased $23.9 million from $38.0 million at December 31, 2013 to $14.1 million at June 30, 2014. The ratio of allowance for loan losses to gross loans held-for-investment was 1.53% at June 30, 2014, as compared to 1.66% at December 31, 2013. Net charge-offs for the three months ended June 30, 2014 were $20.2 million as compared to net recoveries of $2.8 million during the same period in 2013.

The provision recorded is the amount deemed appropriate by management based on the current risk profile of the portfolio to absorb losses existing at the balance sheet date. At least monthly, management performs an analysis to identify the inherent risk of loss in the Company’s loan portfolio. This analysis includes a qualitative evaluation of concentrations of credit, past loss experience, current economic conditions, amount and composition of the loan portfolio (including loans being specifically monitored by management), estimated fair value of underlying collateral, delinquencies, and other factors. Additionally, management updates the migration analysis and historic loss and recovery experience on a quarterly basis.

Non-Interest Income. Non-interest income decreased $6.3 million to $4.0 million for the three months ended June 30, 2014, as compared to $10.3 million for the same period in 2013. This decrease was primarily attributable to a decrease in mortgage banking revenue, net of $5.1 million due to a decline in residential mortgage production volume resulting from rising interest rates as well as a $1.2 million decline in the derivative credit adjustment primarily due to swap termination fees of $1.4 million, recorded in the three months ended June 30, 2014, associated with the commercial loan sales.

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Non-Interest Expense. Non-interest expense increased $438 thousand to $33.7 million for the three months ended June 30, 2014 as compared to $33.2 million for the same period in 2013. This increase was primarily due to increases in salaries and employee benefits expense of $3.0 million and other non-interest expense of $1.9 million, partially offset by decreases in commission expense of $1.7 million and professional fees of $2.4 million. The increase in salaries and employee benefits expense was due to severance and benefit accruals, the payment part of which is pending regulatory approval, associated with the Company’s reduction in force of 242 full-time employees that occurred in connection with the initial implementation of the Company’s comprehensive strategic restructuring plan and closing of Sun Home Loans. Other non-interest expense increased primarily as a result of loan sale transaction fees. Commission expense declined due to reduced mortgage origination volume and professional fees declined significantly as the Company reduced its reliance on external consultants for operational infrastructure improvements and regulatory remediation.

Comparison of Operating Results for the Six Months Ended June 30, 2014 and 2013

Overview. The Company recognized net loss available to shareholders for the six months ended June 30, 2014 of $26.2 million, or $0.30 per common share, compared to net income of $3.1 million, or $0.04 per common share, for the same period in 2013. During the six months ended June 30, 2014 and 2013, the Company recorded a loan loss provision of $14.8 million and negative provision of $1.7 million, respectively.

Net Interest Income. Net interest income, on a tax-equivalent basis, decreased $2.9 million to $42.3 million for the six months ended June 30, 2014, from $45.2 million for the same period in 2013.

Tax equivalent interest income decreased $4.4 million, or 8.3%, from $53.2 million for the six months ended June 30, 2013, to $48.7 million for the six months ended June 30, 2014. Average total loans receivable decreased $220.7 million, which resulted in a decrease in interest income on loans of $5.9 million and the yield on total loans decreased 12 basis points, from the six months ended June 30, 2013 to the same period in 2014. This decrease was partially offset by an increase of $1.5 million in interest income from investments, which was primarily due to an increase of 43 basis points in the yield from the six months ended June 30, 2013 to the six months ended June 30, 2014.

Interest expense decreased $1.5 million, or 19.3%, for the six months ended June 30, 2014, as compared to the same period in 2013. The decrease was primarily rate driven as the cost of interest-bearing deposits decreased nine basis points from 0.54% at June 30, 2013 to 0.45% at June 30, 2014.

The interest rate spread and net interest margin for the six months ended June 30, 2014 were 2.91% and 3.05%, respectively, compared to 2.93% and 3.06%, respectively, for the same period in 2013.

Table 4 provides detail regarding the Company’s average daily balances with corresponding interest income (on a tax-equivalent basis) and interest expense as well as yield and cost information for the six months ended June 30, 2014 and 2013. Average balances are derived from daily balances.

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Table 4: Average Balance Sheets

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)

	For the Six Months Ended June 30,
	2014							2013
	Average Balance		Income/ Expense		Yield/ Cost			Average Balance		Income/ Expense		Yield/ Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,520,246	$	31,735		4.17	%	$	1,731,846	$	37,581		4.34	%
Home equity		186,377		3,539		3.80			200,755		3,817		3.80
Second mortgage		24,609		683		5.55			29,508		860		5.83
Residential real estate		334,749		6,145		3.67			319,017		5,556		3.48
Other		24,100		814		6.76			29,665		1,030		6.94
Total loans receivable		2,090,081		42,916		4.11			2,310,791		48,844		4.23
Investment securities (3)		454,590		5,541		2.44			400,516		4,035		2.01
Interest-earning bank balances		231,645		292		0.25			243,658		303		0.25
Total interest-earning assets		2,776,316		48,749		3.51			2,954,965		53,182		3.60
Non-interest earning assets:
Cash and due from banks		41,269							45,867
Restricted Cash		26,000							26,000
Bank properties and equipment, net		48,093							49,774
Goodwill and intangible assets, net		38,709							40,618
Other assets		85,303							97,114
Total non-interest-earning assets		239,374							259,373
Total assets	$	3,015,690						$	3,214,338
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,124,284	$	1,597		0.28	%	$	1,242,974	$	2,205		0.35	%
Savings deposits		265,837		357		0.27			267,519		435		0.33
Time deposits		595,459		2,515		0.84			683,431		3,321		0.97
Total interest-bearing deposit accounts		1,985,580		4,469		0.45			2,193,924		5,961		0.54
Short-term borrowings:
Federal funds purchased		—		—		—			—		—		—
Securities sold under agreements to repurchase—customers		502		—		0.08			2,613		2		0.15
Long-term borrowings:
FHLBNY advances (4)		60,908		628		2.06			61,105		634		2.08
Obligations under capital lease		7,257		250		6.89			7,538		251		6.66
Junior subordinated debentures		92,786		1,065		2.30			92,786		1,093		2.36
Total borrowings		161,453		1,943		2.41			164,042		1,980		2.41
Total interest-bearing liabilities		2,147,033		6,412		0.60			2,357,966		7,941		0.67
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		566,486							518,973
Other liabilities		49,631							74,310
Total non-interest bearing liabilities		616,117							593,283
Total liabilities		2,763,150							2,951,249
Shareholders’ equity		252,540							263,090
Total liabilities and shareholders’ equity	$	3,015,690						$	3,214,339
Net interest income			$	42,337						$	45,241
Interest rate spread (5)						2.91	%						2.93	%
Net interest margin (6)						3.05	%						3.06	%
Ratio of average interest-earning assets to average interest-bearing liabilities						129.31	%						125.32	%

(1) Average balances include non-accrual loans, loans held-for-sale, branch assets held-for-sale and deposits held-for-sale.

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(2) Loan fees are included in interest income and the amount is not material for this analysis.

(3) Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the six months ended June 30, 2014 and 2013 were $333 thousand and $387 thousand, respectively.

(4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase—FHLBNY.

(5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.

Table 5: Rate/Volume⁽¹⁾

	For the Six Months Ended June 30, 2014 vs. 2013
	Increase (Decrease) Due To
	Volume			Rate			Net
Interest income:
Loans receivable:
Commercial and industrial	$	(4,459	)	$	(1,387	)	$	(5,846	)
Home equity lines of credit		(273	)		(5	)		(278	)
Home equity term loan		(137	)		(40	)		(177	)
Residential real estate		281			308			589
Other		(189	)		(27	)		(216	)
Total loans receivable		(4,777	)		(1,151	)		(5,928	)
Investment securities		568			1,114			1,682
Interest-earning deposits with banks		(15	)		4			(11	)
Total interest-earning assets		(4,224	)		(33	)		(4,257	)
Interest expense:
Interest-bearing deposit accounts:
Interest-bearing demand deposits		(197	)		(411	)		(608	)
Savings deposits		(3	)		(75	)		(78	)
Time deposits		(400	)		(406	)		(806	)
Total interest-bearing deposit accounts		(600	)		(892	)		(1,492	)
Short-term borrowings:
Federal funds purchased		—			—			—
Securities sold under agreements to repurchase—customers		(2	)		—			(2	)
Long-term borrowings:
FHLBNY advances(2)		(2	)		(4	)		(6	)
Obligations under capital lease		(9	)		8			(1	)
Junior subordinated debentures		—			(28	)		(28	)
Total borrowings		(13	)		(24	)		(37	)
Total interest-bearing liabilities		(613	)		(916	)		(1,529	)
Net change in net interest income	$	(3,611	)	$	883		$	(2,728	)

(1) For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in average volume multiplied by old rate) and (ii) changes in rate (changes in rate multiplied by old average volume). The combined effect of changes in both volume and rate has been allocated to volume or rate changes in proportion to the absolute dollar amounts of the change in each.

(2) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase – FHLBNY.

Provision for Loan Losses. The Company recorded provision expense of $14.8 million during the six months ended June 30, 2014, as compared to negative provision of $1.7 million for the same period in 2013. In the three months ended June 30, 2014, the Company recorded provision expense of $14.0 million related to commercial loan sales of $71.1 million and the transfer of $24.4 million in consumer loans to held-for-sale. Total non-performing loans held-for-investment decreased $23.9 million from $38.0 million at December 31, 2013 to $14.1 million at June 30, 2014. The ratio of allowance for loan losses to gross loans receivable was 1.53% at June 30, 2014 as compared to 1.66% at December 31, 2013. Net charge-offs for the six months ended June 30, 2014 were $21.9 million as compared to net recoveries of $3.8 million during the same period in 2013.

The provision recorded is the amount deemed appropriate by management based on the current risk profile of the portfolio to absorb losses existing at the balance sheet date. At least monthly, management performs an analysis to identify the inherent risk of loss in the Company’s loan portfolio. This analysis includes a qualitative evaluation of concentrations of credit, past loss experience, current economic conditions, amount and composition of the loan portfolio (including loans being specifically monitored by management), estimated fair value of underlying collateral, delinquencies, and other factors. Additionally, management updates the migration analysis and historic loss and recovery experience on a quarterly basis.

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Non-Interest Income. Non-interest income decreased $12.2 million to $8.9 million for the six months ended June 30, 2014, as compared to $21.1 million for the same period in 2013. During the six months ended June 30, 2014, the Company recorded $1.2 million of mortgage banking revenue, net, a decrease of $7.8 million compared to the prior year period, due to a significant volume reduction in the Company’s mortgage operations. The decrease was also driven by a $3.4 million decrease in gain on sale of investment securities from $3.5 million recorded during the six months ended June 30, 2013 to $50 thousand recorded during the six months ended June 30, 2014.

Non-Interest Expense. Non-interest expense decreased $3.0 million to $61.6 million for the six months ended June 30, 2014 as compared to $64.6 million for the same period in 2013. The decrease was primarily due to decreases of $3.7 million in professional fees and $2.9 million in commission expense, partially offset by increases of $2.2 million in other non-interest expense and $1.6 million in salaries and employee benefits expense. The increase in salaries and employee benefits expense was due to severance and benefit accruals associated with the Company’s reduction in force. Other non-interest expense increased primarily as a result of loan sale transaction fees. Commission expense declined due to reduced mortgage origination volume and professional fees declined significantly as the Company reduced its reliance on external consultants for operational infrastructure improvements and regulatory remediation.

Liquidity and Capital Resources

The liquidity of the Company is the ability to maintain cash flows that are adequate to fund operations and meet its other obligations on a timely and cost-effective basis in various market conditions. The ability of the Company to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets and the availability of alternative sources of funds. To meet the needs of the clients and manage the risk of the Company, the Company engages in liquidity planning and management.

The major source of the Company’s funding on a consolidated basis 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, loan sales or participations and maturities or calls of investment securities. Additional liquidity can be obtained in a variety of wholesale funding sources as well, including, but not limited to, federal funds purchased, FHLBNY advances, securities sold under agreements to repurchase, and other securities and unsecured borrowings. Through the Bank, the Company also purchases brokered deposits for funding purposes; however, this funding source is currently limited to 6.0% of the Bank’s total liabilities in accordance with a written agreement between the Bank and the OCC and the OCC’s subsequent approved increase in the limit on brokered deposits, as discussed later in this section. In a continued effort to balance deposit growth and net interest margin, especially in the current interest rate environment and with competitive local deposit pricing, the Company continually evaluates these other funding sources for funding cost efficiencies. Deposit rates continued to decrease in 2014, but at a rate slower than in previous quarters. Core deposits, which exclude all certificates of deposit, decreased by $260.3 million to $1.75 billion, or 76.8% of total deposits at June 30, 2014, as compared to $2.01 billion, or 76.6% of total deposits at December 31, 2013. This decrease was primarily due to the reclassification of $160.8 million of deposits to deposits held-for-sale on the unaudited condensed consolidated statements of financial condition at June 30, 2014 as well as planned declines in public funds deposits. The Company has additional secured borrowing capacity with the Federal Reserve Bank of approximately $141.4 million, of which none was utilized, and the FHLBNY of approximately $174.4 million, of which $60.9 million was utilized. In addition to secured borrowings, the Company also has unsecured borrowing capacity through lines of credit with other financial institutions of $35.0 million, of which none were utilized as of June 30, 2014. Management continues to monitor the Company’s liquidity and has taken measures to increase its borrowing capacity by providing additional collateral through the pledging of loans. As of June 30, 2014, the Company had a par value of $198.9 million and $172.6 million in loans and securities, respectively, pledged as collateral on secured borrowings.

The Company’s primary uses of funds are the origination of loans, the funding of the Company’s maturing certificates of deposit, deposit withdrawals, the repayment of borrowings and general operating expenses. Certificates of deposit scheduled to mature during the 12 months ending June 30, 2015 total $353.8 million, or approximately 63.45% of total certificates of deposit. The Company continues to operate with a core deposit relationship strategy that values a long-term stable customer relationship. This strategy employs a pricing strategy that rewards customers that establish core accounts and maintain a certain minimum threshold account balance. Based on market conditions and other liquidity considerations, the Company may also avail itself to the secondary borrowings discussed above.

The Company anticipates that deposits, cash and cash equivalents on hand, the cash flow from assets, as well as other sources of funds will provide adequate liquidity for the Company’s future operating, investing and financing needs.

The Bank’s deposits are insured to applicable limits by the FDIC. Pursuant to the Dodd-Frank Act, the Federal Deposit Insurance Act was amended to increase the maximum deposit insurance amount from $100,000 to $250,000.

On April 15, 2010, the Bank entered into the OCC Agreement which contained requirements to develop and implement a profitability and capital plan which provides for the maintenance of adequate capital to support the Bank’s risk profile in the current economic environment. The capital plan was required to contain a dividend policy allowing

55

dividends only if the Bank is in compliance with the capital plan, and obtains prior approval from the OCC. In addition, we are required to seek the prior approval of the Federal Reserve Bank before paying interest, principal or other sums on trust preferred securities or any related subordinated debentures, declaring or paying cash dividends or taking dividends from the Bank, repurchasing outstanding stock or incurring indebtedness. The Company is also required to take certain remedial steps and submit plans and progress reports to the Federal Reserve Bank. All requirements noted above were met as of June 30, 2014.

The Bank also agreed to: (a) implement a program to protect the Bank’s interest in criticized or classified assets, (b) review and revise the Bank’s loan review program; (c) implement a program for the maintenance of an adequate allowance for loan losses; and (d) revise the Bank’s credit administration policies. The Bank initially agreed that its brokered deposits would not exceed 3.5% of its total liabilities unless approved by the OCC. However, effective October 18, 2012, the OCC approved an increase to this limit to 6.0%. Management does not expect this restriction will limit its access to liquidity as the Bank does not rely on brokered deposits as a major source of funding. At June 30, 2014, the Bank’s brokered deposits represented 3.9% of its total liabilities.

Management believes it is taking all necessary actions for the Bank to achieve full compliance with all requirements of the OCC Agreement and the Federal Reserve Bank requirements discussed above.

The Bank is also subject to individual minimum capital ratios established by the OCC for the Bank requiring the Bank to continue to maintain a Leverage ratio at least equal to 8.50% of adjusted total assets, to continue to maintain a Tier 1 Capital ratio at least equal to 9.50% of risk-weighted assets and maintain a Total Capital ratio at least equal to 11.50% of risk-weighted assets. At June 30, 2014, the Bank met all of the three capital ratios established by the OCC as its Leverage ratio was 9.12%, Tier 1 Capital ratio was 13.20%, and Total Capital ratio was 14.45%.

Effective June 30, 2014, the company contributed $7.5 million to the Bank, leaving the Company with cash and cash equivalents of approximately $10.5 million for debt service and operating expenses at June 30, 2014.

The following table provides both the Company’s and the Bank’s regulatory capital ratios as of June 30, 2014:

Table 6: Regulatory Capital Levels

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action  Provision(1)
	Amount		Ratio			Amount		Ratio			Amount			Ratio
June 30, 2014
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	304,987		15.00	%	$	162,675		8.00	%			N/A
Sun National Bank		293,434		14.45			162,403		8.00		$	203,003			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		252,788		12.43			81,338		4.00				N/A
Sun National Bank		268,016		13.20			81,201		4.00			121,802			6.00
Leverage ratio:
Sun Bancorp, Inc.		252,788		8.59			117,764		4.00				N/A
Sun National Bank		268,016		9.12			117,571		4.00			146,964			5.00

(1) Not applicable for bank holding companies.

The Company’s capital securities qualify as Tier 1 capital under federal regulatory guidelines. These instruments are subject to a 25% capital limitation under risk-based capital guidelines developed by the FRB. Under FRB rules, restricted core capital elements, which are qualifying trust preferred securities, qualifying cumulative perpetual preferred stock (and related surplus) and certain minority interests in consolidated subsidiaries, are limited in the aggregate to no more than 25% of a bank holding company’s core capital elements (including restricted core capital elements), net of goodwill less any associated deferred tax liability. However, under the Dodd-Frank Act, bank holding companies are prohibited from including in their Tier 1 capital hybrid debt and equity securities, including trust preferred securities, issued on or after May 19, 2010. Any such instruments issued before May 19, 2010 by a bank holding company, such as the Company, with total consolidated assets of less than $15 billion as of December 31, 2009, may continue to be included as Tier 1 capital (subject to the 25% limitation). The portion that exceeds the 25 percent capital limitation qualifies as Tier 2, or supplementary capital of the Company. At June 30, 2014, $63.3 million of a total of $90.0 million in capital securities qualified as Tier 1 with $26.7 million qualifying as Tier 2.

Basel III Capital Rules

Regulatory reforms have recently been instituted, which will also impose restrictions on our current business practices. Recent items affecting us include the final Basel III rule.

On July 2, 2013, the federal banking regulators, including the FRB and the OCC, approved the final Basel III capital rules for U.S. banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking

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Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the final rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets that will apply to all covered financial institution holding companies and all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4 percent for all banking organizations. These new minimum capital ratios will become effective for us on January 1, 2015 and will be fully phased-in on January 1, 2019. These requirements are separate from the individual minimum capital ratios established by the OCC.

In addition, the final rule will impose limits on capital distributions by, and discretionary bonus payments to executive officers of, banking organizations that do not maintain a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The capital conservation buffer will be phased-in over a transition period from January 1, 2016 to January 1, 2019.

The final rule emphasizes common equity tier 1 capital, the most loss-absorbing form of capital, and implements strict eligibility criteria for regulatory capital instruments. The final rule also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Banks and regulators use risk weighting to assign different levels of risk to different classes of assets.

The chart below contains the Basel III regulatory capital levels that we must satisfy during the applicable transition period, from January 1, 2015 until January 1, 2019, which are in addition to and separate from the individual minimum capital ratios established by the OCC.

	Basel III Regulatory Capital Levels
	January 1, 2015			January 1, 2016			January 1, 2017			January 1, 2018			January 1, 2019
Tier 1 common equity		4.5	%		5.125	%		5.75	%		6.375	%		7.0	%
Tier 1 risk-based capital ratio		6.0	%		6.625	%		7.25	%		7.875	%		8.5	%
Total risk-based capital ratio		8.0	%		8.625	%		9.25	%		9.875	%		10.5	%

The Basel III Capital Rules also revise the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, by (i) introducing a common equity tier 1 capital ratio requirement at each level (other than critically undercapitalized), with the required common equity tier 1 capital ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category (other than critically undercapitalized), with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared to the current 6%), and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3% leverage ratio and still be adequately capitalized. The Basel III Capital Rules do not change the total risk-based capital requirement for any prompt corrective action category.

We currently anticipate that our capital ratios, on a Basel III basis, will exceed the regulatory minimum requirements to be considered well-capitalized. However, we are evaluating options to mitigate the capital impact of the final rule prior to its effective implementation date.

Dividend Restrictions

The ability of the Bank to pay dividends to the Company is governed by certain regulatory restrictions. Generally, dividends declared in a given year by a national bank are limited to its net profit, as defined by regulatory agencies, for that year, combined with its retained net income for the preceding two years, less any required transfer to surplus or to fund for the retirement of any preferred stock. In addition, a national bank may not pay any dividends in an amount greater than its undivided profits and a national bank may not declare any dividends if such declaration would leave the bank inadequately capitalized. Therefore, the ability of the Bank to declare dividends will depend on its future net income and capital requirements. Also, banking regulators have indicated that national banks should generally pay dividends only out of current operating earnings. Following this guidance, the Bank was not able to pay a dividend to the Company at June 30, 2014. Moreover, per the OCC Agreement and the Federal Reserve Bank requirements, a dividend may only be declared if it is in accordance with the approved capital plan, the Bank remains in compliance with the capital plan following the payment of the dividend and the dividend is approved by the OCC and the Federal Reserve Bank.

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Volcker Rule

On December 10, 2013, the FRB, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule contained in section 619 of the Dodd-Frank Act, generally to become effective on July 21, 2015. The Volcker Rule prohibits an insured depository institution and its affiliates (referred to as “banking entities”) from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (“covered funds”) subject to certain limited exceptions. These prohibitions impact the ability of U.S. banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

The final Volcker Rule regulations do provide certain exemptions allowing banking entities to continue underwriting, market-making and hedging activities and trading certain government obligations, as well as various exemptions and exclusions from the definition of “covered funds.” However, the level of required compliance activity depends on the size of the banking entity and the extent of its trading.

On January 14, 2014, the five federal agencies approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities from the investment prohibitions of the Volcker Rule. Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if certain qualifications are met. In addition, the agencies released a non-exclusive list of issuers that meet the requirements of the interim final rule. At June 30, 2014, the Company had an investment in one pool of trust preferred securities with an amortized cost of $8.8 million and estimated fair value of $6.7 million. This pool was included in the non-exclusive list of issuers that meet the requirements of the interim final rule released by the agencies and therefore will not be required to be sold by the Company. On April 17, 2014 the FRB released guidance stating that it would extend the conformance period for banks holding collateralized loan obligations by two years to July 2017.

At June 30, 2014, the Bank had 12 collateralized loan obligation securities with an amortized cost of $71.9 million and an estimated fair value of $71.5 million. These securities are subject to the provisions of the Volcker Rule. However, a final determination has yet to be made on whether banks will be required to divest these investments. Discussion has been ongoing among the regulators, Congress and the investors in collateralized loan obligations. Based on the current status of these discussions and through the Bank’s communication with its investment advisors, the Bank’s management believes it will either be able to hold these collateralized loan obligation investments in its portfolio or have them modified such that the perceived risk will be adequately eliminated.

At June 30, 2014, the Bank had one non-rated single issuer security with an amortized cost of $3.8 million and an estimated fair value of $2.7 million. This security is not subject to the provisions of the Volcker Rule.

See Note 12 of the notes to unaudited condensed consolidated financial statements for additional information regarding regulatory matters.

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, 2014 was $28.2 million and the portion of the exposure not covered by collateral was approximately $615 thousand. We believe that the utilization rate of these letters of credit will continue to be substantially less than the amount of these commitments, as has been our experience to date.

The Company maintains a reserve for unfunded loan commitments and letters of credit, which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition, consistent with FASB ASC 825. As of the balance sheet date, the Company records estimated losses inherent with unfunded loan commitments in accordance with FASB ASC 450, Contingencies, and estimated future obligations under letters of credit in accordance with FASB ASC 460, Guarantees. The methodology used to determine the adequacy of this reserve is integrated in the Company’s process for establishing the allowance for loan losses and considers the probability of future losses and obligations that may be incurred under these off-balance sheet agreements. The reserve for unfunded loan commitments and letters of credit at June 30, 2014 and December 31, 2013 was $431 thousand and $454 thousand, respectively. Management believes this reserve level is sufficient to absorb estimated probable losses related to these commitments.

The Company maintains a reserve for residential mortgage loans sold with recourse to third-party purchasers which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition. As of June 30, 2014, the Company records estimated losses inherent with residential mortgage loans sold with recourse in accordance

58

with FASB ASC 460, Guarantees. This reserve is determined based upon the probability of future losses which is calculated using historical Company and industry loss data. The reserve for residential mortgage loan recourse as of June 30, 2014 and December 31, 2013 was $1.0 million and $647 thousand, respectively. Management believes this reserve level is sufficient to address potential recourse exposure.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Asset and Liability Management

Interest rate, credit and operational risks are among the most significant market risks impacting the performance of the Company. The Company has an Asset Liability Committee (“ALCO”), composed of senior management representatives from a variety of areas within the Company. ALCO devises strategies and tactics to maintain the net interest income of the Company within acceptable ranges over a variety of interest rate scenarios. Should the Company’s risk modeling indicate an undesired exposure to changes in interest rates, there are a number of remedial options available including changing the investment portfolio characteristics, and changing loan and deposit pricing strategies. Two of the tools used in monitoring the Company’s sensitivity to interest rate changes are gap analysis and net interest income simulation.

Gap Analysis. Banks are concerned with the extent to which they are able to match maturities or re-pricing characteristics of interest-earning assets and interest-bearing liabilities. Such matching is facilitated by examining the extent to which such assets and liabilities are interest-rate sensitive and by monitoring the bank’s interest rate sensitivity gap. Gap analysis measures the volume of interest-earning assets that will mature or re-price within a specific time period, compared to the interest-bearing liabilities maturing or re-pricing within that same time period. On a monthly basis the Company and the Bank monitor their gap, primarily cumulative through both nine months and one year maturities.

At June 30, 2014, the Company’s gap analysis showed an asset sensitive position with total interest-earning assets maturing or re-pricing within one year exceeding interest-bearing liabilities maturing or re-pricing during the same time period by $532.6 million representing a positive one-year gap ratio of 18.40%. All amounts are categorized by their actual maturity or anticipated call or re-pricing date with the exception of interest-bearing demand deposits and savings deposits. Though the rates on interest-bearing demand and savings deposits generally trend with open market rates, they often do not fully adjust to open market rates and frequently adjust with a time lag. As a result of prior experience during periods of rate volatility and management’s estimate of future rate sensitivities, the Company allocates the interest-bearing demand deposits and savings deposits based on an estimated decay rate for those deposits.

Net Interest Income Simulation. Due to the inherent limitations of gap analysis, the Company also uses simulation models to measure the impact of changing interest rates on its operations. The simulation model attempts to capture the cash flow and re-pricing characteristics of the current assets and liabilities on the Company’s balance sheet. Assumptions regarding such things as prepayments and rate change behaviors are incorporated into the simulation model. Net interest income is simulated over a twelve month horizon under a variety of linear yield curve shifts, subject to certain limits agreed to by ALCO.

Net interest income simulation analysis at June 30, 2014 shows a position that is relatively neutral to interest rates with a more negative bias as rates decrease. The net income simulation results are impacted by an expected continuation of deposit pricing competition which may limit deposit pricing flexibility in both increasing and decreasing rate environments, floating-rate loan floors initially limiting loan rate increases and a relatively short liability maturity structure including retail certificates of deposit.

Actual results may differ from the simulated results due to such factors as the timing, magnitude and frequency of interest rate changes, changes in market conditions, management strategies and differences in actual versus forecasted balance sheet composition and activity. Table 5 provides the Company’s estimated earnings sensitivity profile as of June 30, 2014. The Company anticipates that strong deposit pricing competition will continue to limit deposit pricing flexibility in an increasing and a decreasing rate environment.

Table 7: Sensitivity Profile

Change in Interest Rates (Basis Points)	Percentage Change in Net Interest Income Year 1
+200		6.2	%
+100		2.9	%
-100		(1.1	)%
-200		(2.4	)%

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Derivative Financial Instruments. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. In general, the derivative transactions entered into by the Company fall into one of two types: a fair value hedge of a specific fixed-rate loan agreement and an economic hedge of a derivative offering to a Bank customer. Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures. The Company seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company does not use derivative financial instruments for trading purposes. For more information on the Company’s financial derivative instruments, please see Note 8 of the notes to unaudited condensed consolidated financial statements.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), the Company’s principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, such disclosure controls and procedures were designed and functioning effectively to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

(b) Changes in internal control over financial reporting. During the quarter under report, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company and the Bank are periodically involved in various claims and lawsuits, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, and claims involving the making and servicing of real property loans. While the ultimate outcome of these proceedings cannot be predicted with certainty, management, after consultation with counsel representing the Company in these proceedings, does not expect that the resolution of these proceedings will have a material effect on the Company’s financial condition, results of operations or cash flows.

Item 1A. Risk Factors

Except as noted below, management of the Company does not believe there have been any material changes to the Risk Factors previously disclosed under Item 1A of the Company’s Form 10-K for the year ended December 31, 2013 previously filed with the Securities and Exchange Commission.

Our Board of Directors recently approved the elimination of non-core business units which subjects us to certain risks, which if we do not manage could adversely affect our results of operations, financial condition and liquidity.

In connection with our comprehensive strategic restructuring plan and renewed focus on commercial lending, we have begun to engage in a number of restructuring initiatives, including but not limited to, the Bank ceasing consumer real estate lending, exiting its healthcare and asset-based lending businesses, the closing of certain retail Bank branches and a reduction in our workforce.

Notwithstanding our decision to exit residential mortgage lending, we had $298.1 million in residential real estate loans held-for-investment at June 30, 2014. The continuation or worsening of volatility in residential real estate values could continue to adversely affect our business and results of operations, and such adverse conditions could result in significant write-downs in the future. Similarly, due to the fact that we are no longer able to offer our legacy real estate lending customers the same range of loan restructuring alternatives in delinquency situations that we may historically have extended to them, such customers may be less able, and less likely, to repay their loans.

We may be unable to efficiently manage our restructuring or complete the transactions under our restructuring plan within the desired timeframes. In particular, we may not achieve the cost-savings and operational synergies expected as a result of closing certain of our branches, reducing personnel and exiting our less profitable lines of business. Similarly, we may be unable to originate or acquire new commercial loans at a level that is sufficient to offset the impact that liquidating our residential real estate and retail sales portfolios may have on our financial condition. If we fail to realize the anticipated benefits of the restructuring of our business we may experience an adverse effect on our results of operations, financial condition and liquidity.

Certain risks associated with the declared reverse stock split.

In connection with the Company’s comprehensive strategic restructuring plan, the Board of Directors recently declared a 1-for-5 reverse stock split to become effective on August 11, 2014 for shareholders of record as of August 8, 2014, which is intended to increase the trading price of the Company’s common stock. The reverse stock split will correspondingly reduce the number of shares of our authorized common stock from 200,000,000 to 40,000,000. The risks associated with the reverse stock split include (but are not limited to) the following:

Our total market capitalization after the reverse stock split may be lower than before the reverse stock split.

There are numerous factors and contingencies that could affect the price of our common stock following implementation of the reverse stock split, including the status of the market for our common stock at the time, our results of operations in future periods, and general economic, market and industry conditions. Accordingly, the market price of our common stock may not be sustainable at the direct arithmetic result of the reverse stock split. If the market price of our common stock declines after the reverse stock split, our total market capitalization (the aggregate value of all of our outstanding common stock at the then existing market price) after the reverse stock split will be lower than before the reverse stock split.

The reverse stock split may result in reduced liquidity of our common stock.

Following the reverse stock split we will have fewer shares of common stock that are publicly traded. As a result, the trading liquidity of our common stock may decline.

The reverse stock split may not generate additional investor interest.

While we believe that a higher stock price may help generate investor interest in our common stock, there can be no assurance that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information

Not Applicable

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Item 6. Exhibits
	Exhibit 3.1 Amended and Restated Certificate of Incorporation of Sun Bancorp, Inc. (1)
	Exhibit 3.2 Amended and Restated Bylaws of Sun Bancorp, Inc. (2)
	Exhibit 4.1 Common Security Specimen (3)
	Exhibit 31(a) Certification of Principal Executive Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
	Exhibit 31(b) Certification of Principal Financial Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
	Exhibit 32 Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
	Exhibit 101.INS XBRL Instance Document
	Exhibit 101.SCH XBRL Taxonomy Extension Schema Document
	Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
	Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document
	Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
	Exhibit 101.DEF XBRL Taxonomy Definition Linkbase Document

(1) Incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-3 filed on February 6, 2009 (Registration Number 333-157131).

(2) Incorporated by reference to the exhibits to the Company’s Current Report on Form 8-K filed on July 7, 2014 (File No. 0-20957).

(3) Incorporated by reference to the registrant’s Registration Statement on Form S-1 filed with the Commission on February 14, 1997 (File No. 333-21903).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Sun Bancorp, Inc.
	Registrant
Date: August 8, 2014	/s/ Thomas M. O’Brien
	Thomas M. O’Brien
	President and Chief Executive Officer
	(Duly Authorized Representative)
Date: August 8, 2014	/s/ Thomas R. Brugger
	Thomas R. Brugger
	Executive Vice President and
	Chief Financial Officer
	(Duly Authorized Representative)

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EX-31.A

Exhibit 31(a)

SECTION 302 CERTIFICATION

I, Thomas M. O’Brien, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2014	/s/ Thomas M. O’Brien
	Thomas M. O’Brien
	President and Chief Executive Officer

EX-31.B

Exhibit 31(b)

SECTION 302 CERTIFICATION

I, Thomas R. Brugger, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2014	/s/ Thomas R. Brugger
	Thomas R. Brugger
	Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “Report”) of Sun Bancorp, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof, we, Thomas M. O’Brien, President and Chief Executive Officer, and Thomas R. Brugger, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2014
/s/ Thomas M. O’Brien	/s/ Thomas R. Brugger
Thomas M. O’Brien	Thomas R. Brugger
President and Chief Executive Officer (Principal Executive Officer)	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

XML

Branch Sale - Summary of Branch Assets and Liabilities Classified as Held-for-Sale (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Assets:
Cash	$ 1,507
Loans held-for-sale	28,543
Properties and equipment, net	4,008
Total branch assets held-for-sale	34,058
Liabilities:
Deposits held-for-sale	$ 160,769

XML

Allowance for Loan Losses - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014 Agreement TDRs	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Receivables [Abstract]
Allowance for loans receivable	$ 28,392	$ 35,537	$ 48,007	$ 45,873
Ratio of allowance for loan losses to gross loans held-for-investment	1.53%	1.66%
Loan not considered as impaired	Less than 90 days
Number of impaired loans classified as TDR	3
TDR with commitments to lend additional funds	1
Commitment to lend additional funds	$ 35
Number of new TDR agreements	0

XML

Investment Securities - Cumulative OTTI Recognized in Earnings (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Amortized Cost And Fair Value Debt Securities [Abstract]
Cumulative OTTI, beginning of period	$ 10,203	$ 10,203	$ 10,203	$ 10,203
Additional increase as a result of net impairment losses recognized on investments
Decrease as a result of the sale of an investment with net impairment losses
Cumulative OTTI, end of period	$ 10,203	$ 10,203	$ 10,203	$ 10,203

XML

Commitments and Contingent Liabilities - Additional Information (Detail) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Commitments And Contingencies Disclosure [Abstract]
Customers' letters of credit	$ 28,200,000	$ 34,600,000
Reserve for unfunded loan commitments and letters of credit	431,000	454,000
Reserve for residential mortgage loan recourse	$ 1,000,000	$ 647,000

XML

Allowance for Loan Losses - Components of Impaired Loans Held-for-Investment (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	$ 5,447	$ 28,777
Unpaid Principal Balance, Total	6,614	38,037
Related Allowance, Total		917
Average Recorded Investment, Total	2,612	18,267
Accrued Interest Income Recognized, Total	19
Cash Interest Income Recognized, Total
Commercial Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	2,761	3,206
Unpaid Principal Balance, With No Related Allowance	3,264	3,281
Recorded Investment, With Related Allowance		423
Related Allowance, With No Related Allowance
Unpaid Principal Balance, With Related Allowance		425
Average Recorded Investment, With No Related Allowance	180	1,884
Related Allowance, With Related Allowance		423
Accrued Interest Income Recognized, With No Related Allowance	19
Average Recorded Investment, With Related Allowance		73
Cash Interest Income Recognized, With No Related Allowance
Accrued Interest Income Recognized, With Related Allowance
Cash Interest Income Recognized, With Related Allowance
Commercial Loans [Member] | CRE Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	2,502	18,503
Unpaid Principal Balance, With No Related Allowance	3,127	27,367
Recorded Investment, With Related Allowance		2,164
Related Allowance, With No Related Allowance
Unpaid Principal Balance, With Related Allowance		2,164
Average Recorded Investment, With No Related Allowance	2,068	13,528
Related Allowance, With Related Allowance		494
Accrued Interest Income Recognized, With No Related Allowance
Average Recorded Investment, With Related Allowance		47
Cash Interest Income Recognized, With No Related Allowance
Accrued Interest Income Recognized, With Related Allowance
Cash Interest Income Recognized, With Related Allowance
Commercial Loans [Member] | CRE Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance		1,969
Unpaid Principal Balance, With No Related Allowance		2,251
Related Allowance, With No Related Allowance
Average Recorded Investment, With No Related Allowance		66
Accrued Interest Income Recognized, With No Related Allowance
Cash Interest Income Recognized, With No Related Allowance
Commercial Loans [Member] | Land and Development [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	184	2,512
Unpaid Principal Balance, With No Related Allowance	223	2,549
Related Allowance, With No Related Allowance
Average Recorded Investment, With No Related Allowance	364	2,669
Accrued Interest Income Recognized, With No Related Allowance
Cash Interest Income Recognized, With No Related Allowance
Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	12,608	8,142
Unpaid Principal Balance, Total	18,430	11,236
Related Allowance, Total		17
Average Recorded Investment, Total	11,108	6,236
Accrued Interest Income Recognized, Total
Cash Interest Income Recognized, Total	45
Consumer Loans [Member] | Home Equity Lines of Credit [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	2,325	3,749
Unpaid Principal Balance, With No Related Allowance	3,255	5,051
Related Allowance, With No Related Allowance
Average Recorded Investment, With No Related Allowance	2,166	3,132
Accrued Interest Income Recognized, With No Related Allowance
Cash Interest Income Recognized, With No Related Allowance
Consumer Loans [Member] | Home Equity Lines of Credit Held for Sale [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	1,947
Unpaid Principal Balance, With No Related Allowance	3,428
Average Recorded Investment, With No Related Allowance	2,154
Consumer Loans [Member] | Home Equity Term Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	578	1,238
Unpaid Principal Balance, With No Related Allowance	649	1,456
Related Allowance, With No Related Allowance
Average Recorded Investment, With No Related Allowance	518	918
Accrued Interest Income Recognized, With No Related Allowance
Cash Interest Income Recognized, With No Related Allowance
Consumer Loans [Member] | Home Equity Term Loans Held for Sale [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	354
Unpaid Principal Balance, With No Related Allowance	610
Average Recorded Investment, With No Related Allowance	497
Consumer Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	5,609	2,569
Unpaid Principal Balance, With No Related Allowance	6,388	3,135
Related Allowance, With No Related Allowance
Average Recorded Investment, With No Related Allowance	4,262	1,689
Accrued Interest Income Recognized, With No Related Allowance
Cash Interest Income Recognized, With No Related Allowance	45
Consumer Loans [Member] | Residential Real Estate Held For Sale [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	1,322
Unpaid Principal Balance, With No Related Allowance	2,334
Average Recorded Investment, With No Related Allowance	1,041
Consumer Loans [Member] | Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	10	560
Unpaid Principal Balance, With No Related Allowance	14	1,567
Recorded Investment, With Related Allowance		26
Related Allowance, With No Related Allowance
Unpaid Principal Balance, With Related Allowance		27
Average Recorded Investment, With No Related Allowance	10	481
Related Allowance, With Related Allowance		17
Accrued Interest Income Recognized, With No Related Allowance
Average Recorded Investment, With Related Allowance		16
Accrued Interest Income Recognized, With Related Allowance
Cash Interest Income Recognized, With Related Allowance
Consumer Loans [Member] | Other Loans Held For Sale [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With No Related Allowance	463
Unpaid Principal Balance, With No Related Allowance	1,752
Average Recorded Investment, With No Related Allowance	$ 460

XML

Regulatory Matters - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Oct. 18, 2012	Dec. 31, 2009
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Brokered deposits revised limit					6.00%
Brokered deposits as a percentage of total liabilities	3.90%		3.90%
Leverage ratio, Actual ratio	9.12%		9.12%
Tier 1 capital (to Risk-Weighted Assets), Actual Ratio	13.20%		13.20%			25.00%
Total Capital (to Risk-Weighted Assets)	14.45%		14.45%
Additional capital contribution to bank	$ 7,500,000		$ 7,500,000
Amount available for payment of dividends to the company by the Bank	0		0
FDIC assessment expense	944,000	1,100,000	2,000,000	2,200,000
Tier 1 capital limitation, interest	25.00%		25.00%
Limited capital securities and other restricted core capital elements, interest	25.00%		25.00%
Capital securities qualified as Tier 1 capital	63,300,000		63,300,000
Capital securities qualified as Tier 2 capital	26,700,000		26,700,000
Total capital	90,000,000		90,000,000
Marginal federal tax rate	35.00%	35.00%	35.00%	35.00%
Effect of tax-exempt income	166,000	175,000	333,000	387,000
Minimum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio, Actual ratio	8.50%		8.50%
Tier 1 capital (to Risk-Weighted Assets), Actual Ratio	9.50%		9.50%
Total Capital (to Risk-Weighted Assets)	11.50%		11.50%
Maximum deposit insurance	100,000		100,000
Maximum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Brokered deposits limit	3.50%		3.50%
Maximum deposit insurance	250,000		250,000
Capital securities qualified as Tier 1 capital						$ 15,000,000,000

XML

Investment Securities - Gross Unrealized Losses by Investment Category (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value	$ 77,765	$ 292,077
Less than 12 Months, Gross Unrealized Losses	(416)	(8,060)
12 Months or longer estimated fair value	76,618	20,335
12 Months or Longer, Gross Unrealized Losses	(5,013)	(6,142)
Total, Estimated Fair Value	154,383	312,412
Total, Gross Unrealized Losses	(5,429)	(14,202)
U.S. Government Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
12 Months or longer estimated fair value	4,729	4,407
12 Months or Longer, Gross Unrealized Losses	(242)	(562)
Total, Estimated Fair Value	4,729	4,407
Total, Gross Unrealized Losses	(242)	(562)
U.S. Government Agency Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value	60,464	246,348
Less than 12 Months, Gross Unrealized Losses	(267)	(7,374)
12 Months or longer estimated fair value	40,226	7,961
12 Months or Longer, Gross Unrealized Losses	(1,307)	(921)
Total, Estimated Fair Value	100,690	254,309
Total, Gross Unrealized Losses	(1,574)	(8,295)
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
12 Months or longer estimated fair value	9,473	7,967
12 Months or Longer, Gross Unrealized Losses	(3,154)	(4,659)
Total, Estimated Fair Value	9,473	7,967
Total, Gross Unrealized Losses	(3,154)	(4,659)
Collateralized Loan Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value	17,301	45,729
Less than 12 Months, Gross Unrealized Losses	(149)	(686)
12 Months or longer estimated fair value	22,190
12 Months or Longer, Gross Unrealized Losses	(310)
Total, Estimated Fair Value	39,491	45,729
Total, Gross Unrealized Losses	$ (459)	$ (686)

XML

Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Risk-Based Capital Ratios

The following table provides both the Company’s and the Bank’s risk-based capital ratios as of June 30, 2014 and December 31, 2013.

Regulatory Capital Levels

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective  Action Provision(1)
	Amount		Ratio			Amount		Ratio			Amount			Ratio
June 30, 2014
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	304,987		15.00	%	$	162,675		8.00	%			N/A
Sun National Bank		293,434		14.45			162,403		8.00		$	203,003			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		252,788		12.43			81,338		4.00				N/A
Sun National Bank		268,016		13.20			81,201		4.00			121,802			6.00
Leverage ratio:
Sun Bancorp, Inc.		252,788		8.59			117,764		4.00				N/A
Sun National Bank		268,016		9.12			117,571		4.00			146,964			5.00
December 31, 2013
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	332,295		14.41	%	$	184,494		8.00	%			N/A
Sun National Bank		314,107		13.65			184,070		8.00		$	230,088			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		284,781		12.34			92,247		4.00				N/A
Sun National Bank		285,257		12.40			92,035		4.00			138,053			6.00
Leverage ratio:
Sun Bancorp, Inc.		284,781		8.99			126,682		4.00				N/A
Sun National Bank		285,257		9.02			126,479		4.00			158,099			5.00

(1) Not applicable for bank holding companies.

Reconciliation of Tax Equivalent Net Interest Income to GAAP Net Interest Income

The following table provides a reconciliation of tax equivalent net interest income to GAAP net interest income using a 35% tax rate:

For the Three Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	20,612	$	21,776
Effect of tax-exempt income		166		175
Net interest income, tax equivalent	$	20,778	$	21,951

For the Six Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	42,004	$	44,854
Effect of tax-exempt income		333		387
Net interest income, tax equivalent	$	42,337	$	45,241

Reconciliation of Core Deposits to GAAP Total Deposits

The following table provides a reconciliation of core deposits to GAAP total deposits at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Total deposits	$	2,272,765	$	2,621,571
Less: Time deposits		422,634		506,770
Less: Brokered deposits		103,541		107,930
Core deposits	$	1,746,590	$	2,006,871

XML

Regulatory Matters - Risk-Based Capital Ratios (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2009	Jun. 30, 2014 Sun Bancorp, Inc. [Member]	Dec. 31, 2013 Sun Bancorp, Inc. [Member]	Jun. 30, 2014 Sun National Bank [Member]	Dec. 31, 2013 Sun National Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets), Actual, Amount	$ 90,000		$ 304,987	$ 332,295	$ 293,434	$ 314,107
Total capital (to risk-weighted assets), For Capital Adequacy Purposes, Amount			162,675	184,494	162,403	184,070
Total capital (to risk-weighted assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount					203,003	230,088
Total capital (to risk-weighted assets), Actual, Ratio	14.45%		15.00%	14.41%	14.45%	13.65%
Total capital (to risk-weighted assets), For Capital Adequacy Purposes, Ratio			8.00%	8.00%	8.00%	8.00%
Total capital (to risk-weighted assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio					10.00%	10.00%
Tier 1 capital (to risk-weighted assets), Actual, Amount	63,300		252,788	284,781	268,016	285,257
Tier 1 capital (to risk-weighted assets), For Capital Adequacy Purposes, Amount			81,338	92,247	81,201	92,035
Tier 1 capital (to risk-weighted assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount					121,802	138,053
Tier 1 capital (to risk-weighted assets), Actual, Ratio	13.20%	25.00%	12.43%	12.34%	13.20%	12.40%
Tier 1 capital (to risk-weighted assets), For Capital Adequacy Purposes, Ratio			4.00%	4.00%	4.00%	4.00%
Tier 1 capital (to risk-weighted assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio					6.00%	6.00%
Leverage ratio, Actual, Amount			252,788	284,781	268,016	285,257
Leverage ratio, For Capital Adequacy Purposes, Amount			117,764	126,682	117,571	126,479
Leverage ratio, To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount					$ 146,964	$ 158,099
Leverage ratio, Actual, Ratio	9.12%		8.59%	8.99%	9.12%	9.02%
Leverage ratio, For Capital Adequacy Purposes, Ratio			4.00%	4.00%	4.00%	4.00%
Leverage ratio, To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio					5.00%	5.00%

XML

Fair Value of Financial Instruments - Summary of Level 3 Fair Value Measurement Activity (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Total gains (losses), realized/unrealized:
Transfers into Level 3	$ 0
Investment Securities [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, beginning of period	8,616,000	16,803,000	7,967,000	5,882,000
Total gains (losses), realized/unrealized:
Included in earnings
Included in accumulated other comprehensive income	857,000	1,372,000	1,506,000	1,793,000
Purchases				10,500,000
Maturities
Prepayments
Calls
Transfers out of Level 3		(10,500,000)
Transfers into Level 3				(10,500,000)
Balance, end of period	9,473,000	7,675,000	9,473,000	7,675,000
Interest Rate Lock Commitments on Residential Mortgages [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, beginning of period	115,000	633,000	119,000	847,000
Total gains (losses), realized/unrealized:
Included in earnings	110,000	171,000	106,000	(43,000)
Included in accumulated other comprehensive income
Purchases
Maturities
Prepayments
Calls
Transfers into Level 3
Balance, end of period	$ 225,000	$ 804,000	$ 225,000	$ 804,000

XML

Allowance for Loan Losses - Information Regarding Types of Concessions Granted on Loans (Detail)	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Contract	Jun. 30, 2013 Contract
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Commercial and Industrial [Member] | Modified Principal Repayment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
CRE Owner Occupied [Member] | Interest Rate Concession [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
Residential Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Residential Real Estate Loans [Member] | Modified Term Debt to Interest Only for Six Month Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1

XML

Fair Value of Financial Instruments - Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets:
Cash and due from banks	$ 49,384	$ 38,075
Interest-earning bank balances	281,056	229,687
Restricted cash	26,000	26,000
Investment securities available for sale	437,027	440,097
Investment securities held to maturity	636	681
Loans held-for-sale, at fair value	9,410	20,662
Branch assets held-for-sale	34,058
Restricted equity investments	16,388	17,019
Liabilities:
Savings deposits	232,018	266,573
Time deposits	422,634	506,770
Deposits held-for-sale	160,769
Securities sold under agreements to repurchase - customers	670	478
Advances from FHLBNY	60,873	60,956
Carrying Amount [Member]
Assets:
Cash and due from banks	49,384	38,075
Interest-earning bank balances	281,056	229,687
Restricted cash	26,000	26,000
Investment securities available for sale	437,027	440,097
Investment securities held to maturity	636	681
Loans receivable, net	1,809,886	2,079,732
Loans held-for-sale, at fair value	9,410	20,662
Loans held-for-sale, at lower of cost or market	19,761
Hedged commercial loans	17,838	22,435
Branch assets held-for-sale	34,058
Restricted equity investments	16,388	17,019
Interest rate lock commitments on residential mortgages	225	119
Liabilities:
Demand deposits	1,505,172	1,740,298
Savings deposits	241,420	266,573
Time deposits	526,173	614,700
Deposits held-for-sale	160,769
Securities sold under agreements to repurchase - customers	670	478
Advances from FHLBNY	60,873	60,956
Junior subordinated debentures	92,786	92,786
Fair value interest rate swaps	1,138	1,632
Carrying Amount [Member] | Interest Rate Swaps [Member]
Assets:
Interest rate	16,994	23,299
Liabilities:
Interest rate swaps and floor	17,082	23,526
Carrying Amount [Member] | Interest Rate Floor [Member]
Assets:
Interest rate	62	132
Liabilities:
Interest rate swaps and floor	62	132
Estimated Fair Value [Member]
Assets:
Cash and due from banks	49,384	38,075
Interest-earning bank balances	281,056	229,687
Restricted cash	26,000	26,000
Investment securities available for sale	437,027	440,097
Investment securities held to maturity	645	692
Loans receivable, net	1,735,087	1,964,856
Loans held-for-sale, at fair value	9,410	20,662
Loans held-for-sale, at lower of cost or market	20,924
Hedged commercial loans	17,838	22,435
Branch assets held-for-sale	34,058
Restricted equity investments	16,388	17,019
Interest rate lock commitments on residential mortgages	225	119
Liabilities:
Demand deposits	1,537,452	1,795,685
Savings deposits	245,147	272,264
Time deposits	525,890	615,735
Deposits held-for-sale	174,860
Securities sold under agreements to repurchase - customers	670	478
Advances from FHLBNY	60,971	61,072
Junior subordinated debentures	64,060	63,747
Fair value interest rate swaps	1,138	1,632
Estimated Fair Value [Member] | Interest Rate Swaps [Member]
Assets:
Interest rate	16,994	23,299
Liabilities:
Interest rate swaps and floor	17,082	23,526
Estimated Fair Value [Member] | Interest Rate Floor [Member]
Assets:
Interest rate	62	132
Liabilities:
Interest rate swaps and floor	$ 62	$ 132

XML

Regulatory Matters - Reconciliation of Core Deposits to GAAP Total Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Banking And Thrift [Abstract]
Total deposits	$ 2,272,765	$ 2,621,571
Less: Time deposits	422,634	506,770
Less: Brokered deposits	103,541	107,930
Core deposits	$ 1,746,590	$ 2,006,871

XML

Fair Value of Financial Instruments - Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Commercial hedge loan adjustment to market change	$ 1.1	$ 1.6

XML

Fair Value of Financial Instruments - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets:
Investment securities available for sale	$ 437,027	$ 440,097
Interest Rate Lock Commitments on Residential Mortgages [Member]
Assets:
Investment securities available for sale	225	119
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member]
Assets:
Investment securities available for sale	2,502	2,500
Fair Value, Measurements, Recurring [Member] | U.S. Government Agency Securities [Member]
Assets:
Investment securities available for sale	4,729	4,407
Fair Value, Measurements, Recurring [Member] | U.S. Government Agency Mortgage-Backed Securities [Member]
Assets:
Investment securities available for sale	297,992	318,064
Fair Value, Measurements, Recurring [Member] | Other Mortgage-Backed Securities [Member]
Assets:
Investment securities available for sale	273	293
Fair Value, Measurements, Recurring [Member] | State and Municipal Securities [Member]
Assets:
Investment securities available for sale	31,012	30,453
Fair Value, Measurements, Recurring [Member] | Trust Preferred Securities [Member]
Assets:
Investment securities available for sale	9,473	7,967
Fair Value, Measurements, Recurring [Member] | Collateralized Loan Obligations [Member]
Assets:
Investment securities available for sale	71,484	73,229
Fair Value, Measurements, Recurring [Member] | Other Securities [Member]
Assets:
Investment securities available for sale	19,562	3,184
Fair Value, Measurements, Recurring [Member] | Hedged Commercial Loans [Member]
Assets:
Investment securities available for sale	17,838	22,435
Fair Value, Measurements, Recurring [Member] | Residential Mortgage Loans Held-for-Sale [Member]
Assets:
Investment securities available for sale	9,410	20,662
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments on Residential Mortgages [Member]
Assets:
Investment securities available for sale	225	119
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member]
Assets:
Investment securities available for sale	16,994	23,299
Liabilities:
Derivative instruments, liabilities	17,082	23,526
Fair Value, Measurements, Recurring [Member] | Interest Rate Floor [Member]
Assets:
Investment securities available for sale	62	132
Liabilities:
Derivative instruments, liabilities	62	132
Fair Value, Measurements, Recurring [Member] | Fair Value Interest Rate Swaps [Member]
Liabilities:
Derivative instruments, liabilities	1,137	1,635
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member]
Assets:
Investment securities available for sale	2,502	2,500
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Other Securities [Member]
Assets:
Investment securities available for sale	19,562	3,184
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Government Agency Securities [Member]
Assets:
Investment securities available for sale	4,729	4,407
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Government Agency Mortgage-Backed Securities [Member]
Assets:
Investment securities available for sale	297,992	318,064
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Other Mortgage-Backed Securities [Member]
Assets:
Investment securities available for sale	273	293
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | State and Municipal Securities [Member]
Assets:
Investment securities available for sale	31,012	30,453
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Loan Obligations [Member]
Assets:
Investment securities available for sale	71,484	73,229
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Hedged Commercial Loans [Member]
Assets:
Investment securities available for sale	17,838	22,435
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Mortgage Loans Held-for-Sale [Member]
Assets:
Investment securities available for sale	9,410	20,662
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member]
Assets:
Investment securities available for sale	16,994	23,299
Liabilities:
Derivative instruments, liabilities	17,082	23,526
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Floor [Member]
Assets:
Investment securities available for sale	62	132
Liabilities:
Derivative instruments, liabilities	62	132
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value Interest Rate Swaps [Member]
Liabilities:
Derivative instruments, liabilities	1,137	1,635
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Trust Preferred Securities [Member]
Assets:
Investment securities available for sale	9,473	7,967
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments on Residential Mortgages [Member]
Assets:
Investment securities available for sale	$ 225	$ 119

XML

Investment Securities (Tables)

6 Months Ended

Jun. 30, 2014

Investments Debt And Equity Securities [Abstract]

Available for Sale and Held to Maturity Investment

The amortized cost of investment securities and the approximate fair value at June 30, 2014 and December 31, 2013 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
June 30, 2014
Available for sale:
U.S. Treasury securities	$	2,497	$	5	$	—		$	2,502
U.S. Government agency securities		4,971		—		(242	)		4,729
U.S. Government agency mortgage-backed securities		296,732		2,834		(1,574	)		297,992
Other mortgage-backed securities		271		2		—			273
State and municipal securities		28,976		2,036		—			31,012
Trust preferred securities		12,627		—		(3,154	)		9,473
Collateralized loan obligations		71,922		21		(459	)		71,484
Other securities		19,562		—		—			19,562
Total available for sale		437,558		4,898		(5,429	)		437,027
Held to maturity:
U.S. Government agency mortgage-backed securities		386		9		—			395
Other securities		250		—		—			250
Total held to maturity		636		9		—			645
Total investment securities	$	438,194	$	4,907	$	(5,429	)	$	437,672
December 31, 2013
Available for sale:
U.S. Treasury securities	$	2,496	$	4	$	—		$	2,500
U.S. Government agency securities		4,969		—		(562	)		4,407
U.S. Government agency mortgage-backed securities		325,316		1,043		(8,295	)		318,064
Other mortgage-backed securities		277		16		—			293
State and municipal obligations		29,240		1,213		—			30,453
Trust preferred securities		12,626		—		(4,659	)		7,967
Collateralized loan obligations		73,915		—		(686	)		73,229
Other securities		3,184		—		—			3,184
Total available for sale		452,023		2,276		(14,202	)		440,097
Held to maturity:
U.S. Government agency mortgage-backed securities		431		11		—			442
Other securities		250		—		—			250
Total held to maturity		681		11		—			692
Total investment securities	$	452,704	$	2,287	$	(14,202	)	$	440,789

Gross Unrealized Losses by Investment Category

Gross Unrealized Losses by Investment Category

	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2014
U.S. Government agency securities	$	—	$	—		$	4,729	$	(242	)	$	4,729	$	(242	)
U.S. Government agency mortgage-backed securities		60,464		(267	)		40,226		(1,307	)		100,690		(1,574	)
Trust preferred securities		—		—			9,473		(3,154	)		9,473		(3,154	)
Collateralized loan obligations		17,301		(149	)		22,190		(310	)		39,491		(459	)
Total	$	77,765	$	(416	)	$	76,618	$	(5,013	)	$	154,383	$	(5,429	)
December 31, 2013
U.S. Government agency securities	$	—	$	—		$	4,407	$	(562	)	$	4,407	$	(562	)

U.S. Government agency mortgage-backed securities		246,348		(7,374	)		7,961		(921	)		254,309		(8,295	)
Trust preferred securities		—		—			7,967		(4,659	)		7,967		(4,659	)
Collateralized Loan Obligations		45,729		(686	)							45,729		(686	)
Total	$	292,077	$	(8,060	)	$	20,335	$	(6,142	)	$	312,412	$	(14,202	)

Cumulative OTTI Recognized in Earnings

The following is a roll-forward for the three and six months ended June 30, 2014 and 2013 of OTTI charges recognized in earnings as a result of credit losses on investments:

	For the Three Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

	For the Six Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

Contractual Maturities of Investment Securities

The amortized cost and estimated fair value of the investment securities, by contractual maturity, at June 30, 2014 and December 31, 2013 are shown below. Actual maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
June 30, 2014
Due in one year or less	$	19,314	$	19,314	$	—	$	—
Due after one year through five years		3,809		3,884		250		250
Due after five years through ten years		63,240		63,655		—		—
Due after ten years		54,192		51,909		—		—
Total investment securities, excluding mortgage-backed securities		140,555		138,762		250		250
U.S. Government agency mortgage-backed securities		296,732		297,992		386		395
Other mortgage-backed securities		271		273		—		—
Total investment securities	$	437,558	$	437,027	$	636	$	645
December 31, 2013
Due in one year or less	$	3,184	$	3,184	$	—	$	—
Due after one year through five years		3,430		3,490		250		250
Due after five years through ten years		35,452		35,460		—		—
Due after ten years		84,364		79,606		—		—
Total investment securities, excluding mortgage-backed securities		126,430		121,740		250		250
U.S. Government agency mortgage-backed securities		325,316		318,064		431		442
Other mortgage-backed securities		277		293		—		—
Total investment securities	$	452,023	$	440,097	$	681	$	692

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Loans - Loan Components (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	$ 1,856,116	$ 2,137,704	$ 2,158,792
Allowance for loan losses	(28,392)	(35,537)	(48,007)	(45,873)
Net loans held-for-investment	1,827,724	2,102,167
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	373,241	478,734
CRE Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	366,185	468,442
CRE Non-Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	555,829	576,084
Land and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	68,645	64,306
Home Equity Lines of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	165,671	188,478
Home Equity Term Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	21,282	25,279
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	298,063	305,552
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	7,200	30,829
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	1,363,900		1,676,133
Allowance for loan losses	(21,016)	(27,828)	(39,266)	(33,197)
Commercial Loans [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	373,241	478,734
Commercial Loans [Member] | CRE Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	366,185	468,442
Commercial Loans [Member] | CRE Non-Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	555,829	576,084
Commercial Loans [Member] | Land and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	68,645	64,306
Consumer Loans [Member] | Home Equity Lines of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	165,671	188,478
Consumer Loans [Member] | Home Equity Term Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	21,282	25,279
Consumer Loans [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	298,063	305,552
Consumer Loans [Member] | Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans held-for-investment	$ 7,200	$ 30,829

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Stock-Based Compensation - Significant Weighted Average Assumptions Used to Calculate Fair Value of Options (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Weighted average fair value of Options granted	$ 1.45	$ 1.84
Weighted average risk-free rate of return	1.16%	0.76%
Weighted average expected option life in months	49 months	59 months
Weighted average expected volatility	55.00%	62.00%
Expected dividends

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Fair Value of Financial Instruments - Valuation Methods for Determining Fair Value of Impairment Loans (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014
Fair Value Disclosures [Abstract]
Loans less than $1 million	Less than 1 million
Loans $1 million or greater	1 million or greater
Commercial Loans	$ 1,000,000
Existing appraisal 18 months or less	18 months or less
Existing appraisal greater than 18 months	Greater than 18 months
Existing Appraisal Period	1 year 6 months
Commercial loans secured primarily by residential real estate
Loans less than $1 million	Less than 1 million
Loans $1 million or greater	1 million or greater
Other Commercial	1,000,000
Non-commercial loans secured primarily by residential real estate
Loans less than $250 thousand	Less than 250 thousand
Loans $250 thousand or greater	250 thousand or greater
Non-commercial loans	$ 250,000

XML

Summary of Significant Accounting Policies - Reclassifications of Accumulated Other Comprehensive Income Items (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accounting Policies [Abstract]
Unrealized holding gain (loss) on securities available for sale during the period, pre-tax	$ 2,695	$ (6,904)	$ 11,345	$ (5,127)
Unrealized holding gain on securities available for sale during the period, tax	(1,102)	2,820	(4,635)	2,094
Unrealized holding gain (loss) on securities available for sale during the period, after-Tax	1,593	(4,084)	6,710	(3,033)
Reclassification adjustment for net gains included in net income, pre-tax	50	(9)	50	(3,452)
Reclassification adjustment for net gains included in net income, tax	(20)	4	(20)	1,410
Reclassification adjustment for net gains included in net income, after-tax	30	(5)	30	(2,042)
Net unrealized gain on securities available for sale, pre-tax	2,745	(6,913)	11,395	(8,579)
Net unrealized gain on securities available for sale, tax	(1,122)	2,824	(4,655)	3,504
Net unrealized gain on securities available for sale, after-tax	$ 1,623	$ (4,089)	$ 6,740	$ (5,075)

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Loans - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014 Relationships Relationship	Dec. 31, 2013 Relationship Relationships
Receivables [Abstract]
Outstanding amount of relationships which agreements included interest reserves	$ 55.4	$ 54.5
No of residential construction, commercial construction and land development relationships	13	17
Amount available to fund interest payments	2.9	4.3
Number of relationships with interest reserves on non-accrual status	0	0
Interest Reserve in the aggregate on non accrual status of commercial construction relationships	$ 0	$ 0

XML

(Loss) Earnings Per Share - Summary of (Loss) Earnings Per Share Computation (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net (loss) income	$ (24,248)	$ 678	$ (26,154)	$ 3,131
Average common shares outstanding	87,089,147	86,323,099	86,915,959	86,284,325
Net effect of dilutive common stock equivalents		33,697		73,643
Adjusted average shares outstanding - dilutive	87,089,147	86,356,796	86,915,959	86,357,968
Basic (loss) earnings per share	$ (0.28)	$ 0.01	$ (0.30)	$ 0.04
Diluted (loss) earnings per share	$ (0.28)	$ 0.01	$ (0.30)	$ 0.04

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Real Estate Owned - Summary of Real Estate Owned Activity (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Real Estate By Property [Line Items]
Balance, beginning of year	$ 2,503
Transfers into real estate owned	567
Sale of real estate owned	(1,478)
Reserve for losses in real estate owned	(265)
Balance, end of year	1,327
Commercial Real Estate Loans [Member]
Real Estate By Property [Line Items]
Balance, beginning of year	1,227
Transfers into real estate owned
Sale of real estate owned
Reserve for losses in real estate owned	(197)
Balance, end of year	1,030
Residential Properties [Member]
Real Estate By Property [Line Items]
Balance, beginning of year	1,276
Transfers into real estate owned	567
Sale of real estate owned	(1,478)
Reserve for losses in real estate owned	(68)
Balance, end of year	297
Bank Properties [Member]
Real Estate By Property [Line Items]
Balance, beginning of year
Transfers into real estate owned
Sale of real estate owned
Reserve for losses in real estate owned
Balance, end of year

XML

Investment Securities - Additional Information (Detail) (USD $)	6 Months Ended								0 Months Ended	6 Months Ended		6 Months Ended			6 Months Ended			6 Months Ended					6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2014 Amortized Cost [Member]	Jun. 30, 2014 Estimated Fair Value [Member]	Aug. 31, 2009 Trust Preferred Securities [Member]	Jun. 30, 2014 Trust Preferred Securities [Member] Times Security	Dec. 31, 2013 Trust Preferred Securities [Member]	Jun. 30, 2014 Trust Preferred Securities [Member] Minimum [Member]	Jun. 30, 2014 U.S. Government Agency Securities [Member] Security	Dec. 31, 2013 U.S. Government Agency Securities [Member]	Jun. 30, 2014 U.S. Government Agency Securities [Member] Minimum [Member]	Jun. 30, 2014 U.S. Government Agency Mortgage-Backed Securities [Member] Security	Dec. 31, 2013 U.S. Government Agency Mortgage-Backed Securities [Member]	Jun. 30, 2014 U.S. Government Agency Mortgage-Backed Securities [Member] Minimum [Member]	Jun. 30, 2014 U.S. Government Agency Mortgage-Backed Securities [Member] Maximum [Member]	Jun. 30, 2014 Collateralized Loan Obligations [Member] Securities	Dec. 31, 2013 Collateralized Loan Obligations [Member]	Jun. 30, 2014 Collateralized Loan Obligations [Member] AA [Member] Security	Jun. 30, 2014 Collateralized Loan Obligations [Member] Minimum [Member]	Jun. 30, 2014 Collateralized Loan Obligations [Member] Maximum [Member]	Jun. 30, 2014 Collateralized Loan Obligations [Member] Maximum [Member] AA [Member] Security	Jun. 30, 2014 Collateralized Loan Obligations [Member] Maximum [Member] AAA [Member] Security
Schedule of Available-for-sale Securities [Line Items]
OTTI credit related charge	$ 0	$ 0
Gross unrealized loss in the category of 12 months or longer	5,013,000			6,142,000						3,154,000	4,659,000		242,000	562,000		1,307,000	921,000			310,000				310,000
Gross unrealized loss in the category												12 months			12 months			12 months	12 months				12 months	12 months
Number of investment securities in unrealized loss position of twelve months or longer										2			1			7						1				2
12 Months or longer estimated fair value	76,618,000			20,335,000						9,473,000	7,967,000		4,729,000	4,407,000		40,226,000	7,961,000			22,190,000
Less than 12 months gross unrealized loss	416,000			8,060,000												267,000	7,374,000			149,000	686,000
Number of investment securities in unrealized loss less than 12 months																8									5
Less than 12 months estimated fair value	77,765,000			292,077,000												60,464,000	246,348,000			17,301,000	45,729,000
Number of investment securities																				12
Amortized cost of securities	71,900,000
Estimated fair value of securities	71,500,000
Number of Non-rated single issuer security										1
Non-rated single issuer security with amortized cost										3,800,000
Investment grade rated pooled security with an amortized cost										8,800,000
Non-rated single issuer security with estimated fair value										2,700,000
Investment grade rated pooled security with estimated fair value										6,700,000
Number of investment grade rated pooled security										1
Security with principal coverage										2.9
Future default rate	3.60%
Period of time with no recovery rate	3 years
Non-rated single issuer trust preferred security, permitted period for deferment on dividend									5 years
Cumulative OTTI on security	10,203,000	10,203,000	10,203,000	10,203,000	10,203,000	10,203,000				1,200,000
Amortized cost of investment securities pledged to secure public deposits							44,200,000
Estimated fair value of investment securities pledged to secure public deposits								46,200,000
Amortized cost of investment securities pledged as collateral on secured borrowings							175,600,000
Estimated fair value of investment securities pledged as collateral on secured borrowings								$ 177,100,000

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Branch Sale

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Branch Sale

(2) Branch Sale

On July 2, 2014 the Company entered into a Purchase and Assumption Agreement (the “Purchase Agreement”) with Sturdy Savings Bank, pursuant to which the Bank agreed to sell certain assets and assume certain liabilities relating to seven branch offices in and around Cape May County, New Jersey. The Purchase Agreement provides for a purchase price equal to the sum of a deposit premium of 8.765% of the average daily closing balance of deposits for the 31 days prior to the closing date, the Company’s carrying amount of loans identified and approved by both parties, the aggregate amount of cash on hand and accrued interest on the loans acquired.

The Purchase Agreement contains certain customary representations, warranties, indemnities and covenants of the parties, and is subject to termination in certain circumstances. The transaction is expected to be completed during the first quarter of 2015, subject to regulatory approvals and customary closing conditions.

The following summarizes the branch assets and liabilities classified as held-for-sale at June 30, 2014 related to the Purchase Agreement:

Assets:
Cash	$	1,507
Loans held-for-sale		28,543
Properties and equipment, net		4,008
Total branch assets held-for-sale	$	34,058
Liabilities:
Deposits held-for-sale	$	160,769

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Derivative Financial Instruments and Hedging Activities - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Derivatives, Fair Value [Line Items]
Fair value of swaps at inception	$ 0		$ 0
Fair value adjustments			113	419
Interest rate lock commitments on residential mortgages, fair value adjustments	110	171	106	(43)
Investment securities available for sale	437,027		437,027		440,097
Interest Rate Lock Commitments on Residential Mortgages [Member]
Derivatives, Fair Value [Line Items]
Investment securities available for sale	225		225		119
Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Notional	16,600		16,600		21,200
Interest payment description			For each of these swap agreements, the floating rate is based on the one-month London Interbank Offered Rate ("LIBOR") paid on the first day of the month which matches the interest payment date on each subordinated note.
Interest Rate Floor [Member]
Derivatives, Fair Value [Line Items]
Notional	14,800		14,800		15,200
Fair value adjustments	0	0	0	0
Number of interest rate floors	2		2
Residential Mortgage [Member]
Derivatives, Fair Value [Line Items]
Interest rate lock commitments on residential mortgages, fair value adjustments	110	171	106	43
Residential Mortgage [Member] | Held-for-Sale Pipeline [Member]
Derivatives, Fair Value [Line Items]
Notional	26,900		26,900
Residential Mortgage [Member] | Interest Rate Lock Commitments on Residential Mortgages [Member]
Derivatives, Fair Value [Line Items]
Investment securities available for sale	$ 225		$ 225		$ 119
Minimum [Member]
Derivatives, Fair Value [Line Items]
Expiration dates for swap agreements, range			Aug. 01, 2014
Maximum [Member]
Derivatives, Fair Value [Line Items]
Expiration dates for swap agreements, range			Aug. 01, 2022

XML

Stock-Based Compensation - Significant Weighted Average Assumptions Used to Calculate Fair Value of Options (Parenthetical) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Common stock dividends paid in cash	$ 0	$ 0

XML

Derivative Financial Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Summary of Interest Rate Swaps Designated as Fair Value Hedges

Summary of Interest Rate Swaps Designated As Fair Value Hedges

	June 30, 2014					December 31, 2013
Balance Sheet Location	Notional		Fair Value			Notional		Fair Value
Other liabilities	$	16,644	$	(1,137	)	$	21,172	$	(1,632	)

Summary of Interest Rate Swap Components

Summary of Interest Rate Swap Components

	June 30, 2014			December 31, 2013
Weighted average pay rate		6.96	%		6.94	%
Weighted average receive rate		2.01	%		2.04	%
Weighted average maturity in years		1.66			1.9

Summary of Interest Rate Swaps Not Designated as Hedging Instruments

	June 30, 2014						December 31, 2013
Balance Sheet Location	Notional			Fair Value			Notional		Fair Value
Other assets	$	213,619		$	16,994		$	251,207	$	23,299
Other liabilities		(213,619	)		(17,144	)		251,207		(23,526	)

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Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Schedule of Real Estate Owned

Real estate owned at June 30, 2014 and December 31, 2013 was as follows:

	June 30, 2014		December 31, 2013
Commercial properties	$	1,030	$	1,227
Residential properties		297		1,276
Bank properties		—		—
Total	$	1,327	$	2,503

Summary of Real Estate Owned Activity

Summary of Real Estate Owned Activity

	Commercial Properties			Residential Properties			Bank Properties		Total
Beginning balance, January 1, 2014	$	1,227		$	1,276		$	—	$	2,503
Transfers into real estate owned		—			567			—		567
Sale of real estate owned		—			(1,478	)		—		(1,478	)
Reserve for losses in real estate owned		(197	)		(68	)		—		(265	)
Ending balance, June 30, 2014	$	1,030			297			—		1,327

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Allowance for Loan Losses - Analysis of Company's TDR Agreements (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Contract	Jun. 30, 2013 Contract
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	$ 1,417	$ 1,417
Post-Modification Outstanding Recorded Investment	1,392	1,392
CRE Owner occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	413	413
Post-Modification Outstanding Recorded Investment	406	406
Residential Real Estate Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Pre-Modification Outstanding Recorded Investment		199
Post-Modification Outstanding Recorded Investment		$ 197

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Stock-Based Compensation - Summary of Nonvested Stock Award Activity (Detail) (Restricted Stock [Member], USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Nonvested Stock Awards Outstanding, Beginning Balance	431,834	639,037
Number of Shares, Issued	112,180	20,643
Number of Shares, Vested	(20,643)	(73,336)
Number of Shares, Forfeited	(47,188)	(28,733)
Number of Shares, Nonvested Stock Awards Outstanding, Ending Balance	476,183	557,611
Weighted Average Grant Date Fair Value, Nonvested Stock Awards Outstanding, Beginning Balance	$ 3.13	$ 3.30
Weighted Average Grant Date Fair Value, Issued	$ 3.43	$ 3.39
Weighted Average Grant Date Fair Value, Vested	$ 3.39	$ 4.60
Weighted Average Grant Date Fair Value, Forfeited	$ 3.06	$ 3.03
Weighted Average Grant Date Fair Value, Nonvested Stock Awards Outstanding, Ending Balance	$ 3.19	$ 3.14

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Deposits (Tables)

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Major Classifications of Deposits

Deposits consist of the following major classifications:

	June 30, 2014		December 31, 2013
Interest-bearing demand deposits	$	977,549	$	1,179,292
Non-interest-bearing demand deposits		537,023		561,006
Savings deposits		232,018		266,573
Time certificates under $100,000		250,066		300,309
Time certificates $100,000 or more		172,568		206,461
Brokered time deposits		103,541		107,930
Total	$	2,272,765	$	2,621,571

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(Loss) Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Summary of (Loss) Earnings Per Share Computation

(Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Average common shares outstanding		87,089,147			86,323,099
Net effect of dilutive common stock equivalents		—			33,697
Adjusted average shares outstanding—dilutive		87,089,147			86,356,796
Basic (loss) earnings per share	$	(0.28	)	$	0.01
Diluted (loss) earnings per share	$	(0.28	)	$	0.01
	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Average common shares outstanding		86,915,959			86,284,325
Net effect of dilutive common stock equivalents		—			73,643
Adjusted average shares outstanding—dilutive		86,915,959			86,357,968
Basic (loss) earnings per share	$	(0.30	)	$	0.04
Diluted (loss) earnings per share	$	(0.30	)	$	0.04

Summary of Pro-Forma (Loss) Earnings Per Share Computation

The following tables present the Companies pro-forma (Loss) Earnings Per Share Computation.

Pro-forma (Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Pro-forma average common shares outstanding		17,417,829			17,264,620
Pro-forma net effect of dilutive common stock equivalents		—			6,739
Pro-forma adjusted average shares outstanding—dilutive		17,417,829			17,271,359
Pro-forma basic (loss) earnings per share	$	(1.39	)	$	0.04
Pro-forma diluted (loss) earnings per share	$	(1.39	)	$	0.04

	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Pro-forma average common shares outstanding		17,383,192			17,256,865
Pro-forma net effect of dilutive common stock equivalents		—			14,729
Pro-forma adjusted average shares outstanding—dilutive		17,383,192			17,271,594
Pro-forma basic (loss) earnings per share	$	(1.50	)	$	0.18
Pro-forma diluted (loss) earnings per share	$	(1.50	)	$	0.18

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(1) Summary of Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”).

All normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Annual Report on Form 10-K of Sun Bancorp, Inc. (the “Company”) for the year ended December 31, 2013. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other period. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The significant estimates include the allowance for loan losses, other-than-temporary impairment on investment securities, goodwill, intangible assets, income taxes, stock-based compensation and the fair value of financial instruments. Actual results may differ from these estimates under different assumptions or conditions.

Prior Period Revision. Previously, the Company presented restricted cash, with respect to amounts held as collateral against letters of credit, in “Cash and due from banks” on the consolidated statements of financial condition. During the fourth quarter of 2013, the Company identified that certain of these balances should be classified as restricted cash. The table below reports the impact of these revisions to the consolidated statements of cash flows for the six months ended June 30, 2013:

Six Months Ended June 30,	Revised 2013		As reported 2013
Cash and cash equivalents, beginning of year	$	143,616	$	169,616
Cash and cash equivalents, end of period		416,239		442,239

Basis of Consolidation. The unaudited condensed consolidated financial statements include, after all intercompany balances and transactions have been eliminated, the accounts of the Company, its principal wholly-owned subsidiary, Sun National Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Sun Financial Services, L.L.C., 2020 Properties, L.L.C., and 4040 Properties, L.L.C. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 810-10, Consolidation, Sun Capital Trust V, Sun Capital Trust VI, Sun Capital Trust VII, Sun Statutory Trust VII, and Sun Capital Trust VIII, collectively, the “Issuing Trusts”, are presented on a deconsolidated basis.

Segment Information. As defined in accordance with FASB ASC 280, Segment Reporting, the Company has one reportable and operating segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, lending is dependent upon the ability of the Company to fund itself with deposits and other borrowings and manage interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

Loans Held-For-Sale. Loans held-for-sale totaled $29.2 million and $20.7 million at June 30, 2014 and December 31, 2013, respectively. The balance at June 30, 2014 and December 31, 2013 includes $9.4 million and $20.7 million, respectively, of residential mortgages originated with the intent to sell which were recorded at fair value. At June 30, 2014, loans held-for-sale also includes $19.8 million of consumer loans identified for sale out of the portfolio and recorded at lower of cost or market.

Allowance for Loan Losses. The allowance for loan losses is determined by management based upon past experience, evaluation of estimated loss and impairment in the loan portfolio, current economic conditions and other pertinent factors. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

The provision for loan losses is based upon historical loan loss experience, a series of qualitative factors and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC 310, Receivables (“FASB ASC 310”). Values assigned to the qualitative factors and those developed from historic loss experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans that continue to perform. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. For this purpose, delays of less than 90 days are considered to be insignificant. Impairment losses are included in the provision for loan losses. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historic loss experience and qualitative factors. Included in these qualitative factors are:

• Levels of past due, classified and non-accrual loans, and troubled debt restructurings;

• Nature, volume, and concentration of loans;

• Historical loss trends;

• Changes in lending policies and procedures, underwriting standards, collections, and for commercial loans, the level of loans being approved with exceptions to policy;

• Experience, ability and depth of management and staff;

• National and local economic and business conditions, including various market segments;

• Quality of the Company’s loan review system and degree of Board oversight; and

• Effect of external factors, including the deterioration of collateral values, on the level of estimated credit losses in the current portfolio.

Commercial loans, including commercial real estate loans, are placed on non-accrual status at the time the loan has been delinquent for 90 days unless the loan is well secured and in the process of collection. Generally, commercial loans and commercial real estate loans are charged-off no later than 180 days after becoming delinquent unless the loan is well secured and in the process of collection, or other extenuating circumstances support collection. Residential real estate loans are typically placed on non-accrual status at the time the loan has been delinquent for 90 days. Other consumer loans are typically charged-off at 180 days delinquent. In all cases, loans must be placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Goodwill and Intangible Assets. Goodwill is the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tests goodwill for impairment annually as of December 31, unless circumstances indicate that a test is required at an earlier date. The Company elected to not apply the qualitative evaluation option permitted under Accounting Standards Update (“ASU”) 2011-8, Intangibles – Goodwill and Other (Topic 35): Testing Goodwill for Impairment issued in September 2011. Therefore, the Company utilizes the two-step goodwill impairment test outlined in FASB ASC 350, Intangibles – Goodwill and Other (“FASB ASC 350”). Step one, which is used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. A reporting unit is an operating segment, or one level below an operating segment, as defined in FASB ASC 280. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired and step two is therefore unnecessary. If the carrying amount of the reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment loss, if any. At December 31, 2013, the Company performed its annual goodwill impairment test, and step one of the analysis indicated that the Company’s fair value was greater than its carrying value; therefore, the Company’s goodwill was not impaired at December 31, 2013. Nothing has occurred since that time to suggest that an impairment exists at June 30, 2014. The carrying amount of goodwill totaled $38.2 million at June 30, 2014 and December 31, 2013.

Intangible assets, net on the consolidated statements of financial condition, consist of core deposit intangibles, net of accumulated amortization from the Bank’s previous acquisitions. Core deposit intangibles are amortized using the straight-line method based on the characteristics of the particular deposit type and are evaluated annually for impairment.

Bank Owned Life Insurance (“BOLI”). The Company has purchased life insurance policies on certain key employees. These policies are recorded at their cash surrender value, or the amount that can be realized in accordance with FASB ASC 325-30, Investments in Insurance Contracts. At June 30, 2014, the Company had $26.6 million invested in a general account and $51.6 million in a separate account, for a total BOLI cash surrender value of $78.2 million. The BOLI separate account is invested in a mortgage-backed securities fund, which is managed by an independent investment firm. Pricing volatility of these underlying instruments may have an impact on investment income; however, the fluctuations would be partially mitigated by a stable value wrap agreement which is a component of the separate account. Income from these policies and changes in the cash surrender value are recorded in BOLI income of the unaudited condensed consolidated statements of operations.

Income Taxes. The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management exercises significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based upon changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the unaudited condensed consolidated statements of operations. Assessment of uncertain tax positions under FASB ASC 740 requires careful consideration of the technical merits of a position based on management’s analysis of tax regulations and interpretations. Significant judgment is applied when addressing the requirements of FASB ASC 740. At June 30, 2014, the Company had a valuation allowance of $131.0 million against its gross deferred tax asset. As the Company remained in a cumulative loss position, the deferred tax valuation allowance is still appropriate at June 30, 2014. The net deferred tax liability of $796 thousand in the unaudited condensed consolidated statements of financial condition at June 30, 2014 primarily represents the tax liability created from the goodwill amortization recorded for tax purposes and not for book. For those securities in an unrealized loss position, the Company intends to hold these securities until maturity or until such time that they are in an unrealized gain position and therefore, the deferred tax asset is considered appropriate.

Mortgage Banking Revenue, Net. Mortgage banking revenue, net includes revenues associated with the sale of residential mortgage loans originated with the intent to sell, net of recourse liability provision as well as gain on bulk sales of jumbo residential mortgage loans. The components of this line item are as follows:

	For the Six Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	1,418		$	7,924
Gain on bulk sale of jumbo residential mortgage loans		134			2,363
Market value adjustment on loans held-for-sale		(34	)		(1,039	)
Fair value adjustment on interest rate lock commitments		106			(43	)
Recourse liability provision		(460	)		(200	)
Mortgage banking revenue, net	$	1,164		$	9,005
	For the Three Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	649		$	3,818
Gain on bulk sale of jumbo residential mortgage loans		131			1,507
Market value adjustment on loans held-for-sale		70			205
Fair value adjustment on interest rate lock commitments		110			171
Recourse liability provision		(430	)		(100	)
Mortgage banking revenue, net	$	530		$	5,601

Accumulated Other Comprehensive Income. The Company classifies items of accumulated comprehensive income by their nature and displays the details of other comprehensive income in the unaudited condensed consolidated statements of comprehensive income. Amounts categorized as comprehensive loss/income represent net unrealized gains or losses on investment securities available for sale, net of tax and the non-credit portion of any other-than-temporary impairment (“OTTI”) loss not recorded in earnings. Reclassifications are made to avoid double counting items which are displayed as part of net income (loss) for the period. These reclassifications for the three and six months ended June 30, 2014 and 2013 were as follows:

	For the Three Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	2,695	$	(1,102	)	$	1,593	$	(6,904	)	$	2,820	$	(4,084	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(9	)		4		(5	)
Net unrealized gain on securities available for sale	$	2,745	$	(1,122	)	$	1,623	$	(6,913	)	$	2,824	$	(4,089	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

	For the Six Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	11,345	$	(4,635	)	$	6,710	$	(5,127	)	$	2,094	$	(3,033	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(3,452	)		1,410		(2,042	)
Net unrealized gain on securities available for sale	$	11,395	$	(4,655	)	$	6,740	$	(8,579	)	$	3,504	$	(5,075	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

Recent Accounting Principles.

In June 2014, the FASB issued ASU 2014-11: Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The accounting changes in the amendment affect all entities that enter into repurchase-to-maturity transactions or repurchase financings. The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting and for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty which will result in secured borrowing accounting for the repurchase agreement. All entities are subject to new disclosure requirements for certain transactions that involve a transfer of a financial asset accounted for as a sale. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In May 2014, the FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606): Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40), Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables, Background Information and Basis for Conclusions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the considerations to which the entity expects to be entitled in exchange for those goods or services. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In January 2014, the FASB issued ASU 2014-4, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For public entities, the amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In July 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this update seek to eliminate the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists by presenting the unrecognized tax benefit, or a portion of the unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset. To the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward are not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. The Company has evaluated the impact of the adoption of this accounting standards update on its financial statements and determined that there currently is no impact to the Company’s presentation.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

The assets and liabilities measured at fair value on a recurring basis are as follows:

			Category Used for Fair Value Measurement
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,502	$	2,502	$	—	$	—
U.S. Government agency securities		4,729		—		4,729		—
U.S. Government agency mortgage-backed securities		297,992		—		297,992		—
Other mortgage-backed securities		273		—		273		—
State and municipal securities		31,012		—		31,012		—
Trust preferred securities		9,473		—		—		9,473
Collateralized loan obligations		71,484		—		71,484		—
Other securities		19,562		19,562		—		—
Hedged commercial loans		17,838		—		17,838		—
Residential mortgage loans held-for-sale		9,410		—		9,410		—
Interest rate lock commitments on residential mortgages		225		—		—		225
Interest rate swaps		16,994		—		16,994		—

Interest rate floor		62		—		62		—
Liabilities:
Fair value interest rate swaps		1,137		—		1,137		—
Interest rate swaps		17,082		—		17,082		—
Interest rate floor		62		—		62		—
December 31, 2013
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,500	$	2,500	$	—	$	—
U.S. Government agency securities		4,407		—		4,407		—
U.S. Government agency mortgage-backed securities		318,064		—		318,064		—
Other mortgage-backed securities		293		—		293		—
State and municipal obligations		30,453		—		30,453		—
Trust preferred securities		7,967		—		—		7,967
Collateralized loan obligations		73,229		—		73,229		—
Other securities		3,184		3,184		—		—
Hedged commercial loans		22,435		—		22,435		—
Residential loans held-for-sale		20,662		—		20,662		—
Interest rate lock commitments on residential mortgages		119		—		—		119
Interest rate swaps		23,299		—		23,299		—
Interest rate floor		132		—		132		—
Liabilities:
Fair value interest rate swaps		1,635		—		1,635		—
Interest rate swaps		23,526		—		23,526		—
Interest rate floor		132		—		132		—

Summary of Assets Measured at Fair Value on Non Recurring Basis

At June 30, 2014 and 2013, these assets were valued in accordance with GAAP and, except for impaired loans, loans held-for-sale, and real estate owned included in the following table, did not require fair value disclosure under the provisions of FASB ASC 820. The related changes in fair value for the six months ended June 30, 2014 and 2013 are as follows:

			Category Used for Fair Value Measurement						Total Losses Or Changes in Net Assets / Liabilities
	Total		Level 1		Level 2		Level 3
June 30, 2014
Assets:
Impaired loans	$	2,962	$	—	$	—	$	2,962	$	(3,961	)
Loans held-for-sale		6,355				6,355				(4,685	)

Real estate owned		294		—		—		294		(265	)
June 30, 2013
Assets:
Impaired loans	$	63,093	$	—	$	—	$	63,093	$	(7,127	)
Real estate owned		347		—		—		347		(380	)

Valuation Methods for Determining Fair Value of Impairment Loans

The following table summarizes the Company’s appraisal approach based upon loan category.

Loan Category Used for Impairment Review	Method of Determining the Value
Loans less than $1 million	Evaluation report or restricted use appraisal
Loans $1 million or greater
Existing appraisal 18 months or less	Restricted use appraisal
Existing appraisal greater than 18 months	Summary form appraisal
Commercial loans secured primarily by residential real estate
Loans less than $1 million	Automated valuation model
Loans $1 million or greater	Summary form appraisal
Non-commercial loans secured primarily by residential real estate
Loans less than $250 thousand	Automated valuation model or summary form appraisal
Loans $250 thousand or greater	Summary form appraisal

Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities

Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities

	June 30, 2014				December 31, 2013
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and due from banks	$	49,384	$	49,384	$	38,075	$	38,075
Interest-earning bank balances		281,056		281,056		229,687		229,687
Restricted cash		26,000		26,000		26,000		26,000
Investment securities available for sale		437,027		437,027		440,097		440,097
Investment securities held-to-maturity		636		645		681		692
Loans receivable, net		1,809,886		1,735,087		2,079,732		1,964,856
Loans held-for-sale, at fair value		9,410		9,410		20,662		20,662
Loans held-for-sale, at lower of cost or market		19,761		20,924		—		—
Hedged commercial loans(1)		17,838		17,838		22,435		22,435
Branch assets held-for-sale		34,058		34,058		—		—
Restricted equity investments		16,388		16,388		17,019		17,019
Interest rate lock commitments on residential mortgages		225		225		119		119

Interest rate swaps	16,994	16,994	23,299	23,299
Interest rate floor	62	62	132	132
Liabilities:
Demand deposits	1,505,172	1,537,452	1,740,298	1,795,685
Savings deposits	241,420	245,147	266,573	272,264
Time deposits	526,173	525,890	614,700	615,735
Deposits held-for-sale	160,769	174,860	—	—
Securities sold under agreements to repurchase – customers	670	670	478	478
Advances from FHLBNY	60,873	60,971	60,956	61,072
Junior subordinated debentures	92,786	64,060	92,786	63,747
Fair value interest rate swaps	1,138	1,138	1,632	1,632
Interest rate swaps	17,082	17,082	23,526	23,526
Interest rate floor	62	62	132	132

(1) Includes positive market value adjustment of $1.1 million and $1.6 million at June 30, 2014 and December 31, 2013, respectively, which is equal to the change in value of related interest rate swaps designated as fair value hedges of these hedged loans in accordance with FASB ASC 815.

Investment Securities [Member]

Summary of Level 3 Fair Value Measurement Activity

The following provides details of the Level 3 fair value measurement activity for the three and six months ended June 30, 2014 and 2013:

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Investment Securities

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	8,616	$	16,803
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		857		1,372
Purchases		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers out of Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675
	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	7,967	$	5,882
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		1,506		1,793
Purchases		—		10,500
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675

Interest Rate Lock Commitments [Member]

Summary of Level 3 Fair Value Measurement Activity

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Interest Rate Lock Commitments on Residential Mortgages

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	115	$	633
Total gains, realized/unrealized:
Included in earnings(1)		110		171
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

(1) Amount included in mortgage banking revenue, net on the consolidated statements of operations.

	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	119	$	847
Total gains, realized/unrealized:
Included in earnings(1)		106		(43	)
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

XML

Stock-Based Compensation - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based incentive plans, options expiry term			10 years
Weighted average remaining contractual term for Options outstanding			6 years 1 month 6 days
Weighted average remaining contractual term for Options exercisable			5 years
Aggregate intrinsic value for Options outstanding	$ 278,000		$ 278,000
Aggregate intrinsic value of Options exercisable	64,000		64,000
Company granted Options			215,972	83,610
Stock Option granted exercise period			10 years
Total compensation expense recognized on stock award	102,000	218,000	232,000	456,000
Total unrecognized compensation cost related to options	387,000		387,000
Total unrecognized compensation cost related to nonvested stock awards	$ 1,100,000		$ 1,100,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested stock awards issued			112,180	20,643
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cost of stock awards recognized over a weighted average period			3 years 8 months 12 days
Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cost of stock awards recognized over a weighted average period			2 years 6 months

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Allowance for Loan Losses - Allowance for Loan Losses and Recorded Investment in Financing Receivables (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Allowance for loan losses:
Beginning balance			$ 35,537	$ 45,873
Charge-offs			(23,304)	(5,786)
Recoveries			1,356	9,632
Net charge-offs			(21,948)	3,846
PROVISION FOR LOAN LOSSES	14,803	(1,883)	14,803	(1,712)
Ending balance	28,392	48,007	28,392	48,007
Ending balance: individually evaluated for impairment		3,257		3,257
Ending balance: collectively evaluated for impairment	28,392	44,750	28,392	44,750
Financing Receivables:
Ending balance	1,856,116	2,158,792	1,856,116	2,158,792	2,137,704
Ending balance: individually evaluated for impairment	13,971	71,615	13,971	71,615
Ending balance: collectively evaluated for impairment	1,842,145	2,087,177	1,842,145	2,087,177
Commercial Loans [Member]
Allowance for loan losses:
Beginning balance			27,828	33,197
Charge-offs			(16,300)	(4,294)
Recoveries			1,078	9,195
Net charge-offs			(15,222)	4,901
PROVISION FOR LOAN LOSSES			8,410	1,168
Ending balance	21,016	39,266	21,016	39,266
Ending balance: individually evaluated for impairment		3,086		3,086
Ending balance: collectively evaluated for impairment	21,016	36,180	21,016	36,180
Financing Receivables:
Ending balance	1,363,900	1,676,133	1,363,900	1,676,133
Ending balance: individually evaluated for impairment	5,447	60,825	5,447	60,825
Ending balance: collectively evaluated for impairment	1,358,453	1,615,308	1,358,453	1,615,308
Home Equity [Member]
Allowance for loan losses:
Beginning balance			3,375	2,734
Charge-offs			(2,319)	(989)
Recoveries			144	305
Net charge-offs			(2,175)	(684)
PROVISION FOR LOAN LOSSES			2,321	2,530
Ending balance	3,521	4,580	3,521	4,580
Ending balance: individually evaluated for impairment		38		38
Ending balance: collectively evaluated for impairment	3,521	4,542	3,521	4,542
Financing Receivables:
Ending balance	186,953	223,214	186,953	223,214
Ending balance: individually evaluated for impairment	2,905	4,825	2,905	4,825
Ending balance: collectively evaluated for impairment	184,048	218,389	184,048	218,389
Residential Real Estate [Member]
Allowance for loan losses:
Beginning balance			2,898	3,333
Charge-offs			(1,425)	(81)
Recoveries			6	7
Net charge-offs			(1,419)	(74)
PROVISION FOR LOAN LOSSES			1,922	(752)
Ending balance	3,401	2,507	3,401	2,507
Ending balance: individually evaluated for impairment		98		98
Ending balance: collectively evaluated for impairment	3,401	2,409	3,401	2,409
Financing Receivables:
Ending balance	298,063	225,147	298,063	225,147
Ending balance: individually evaluated for impairment	5,609	5,309	5,609	5,309
Ending balance: collectively evaluated for impairment	292,454	219,838	292,454	219,838
Other [Member]
Allowance for loan losses:
Beginning balance			1,436	6,609
Charge-offs			(3,260)	(422)
Recoveries			128	125
Net charge-offs			(3,132)	(297)
PROVISION FOR LOAN LOSSES			2,150	(4,658)
Ending balance	454	1,654	454	1,654
Ending balance: individually evaluated for impairment		35		35
Ending balance: collectively evaluated for impairment	454	1,619	454	1,619
Financing Receivables:
Ending balance	7,200	34,298	7,200	34,298
Ending balance: individually evaluated for impairment	10	656	10	656
Ending balance: collectively evaluated for impairment	$ 7,190	$ 33,642	$ 7,190	$ 33,642

XML

Fair Value of Financial Instruments - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair value exceeded the aggregate principal balance loans held-for-sale			$ 278,000
Residential mortgage loans held-for-sale 90 or more days past due	7,001,000		7,001,000		15,400,000
Future default rate	3.60%		3.60%
Assumption used in cash flow model			3 years
Market spreads first pooled security	3.00%		3.00%
Market spreads single issuer security	7.50%		7.50%
Change in fair value discount rate for pooled issue			3.00%
Decrease due to change in applicable discount rate for pooled issue			1,900,000
Increase due to change in applicable discount rate for pooled issue			2,900,000
Change in fair value discount rate for single issue			3.00%
Decrease due to change in applicable discount rate for single issue			569,000
Increase due to change in applicable discount rate for single issue			910,000
Transfers within three Levels	0
Change in fair value discount rate for interest lock commitment			20.00%
Change in fair value of interest rate lock commitments			60,000
Investment securities available for sale	437,027,000		437,027,000		440,097,000
Collateral securities unrecovered		6,000,000		6,000,000
Specific reserve change				3,300,000
Decrease in fair value of consumer properties	68,000	0
Decrease in fair value of bank properties	0	322,000
Commercial Real Estate Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Decrease in fair value commercial properties	197,000	58,000
Non-Recurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair value of Loans held-for-sale	6,355,000		6,355,000
Total Losses Or Changes in Net Assets/Liabilities, loans held- for-sale	(4,685,000)		(4,685,000)
Level 3 [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Pull through percentage based upon historical experience	75.00%		75.00%		75.00%
Level 3 [Member] | Non-Recurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair value of Loans held-for-sale
Level 2 [Member] | Non-Recurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair value of Loans held-for-sale	6,355,000		6,355,000
Residential Mortgage Loans Held-for-Sale [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Residential mortgage loans held-for-sale 90 or more days past due	0		0		0
Interest Rate Lock Commitments on Residential Mortgages [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Investment securities available for sale	225,000		225,000		119,000
Specific Reserve [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Impaired loans with an aggregate carrying amount	0	9,200,000	0	9,200,000
Charge-offs			0	0
Without Specific Reserve [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Impaired loans with an aggregate carrying amount	3,000,000	57,100,000	3,000,000	57,100,000
Without Specific Reserve [Member] | Loan One [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Charge-offs			3,700,000	4,000,000
Without Specific Reserve [Member] | Loan Two [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Charge-offs			$ 3,900,000	$ 670,000

XML

Condensed Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 49,384	$ 38,075
Interest-earning bank balances	281,056	229,687
Cash and cash equivalents	330,440	267,762
Restricted cash	26,000	26,000
Investment securities available for sale (amortized cost of $437,558 and $452,023 at June 30, 2014 and December 31, 2013, respectively)	437,027	440,097
Investment securities held to maturity (estimated fair value of $645 and $692 at June 30, 2014 and December 31, 2013, respectively)	636	681
Loans receivable (net of allowance for loan losses of $28,392 and $35,537 at June 30, 2014 and December 31, 2013, respectively)	1,827,724	2,102,167
Loans held-for-sale, at fair value	9,410	20,662
Loans held-for-sale, at lower of cost or market	19,761
Branch assets held-for-sale	34,058
Restricted equity investments, at cost	16,388	17,019
Bank properties and equipment, net	42,359	49,095
Real estate owned, net	1,327	2,503
Accrued interest receivable	6,276	7,112
Goodwill	38,188	38,188
Intangible assets, net	238	805
Deferred taxes, net		4,575
Bank owned life insurance (BOLI)	78,166	77,236
Other assets	26,660	33,651
Total assets	2,894,658	3,087,553
Liabilities:
Deposits	2,272,765	2,621,571
Deposits held-for-sale	160,769
Securities sold under agreements to repurchase - customers	670	478
Advances from the Federal Home Loan Bank of New York (FHLBNY)	60,873	60,956
Obligations under capital lease	7,191	7,331
Junior subordinated debentures	92,786	92,786
Deferred taxes, net	796
Other liabilities	71,152	59,094
Total liabilities	2,667,002	2,842,216
Commitments and contingencies (see Note 11)
Shareholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued
Common stock, $1 par value, 200,000,000 shares authorized; 88,761,735 shares issued and 87,192,007 shares outstanding at June 30, 2014; 88,711,035 shares issued and 86,714,414 shares outstanding at December 31, 2013	88,757	88,711
Additional paid-in capital	502,104	506,719
Retained deficit	(344,108)	(317,954)
Accumulated other comprehensive loss	(315)	(7,055)
Deferred compensation plan trust	(599)	(522)
Treasury stock at cost, 1,569,728 shares at June 30, 2014; and 1,996,621 shares at December 31, 2013	(18,183)	(24,562)
Total shareholders' equity	227,656	245,337
Total liabilities and shareholders' equity	$ 2,894,658	$ 3,087,553

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Investment Securities - Available for Sale and Held to Maturity Investment (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	$ 437,558	$ 452,023
Gross Unrealized Gains, Available for sale	4,898	2,276
Gross Unrealized Losses, Available for sale	(5,429)	(14,202)
Estimated Fair Value, Available for sale	437,027	440,097
Amortized Cost, Held to maturity	636	681
Gross Unrealized Gains, Held to maturity	9	11
Gross Unrealized Losses, Held to maturity
Estimated Fair Value, Held to maturity	645	692
Amortized Cost	438,194	452,704
Gross Unrealized Gains	4,907	2,287
Gross Unrealized Losses	(5,429)	(14,202)
Estimated Fair Value	437,672	440,789
U.S. Government Agency Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	296,732	325,316
Gross Unrealized Gains, Available for sale	2,834	1,043
Gross Unrealized Losses, Available for sale	(1,574)	(8,295)
Estimated Fair Value, Available for sale	297,992	318,064
Amortized Cost, Held to maturity	386	431
Gross Unrealized Gains, Held to maturity	9	11
Gross Unrealized Losses, Held to maturity
Estimated Fair Value, Held to maturity	395	442
Other Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	19,562	3,184
Estimated Fair Value, Available for sale	19,562	3,184
Amortized Cost, Held to maturity	250	250
Gross Unrealized Losses, Held to maturity
Estimated Fair Value, Held to maturity	250	250
U.S. Treasury Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	2,497	2,496
Gross Unrealized Gains, Available for sale	5	4
Estimated Fair Value, Available for sale	2,502	2,500
U.S. Government Agency Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	4,971	4,969
Gross Unrealized Losses, Available for sale	(242)	(562)
Estimated Fair Value, Available for sale	4,729	4,407
Other Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	271	277
Gross Unrealized Gains, Available for sale	2	16
Estimated Fair Value, Available for sale	273	293
Amortized Cost, Held to maturity
Estimated Fair Value, Held to maturity
State and Municipal Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	28,976
Gross Unrealized Gains, Available for sale	2,036
Estimated Fair Value, Available for sale	31,012
Trust Preferred Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	12,627	12,626
Gross Unrealized Losses, Available for sale	(3,154)	(4,659)
Estimated Fair Value, Available for sale	9,473	7,967
Collateralized Loan Obligations [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale	71,922	73,915
Gross Unrealized Gains, Available for sale	21
Gross Unrealized Losses, Available for sale	(459)	(686)
Estimated Fair Value, Available for sale	71,484	73,229
State and Municipal Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Amortized Cost, Available for sale		29,240
Gross Unrealized Gains, Available for sale		1,213
Estimated Fair Value, Available for sale		$ 30,453

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Condensed Consolidated Statements of Shareholders' Equity (USD $) In Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Deferred Compensation [Member]	Treasury Stock [Member]
Beginning Balance at Dec. 31, 2012	$ 262,595		$ 88,301	$ 506,537	$ (308,011)	$ 2,186	$ (256)	$ (26,162)
Net (loss) income	3,131				3,131
Other comprehensive income (loss)	(5,075)					(5,075)
Issuance of common stock	660		227	519			(86)
Stock-based compensation	353		44	309
Ending Balance at Jun. 30, 2013	261,664		88,572	507,365	(304,880)	(2,889)	(342)	(26,162)
Beginning Balance at Dec. 31, 2013	245,337		88,711	506,719	(317,954)	(7,055)	(522)	(24,562)
Net (loss) income	(26,154)				(26,154)
Other comprehensive income (loss)	6,740					6,740
Issuance of common stock	1,501		46	(4,949)			(77)	6,481
Stock-based compensation	232			(115)				347
Ending Balance at Jun. 30, 2014	$ 227,656		$ 88,757	$ 501,655	$ (344,108)	$ (315)	$ (599)	$ (17,734)

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Allowance for Loan Losses - Company's Analysis of Past Due Held-for-Investment Loans (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 7,638	$ 32,127
60-89 Days Past Due	2,872	17,061
90 Days Past Due	7,001	15,400
Total Past Due	17,511	64,588
Current	1,838,605	2,073,116
Total Financing Receivables	1,856,116	2,137,704	2,158,792
Loans 90 Days Past Due and Accruing
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	373,241	478,734
CRE Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	366,185	468,442
CRE Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	555,829	576,084
Land and Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	68,645	64,306
Home Equity Lines of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	165,671	188,478
Home Equity Term Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	21,282	25,279
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	298,063	305,552
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	7,200	30,829
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Financing Receivables	1,363,900		1,676,133
Commercial Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	232	9,149
60-89 Days Past Due	3	2,726
90 Days Past Due	270	3,452
Total Past Due	505	15,327
Current	372,736	463,407
Total Financing Receivables	373,241	478,734
Loans 90 Days Past Due and Accruing
Commercial Loans [Member] | CRE Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	528	4,901
60-89 Days Past Due	29	5,865
90 Days Past Due	1,626	3,753
Total Past Due	2,183	14,519
Current	364,002	453,923
Total Financing Receivables	366,185	468,442
Loans 90 Days Past Due and Accruing
Commercial Loans [Member] | CRE Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	59	899
60-89 Days Past Due	352	4,661
90 Days Past Due		1,070
Total Past Due	411	6,630
Current	555,418	569,454
Total Financing Receivables	555,829	576,084
Loans 90 Days Past Due and Accruing
Commercial Loans [Member] | Land and Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days Past Due	184	2,512
Total Past Due	184	2,512
Current	68,461	61,794
Total Financing Receivables	68,645	64,306
Loans 90 Days Past Due and Accruing
Consumer Loans [Member] | Home Equity Lines of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,742	3,030
60-89 Days Past Due	702	1,457
90 Days Past Due	1,357	2,324
Total Past Due	3,801	6,811
Current	161,870	181,667
Total Financing Receivables	165,671	188,478
Loans 90 Days Past Due and Accruing
Consumer Loans [Member] | Home Equity Term Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	392	1,032
60-89 Days Past Due	172	223
90 Days Past Due	136	825
Total Past Due	700	2,080
Current	20,582	23,199
Total Financing Receivables	21,282	25,279
Loans 90 Days Past Due and Accruing
Consumer Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	4,643	12,776
60-89 Days Past Due	1,608	1,927
90 Days Past Due	3,417	1,086
Total Past Due	9,668	15,789
Current	288,395	289,763
Total Financing Receivables	298,063	305,552
Loans 90 Days Past Due and Accruing
Consumer Loans [Member] | Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	42	340
60-89 Days Past Due	6	202
90 Days Past Due	11	378
Total Past Due	59	920
Current	7,141	29,909
Total Financing Receivables	7,200	30,829
Loans 90 Days Past Due and Accruing

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014 Segment	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of reportable operating segment	1
Loans held-for-sale	$ 29,200,000	$ 20,700,000
Loans held-for-sale	9,410,000	20,662,000
Commercial loans and commercial real estate loans placed on non-accrual status	90 days
Goodwill impairment		0
Carrying amount of goodwill	38,188,000	38,188,000
Investments in general account	26,600,000
Investments in separate account	51,600,000
Bank owned life insurance (BOLI)	78,166,000	77,236,000
Deferred tax assets valuation allowance	131,000,000
Deferred tax liability net of valuation allowance	796,000
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans delayed before impairment period	90 days
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Delinquent loans charge-off	180 days
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Delinquent loans charge-off	180 days
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential real estate loans placed on non-accrual status	90 days
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held-for-sale	19,800,000
Delinquent loans charge-off	180 days
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held-for-sale	$ 9,400,000	$ 20,700,000

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Derivative Financial Instruments and Hedging Activities - Summary of Interest Rate Swaps Not Designated as Hedging Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Other Assets [Member]
Derivatives, Fair Value [Line Items]
Notional	$ 213,619	$ 251,207
Fair Value	16,994	23,299
Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Notional	(213,619)	251,207
Fair Value	$ (17,144)	$ (23,526)

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Impact of Revisions to Consolidated Statements of Cash Flows

The table below reports the impact of these revisions to the consolidated statements of cash flows for the six months ended June 30, 2013:

Six Months Ended June 30,	Revised 2013		As reported 2013
Cash and cash equivalents, beginning of year	$	143,616	$	169,616
Cash and cash equivalents, end of period		416,239		442,239

Schedule of Components of Mortgage Banking Revenue

The components of this line item are as follows:

	For the Six Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	1,418		$	7,924
Gain on bulk sale of jumbo residential mortgage loans		134			2,363
Market value adjustment on loans held-for-sale		(34	)		(1,039	)
Fair value adjustment on interest rate lock commitments		106			(43	)
Recourse liability provision		(460	)		(200	)
Mortgage banking revenue, net	$	1,164		$	9,005
	For the Three Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	649		$	3,818
Gain on bulk sale of jumbo residential mortgage loans		131			1,507
Market value adjustment on loans held-for-sale		70			205
Fair value adjustment on interest rate lock commitments		110			171
Recourse liability provision		(430	)		(100	)
Mortgage banking revenue, net	$	530		$	5,601

Reclassifications of Accumulated Other Comprehensive Income Items

These reclassifications for the three and six months ended June 30, 2014 and 2013 were as follows:

	For the Three Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	2,695	$	(1,102	)	$	1,593	$	(6,904	)	$	2,820	$	(4,084	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(9	)		4		(5	)
Net unrealized gain on securities available for sale	$	2,745	$	(1,122	)	$	1,623	$	(6,913	)	$	2,824	$	(4,089	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

	For the Six Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	11,345	$	(4,635	)	$	6,710	$	(5,127	)	$	2,094	$	(3,033	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(3,452	)		1,410		(2,042	)
Net unrealized gain on securities available for sale	$	11,395	$	(4,655	)	$	6,740	$	(8,579	)	$	3,504	$	(5,075	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

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Summary of Significant Accounting Policies - Schedule of Components of Mortgage Banking Revenue (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accounting Policies [Abstract]
Gains on the sale of residential mortgage loans	$ 649	$ 3,818	$ 1,418	$ 7,924
Gain on bulk sale of jumbo residential mortgage loans	131	1,507	134	2,363
Market value adjustment on loans held-for-sale	70	205	(34)	(1,039)
Fair value adjustment on interest rate lock commitments	110	171	106	(43)
Recourse liability provision	(430)	(100)	(460)	(200)
Mortgage banking revenue, net	$ 530	$ 5,601	$ 1,164	$ 9,005

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Options Activity

Activity in the stock option plans for the six months ended June 30, 2014 and June 30, 2013 was as follows:

Summary of Options Activity

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2014		1,491,538		$	7.36		1,249,267
Granted		215,972			3.35		—
Exercised		(617	)		3.10		—
Forfeited		(70,570	)		3.40		—
Expired		(439,436	)		8.78		—
June 30, 2014		1,196,887		$	6.35		855,308
Options vested or expected to vest(1)		1,130,575		$	6.52		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2013		1,785,157		$	7.35		1,178,775
Granted		83,610			3.57		—
Exercised		—			—		—
Forfeited		(13,698	)		3.64		—
Expired		—			—		—
June 30, 2013		1,855,069		$	7.21		1,336,893
Options vested or expected to vest(1)		1,814,294		$	7.28		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

Weighted Average Assumptions Used in Black-Scholes Option Pricing Model

Significant weighted average assumptions used to calculate the fair value of the Options for the six months ended June 30, 2014 and 2013 are as follows:

	For the Six Months Ended June 30,
	2014			2013
Weighted average fair value of Options granted	$	1.45		$	1.84
Weighted average risk-free rate of return		1.16	%		0.76	%
Weighted average expected option life in months		49			59
Weighted average expected volatility		55	%		62	%
Expected dividends(1)	$	—		$	—

(1) To date, the Company has not paid cash dividends on its common stock.

Summary of Nonvested Stock Award Activity

A summary of the Company’s nonvested Stock Award activity during the six months ended June 30, 2014 and June 30, 2013 are presented in the following tables:

Summary of Nonvested Stock Award Activity

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2014		431,834		$	3.13
Issued		112,180			3.43
Vested		(20,643	)		3.39
Forfeited		(47,188	)		3.06
Nonvested Stock Awards outstanding, June 30, 2014		476,183		$	3.19
	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2013		639,037		$	3.30
Issued		20,643			3.39
Vested		(73,336	)		4.60
Forfeited		(28,733	)		3.03
Nonvested Stock Awards outstanding, June 30, 2013		557,611		$	3.14

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(Loss) Earnings Per Share - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2014
Earnings Per Share [Abstract]
Reverse stock split	1 for 5 reverse stock split

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
OPERATING ACTIVITIES
Net (loss) income	$ (26,154)	$ 3,131
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	14,803	(1,712)
Decrease in reserve for unfunded commitments	(24)	(125)
Depreciation, amortization and accretion	3,428	5,759
Impairment of bank properties and equipment and real estate owned	511	369
Loss on sale of real estate owned	323	564
Net gain on sales and calls of investment securities available-for-sale	(50)	(3,498)
Gain on sale of mortgage loans	(958)	(7,724)
Gain on bulk sale of jumbo residential mortgage loans, net	(134)	(2,363)
Change in fair value of residential mortgage loans held-for-sale	34	1,039
(Increase) decrease in fair value of interest rate lock commitments	(106)	43
Derivative credit valuation adjustments	(113)	524
Increase in cash surrender value of BOLI	(930)	(934)
Deferred income taxes	716
Stock-based compensation	232	352
Shares contributed to employee benefit plans	1,578	746
Mortgage loans originated for sale	(50,288)	(306,636)
Proceeds from the sale of mortgage loans	55,931	370,441
Change in assets and liabilities which provided (used) cash:
Accrued interest receivable	836	1,237
Other assets	713	3,438
Other liabilities	8,698	(10,591)
Net cash provided by operating activities	9,046	54,060
INVESTING ACTIVITIES
Purchases of available-for-sale securities	(22,363)	(94,250)
Net redemption of restricted equity securities	631	644
Proceeds from maturities, prepayments or calls of investment securities available for sale	28,325	62,674
Proceeds from maturities, prepayments or calls of investment securities held to maturity	44	56
Proceeds from the sale of investment securities available-for-sale	18,276	125,355
Proceeds from sale of commercial real estate loans	57,147	20,771
Proceeds from sale of repossessed assets	80	152
Proceeds from bulk sale of jumbo residential mortgage loans	46,729	99,837
Cash transferred to branch assets held-for-sale	(1,507)
Return of surrender value of BOLI		1,504
Net decrease (increase) in loans	114,058	(6,249)
Purchases of bank properties and equipment	(769)	(943)
Proceeds from sale of real estate owned	1,155	2,119
Net cash provided by investing activities	241,806	211,670
FINANCING ACTIVITIES
Net (decrease) increase in deposits	(188,143)	8,814
Net issuances (redemptions) of securities sold under agreements to repurchase - customer	192	(1,406)
Repayments of advances from FHLBNY	(83)	(378)
Repayment of obligations under capital leases	(140)	(137)
Net cash (used in) provided by financing activities	(188,174)	6,893
NET INCREASE IN CASH AND CASH EQUIVALENTS	62,678	272,623
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	267,762	143,616
CASH AND CASH EQUIVALENTS, END OF PERIOD	330,440	416,239
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	6,629	7,561
Income taxes paid
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Trade date liability from purchase of investment securities	9,975	94,509
Obligations to purchase investment securities		10,500
Transfer of loans and bank property to real estate owned	$ 567	$ 2,070

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Condensed Consolidated Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Amortized cost of investment securities available for sale	$ 437,558	$ 452,023
Estimated fair value of investment securities held to maturity	645	692
Allowance for loans receivable	$ 28,392	$ 35,537
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	88,761,735	88,711,035
Common stock, shares outstanding	87,192,007	86,714,414
Treasury stock, shares	1,569,728	1,996,621

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(Loss) Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

(Loss) Earnings Per Share

(10) (Loss) Earnings Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, during the period. Diluted earnings per share is calculated by dividing net (loss) income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents, based upon the treasury stock method using an average market price for the period.

(Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Average common shares outstanding		87,089,147			86,323,099
Net effect of dilutive common stock equivalents		—			33,697
Adjusted average shares outstanding—dilutive		87,089,147			86,356,796
Basic (loss) earnings per share	$	(0.28	)	$	0.01
Diluted (loss) earnings per share	$	(0.28	)	$	0.01
	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Average common shares outstanding		86,915,959			86,284,325
Net effect of dilutive common stock equivalents		—			73,643
Adjusted average shares outstanding—dilutive		86,915,959			86,357,968
Basic (loss) earnings per share	$	(0.30	)	$	0.04
Diluted (loss) earnings per share	$	(0.30	)	$	0.04

The Company declared a 1 for 5 reverse stock split effective August 11, 2014 for shareholders of record as of August 8, 2014. The following tables present the Companies pro-forma (Loss) Earnings Per Share Computation.

Pro-forma (Loss) Earnings Per Share Computation

	For the Three Months Ended June 30,
	2014			2013
Net (loss) income	$	(24,248	)	$	678
Pro-forma average common shares outstanding		17,417,829			17,264,620
Pro-forma net effect of dilutive common stock equivalents		—			6,739
Pro-forma adjusted average shares outstanding—dilutive		17,417,829			17,271,359
Pro-forma basic (loss) earnings per share	$	(1.39	)	$	0.04
Pro-forma diluted (loss) earnings per share	$	(1.39	)	$	0.04

	For the Six Months Ended June 30,
	2014			2013
Net (loss) income	$	(26,154	)	$	3,131
Pro-forma average common shares outstanding		17,383,192			17,256,865
Pro-forma net effect of dilutive common stock equivalents		—			14,729
Pro-forma adjusted average shares outstanding—dilutive		17,383,192			17,271,594
Pro-forma basic (loss) earnings per share	$	(1.50	)	$	0.18
Pro-forma diluted (loss) earnings per share	$	(1.50	)	$	0.18

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 05, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Entity Registrant Name	SUN BANCORP INC /NJ/
Entity Central Index Key	0001017793
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		87,214,891

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Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2014

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

(11) Commitments and Contingent Liabilities

Letters of Credit

In the normal course of business, the Company has various commitments and contingent liabilities, such as customers’ letters of credit (including standby letters of credit of $28.2 million and $34.6 million at June 30, 2014 and December 31, 2013, respectively) which are not reflected in the accompanying unaudited condensed consolidated financial statements. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Reserve for Unfunded Commitments

The Company maintains a reserve for unfunded loan commitments and letters of credit which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition consistent with FASB ASC 825, Financial Instruments. As of June 30, 2014, the Company recorded estimated losses inherent with unfunded loan commitments in accordance with FASB ASC 450, Contingencies, and estimated future obligations under letters of credit in accordance with FASB ASC 460, Guarantees. The methodology used to determine the adequacy of this reserve is integrated in the Company’s process for establishing the allowance for loan losses and considers the probability of future losses and obligations that may be incurred under these off-balance sheet agreements. The reserve for unfunded loan commitments and letters of credit at June 30, 2014 and December 31, 2013 was $431 thousand and $454 thousand, respectively. Management believes this reserve level is sufficient to absorb estimated probable losses related to these commitments.

Reserve for Residential Mortgage Loans Sold with Recourse

The Company maintains a reserve for residential mortgage loans sold with recourse to third-party purchasers which is reported in other liabilities in the unaudited condensed consolidated statements of financial condition. The Company records estimated losses inherent with residential mortgage loans sold with recourse in accordance with FASB ASC 450, Contingencies. This reserve is determined based upon the probability of future losses which is calculated using historical Company and industry loss data. The reserve for residential mortgage loan recourse as of June 30, 2014 and December 31, 2013 was $1.0 million and $647 thousand, respectively. Management believes this reserve level is sufficient to address potential recourse exposure.

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Regulatory Matters - Reconciliation of Tax Equivalent Net Interest Income to GAAP Net Interest Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Banking And Thrift [Abstract]
Net interest income, as presented	$ 20,612	$ 21,776	$ 42,004	$ 44,854
Effect of tax-exempt income	166	175	333	387
Net interest income, tax equivalent	$ 20,778	$ 21,951	$ 42,337	$ 45,241

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTEREST INCOME
Interest and fees on loans	$ 21,067	$ 23,945	$ 42,916	$ 48,844
Interest on taxable investment securities	2,193	1,225	4,443	2,769
Interest on non-taxable investment securities	308	324	617	718
Dividends on restricted equity investments	209	217	441	463
Total interest income	23,777	25,711	48,417	52,794
INTEREST EXPENSE
Interest on deposits	2,188	2,945	4,469	5,960
Interest on funds borrowed	443	444	879	887
Interest on junior subordinated debentures	534	546	1,065	1,093
Total interest expense	3,165	3,935	6,413	7,940
Net interest income	20,612	21,776	42,004	44,854
PROVISION FOR LOAN LOSSES	14,803	(1,883)	14,803	(1,712)
Net Interest income after provision for loan losses	5,809	23,659	27,201	46,566
NON-INTEREST INCOME
Service charges on deposit accounts	2,215	2,250	4,366	4,479
Mortgage banking revenue, net	529	5,601	1,164	9,005
Gain on sale of investment securities	50		50	3,487
Investment products income	715	728	1,332	1,407
BOLI income	469	486	930	934
Derivative credit valuation adjustment	(1,162)	6	(1,200)	(498)
Other	1,161	1,187	2,284	2,326
Total non-interest income	3,977	10,258	8,926	21,140
NON-INTEREST EXPENSE
Salaries and employee benefits	15,992	13,019	28,876	27,311
Commission expense	811	2,556	1,708	4,597
Occupancy expense	3,552	3,081	7,818	6,657
Equipment expense	2,356	1,830	4,105	3,689
Data processing expense	1,281	1,027	2,478	2,026
Amortization of intangible assets	283	541	567	1,462
Insurance expense	1,358	1,542	2,825	2,972
Professional fees	2,353	4,761	3,839	7,408
Advertising expense	523	698	1,109	1,251
Problem loan expense	566	1,023	1,198	1,822
Real estate owned expense, net	702	1,255	846	1,489
Office supplies expense	285	191	536	420
Other	3,615	1,715	5,660	3,471
Total non-interest expense	33,677	33,239	61,565	64,575
(LOSS) INCOME BEFORE INCOME TAXES	(23,891)	678	(25,438)	3,131
INCOME TAX EXPENSE	357		716
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ (24,248)	$ 678	$ (26,154)	$ 3,131
Basic (loss) earnings per share	$ (0.28)	$ 0.01	$ (0.30)	$ 0.04
Diluted (loss) earnings per share	$ (0.28)	$ 0.01	$ (0.30)	$ 0.04
Weighted average shares-basic	87,089,147	86,323,099	86,915,959	86,284,325
Weighted average shares-diluted	87,089,147	86,356,796	86,915,959	86,357,968

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Loans

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Loans

(5) Loans

The components of loans as of June 30, 2014 and December 31, 2013 were as follows:

Loan Components

	June 30, 2014			December 31, 2013
Commercial:
Commercial and industrial	$	373,241		$	478,734
CRE owner occupied		366,185			468,442
CRE non-owner occupied		555,829			576,084
Land and development		68,645			64,306
Consumer:
Home equity lines of credit		165,671			188,478
Home equity term loans		21,282			25,279
Residential real estate		298,063			305,552
Other		7,200			30,829
Total gross loans held-for-investment		1,856,116			2,137,704
Allowance for loan losses		(28,392	)		(35,537	)
Net loans held-for-investment	$	1,827,724		$	2,102,167

Loans on Non-Accrual Status

	June 30, 2014		December 31, 2013
Commercial:
Commercial & industrial	$	2,773	$	2,358
CRE owner occupied		2,373		14,408
CRE non-owner occupied		—		1,969
Land and development		—		2,158
Consumer:
Home equity lines of credit		2,327		3,749
Home equity lines of credit, held-for-sale		1,947
Home equity term loans		580		1,240
Home equity term loans, held-for-sale		354
Residential real estate		5,406		3,341
Residential real estate, held-for-sale		1,322
Other		11		591
Other, held-for-sale		463
Total non-accrual loans	$	17,556	$	29,814
Troubled debt restructuring, non-accrual	$	583	$	8,163

Many of the Company’s commercial and industrial loans have a real estate component as part of the collateral securing the loan. Additionally, the Company makes commercial real estate loans for the acquisition, refinance, improvement and construction of real property. Loans secured by owner-occupied properties are dependent upon the successful operation of the borrower’s business. If the operating company experiences difficulties in terms of sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Loans secured by properties where repayment is dependent upon payment of rent by third-party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit.

As of June 30, 2014, the Company had $55.4 million outstanding on 13 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. As of December 31, 2013, the Company had $54.5 million outstanding on 17 residential construction, commercial construction and land development relationships for which the agreements included interest reserves. The total amount available in those reserves to fund interest payments was $2.9 million and $4.3 million at June 30, 2014 and December 31, 2013, respectively. There were no relationships with interest reserves which were on non-accrual status at June 30, 2014 and December 31, 2013. Construction projects are monitored throughout their lives by professional inspectors engaged by the Company. The budgets for loan advances and borrower equity injections are developed at the time of underwriting in conjunction with the review of the plans and specifications for the project being financed. Advances of the Company’s funds are based on the prepared budgets and will not be made unless the project has been inspected by the Company’s professional inspector who must certify that the work related to the advance is in place and properly complete. As it relates to construction project financing, the Company does not extend, renew or restructure terms unless its borrower posts cash collateral in an interest reserve.

Included in the Company’s loan portfolio are modified commercial loans. Per FASB ASC 310-40, Troubled Debt Restructuring, (“FASB ASC 310-40”), a modification is one in which the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider, such as providing a below market interest rate and/or forgiving principal or previously accrued interest; this modification may stem from an agreement or be imposed by law or a court, and may involve a multiple note structure. Generally, prior to the modification, the loans which are modified as a troubled debt restructuring (“TDR”) are already classified as non-performing. These loans may only be returned to performing (i.e. accrual status) after considering the borrower’s sustained repayment performance for a reasonable amount of time, generally six months; this sustained repayment performance may include the period of time just prior to the restructuring.

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Investment Securities

6 Months Ended

Jun. 30, 2014

Investments Debt And Equity Securities [Abstract]

Investment Securities

(4) Investment Securities

The amortized cost of investment securities and the approximate fair value at June 30, 2014 and December 31, 2013 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
June 30, 2014
Available for sale:
U.S. Treasury securities	$	2,497	$	5	$	—		$	2,502
U.S. Government agency securities		4,971		—		(242	)		4,729
U.S. Government agency mortgage-backed securities		296,732		2,834		(1,574	)		297,992
Other mortgage-backed securities		271		2		—			273
State and municipal securities		28,976		2,036		—			31,012
Trust preferred securities		12,627		—		(3,154	)		9,473
Collateralized loan obligations		71,922		21		(459	)		71,484
Other securities		19,562		—		—			19,562
Total available for sale		437,558		4,898		(5,429	)		437,027
Held to maturity:
U.S. Government agency mortgage-backed securities		386		9		—			395
Other securities		250		—		—			250
Total held to maturity		636		9		—			645
Total investment securities	$	438,194	$	4,907	$	(5,429	)	$	437,672
December 31, 2013
Available for sale:
U.S. Treasury securities	$	2,496	$	4	$	—		$	2,500
U.S. Government agency securities		4,969		—		(562	)		4,407
U.S. Government agency mortgage-backed securities		325,316		1,043		(8,295	)		318,064
Other mortgage-backed securities		277		16		—			293
State and municipal obligations		29,240		1,213		—			30,453
Trust preferred securities		12,626		—		(4,659	)		7,967
Collateralized loan obligations		73,915		—		(686	)		73,229
Other securities		3,184		—		—			3,184
Total available for sale		452,023		2,276		(14,202	)		440,097
Held to maturity:
U.S. Government agency mortgage-backed securities		431		11		—			442
Other securities		250		—		—			250
Total held to maturity		681		11		—			692
Total investment securities	$	452,704	$	2,287	$	(14,202	)	$	440,789

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013:

Gross Unrealized Losses by Investment Category

	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2014
U.S. Government agency securities	$	—	$	—		$	4,729	$	(242	)	$	4,729	$	(242	)
U.S. Government agency mortgage-backed securities		60,464		(267	)		40,226		(1,307	)		100,690		(1,574	)
Trust preferred securities		—		—			9,473		(3,154	)		9,473		(3,154	)
Collateralized loan obligations		17,301		(149	)		22,190		(310	)		39,491		(459	)
Total	$	77,765	$	(416	)	$	76,618	$	(5,013	)	$	154,383	$	(5,429	)
December 31, 2013
U.S. Government agency securities	$	—	$	—		$	4,407	$	(562	)	$	4,407	$	(562	)

U.S. Government agency mortgage-backed securities		246,348		(7,374	)		7,961		(921	)		254,309		(8,295	)
Trust preferred securities		—		—			7,967		(4,659	)		7,967		(4,659	)
Collateralized Loan Obligations		45,729		(686	)							45,729		(686	)
Total	$	292,077	$	(8,060	)	$	20,335	$	(6,142	)	$	312,412	$	(14,202	)

The Company determines whether unrealized losses are temporary in accordance with FASB ASC 325-40, Investments – Other, when applicable, and FASB ASC 320-10, Investments – Overall, (“FASB ASC 320-10”). The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of an OTTI condition. These include, but are not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer.

FASB ASC 320-10 requires the Company to assess if an OTTI exists by considering whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If either of these situations applies, the guidance requires the Company to record an OTTI charge to earnings for the difference between the amortized cost basis of the security and the fair value of the security. If neither of these situations applies, the Company is required to assess whether it is expected to recover the entire amortized cost basis of the security. If the Company is not expected to recover the entire amortized cost basis of the security, the guidance requires the Company to bifurcate the identified OTTI into a credit loss component and a component representing loss related to other factors. A discount rate is applied which equals the effective yield of the security. The difference between the present value of the expected cash flows and the amortized book value is considered a credit loss. When a market price is not readily available, the market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from open market and other sources as appropriate for the security. The difference between the market value and the present value of cash flows expected to be collected is recognized in accumulated other comprehensive loss on the consolidated statements of financial condition. Application of this guidance resulted in no OTTI charges during the six months ended June 30, 2014 and 2013.

The following is a roll-forward for the three and six months ended June 30, 2014 and 2013 of OTTI charges recognized in earnings as a result of credit losses on investments:

	For the Three Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

	For the Six Months Ended June 30,
	2014		2013
Cumulative OTTI, beginning of period	$	10,203	$	10,203
Additional increase as a result of net impairment losses recognized on investments		—		—
Decrease as a result of the sale of an investment with net impairment losses		—		—
Cumulative OTTI, end of period	$	10,203	$	10,203

On December 10, 2013, the Board of Governors of the Federal Reserve System (“FRB”), the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC’) issued final rules to implement the Volcker Rule contained in section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) generally to become effective on July 21, 2015. The Volcker Rule prohibits an insured depository institution and its affiliates (referred to as “banking entities”) from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (“covered funds”) subject to certain limited exceptions. These prohibitions impact the ability of U.S. banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

U.S. Government Agency Securities. At June 30, 2014, the gross unrealized loss in the category of 12 months or longer of $242 thousand consisted of one agency security with an estimated fair value of $4.7 million issued and guaranteed by a U.S. Government sponsored agency. The Company monitors certain factors such as market rates and possible credit deterioration to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on the aforementioned security based upon its assessment. Management also concluded that it does not intend to sell the security, and that it is not more likely than not it will be required to sell the security, before its recovery, which may be maturity, and management expects to recover the entire amortized cost basis of this security.

U.S. Government Agency Mortgage-Backed Securities. At June 30, 2014, the gross unrealized loss in the category of less than 12 months of $267 thousand consisted of eight mortgage-backed securities with an estimated fair value of $60.5 million, the gross unrealized loss in the category of 12 months or longer of $1.3 million consisted of seven mortgage-backed securities with an estimated fair value of $40.2 million issued and guaranteed by a U.S. Government sponsored agency. The Company monitors certain factors such as market rates and possible credit deterioration to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities, before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

Collateralized Loan Obligation Securities. At June 30, 2014, the gross unrealized loss in the category of less than 12 months of $149 thousand consisted of five AA rated collateralized loan obligation securities with an estimated fair value of $17.3 million, the gross unrealized loss in the category of 12 months or longer of $310 thousand consisted of one AA and two AAA rated collateralized loan obligation securities with an estimated fair value of $22.2 million The Company monitors key credit metrics such as delinquencies, defaults, cumulative losses and credit support levels to determine if an OTTI exists. As of June 30, 2014, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities, before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

At June 30, 2014, the Company had 12 collateralized loan obligation securities with an amortized cost of $71.9 million and an estimated fair value of $71.5 million. These securities are subject to the provisions of the Volcker Rule. However, a final determination has yet to be made whether banks will be required to divest these investments. Discussion has been ongoing among the regulators, Congress and the investors in the collateralized loan obligations. Based on the current status of these discussions and through the Company’s communication with its investment advisors, the Company believes it will either be able to hold these collateralized loan obligation investments in its portfolio or have them modified such that the perceived risk will be adequately eliminated. As such, the Company believes it will not be required to sell these securities prior to recovery and therefore would not be required to record an OTTI charge on these securities. To ensure compliance, in the three months ended June 30, 2014, the Company began proactively transitioning its collateralized loan obligation investments into similar securities which are structured such that they satisfy the provisions of the Volcker Rule.

Trust Preferred Securities. At June 30, 2014, the gross unrealized loss in the category of 12 months or longer of $3.2 million consisted of two trust preferred securities. The trust preferred securities are comprised of one non-rated single issuer security with an amortized cost of $3.8 million and an estimated fair value of $2.7 million, and one investment grade rated pooled security with an amortized cost of $8.8 million and an estimated fair value of $6.7 million. As this security recently received ratings upgrades from multiple agencies, it is no longer deemed non-investment grade.

For the pooled security, the Company monitors each issuer in the collateral pool with respect to financial performance using data from the issuer’s most recent regulatory reports as well as information on issuer deferrals and defaults. Also, the security structure is monitored with respect to collateral coverage and current levels of subordination. Expected future cash flows are projected assuming additional defaults and deferrals based on the performance of the collateral pool. The pooled security is in a senior position in the capital structure. The security had a 2.9 times principal coverage. As of the most recent reporting date, interest has been paid in accordance with the terms of the security. The Company reviews projected cash flow analysis for adverse changes in the present value of projected future cash flows that may result in an other-than-temporary credit impairment to be recognized through earnings. The most recent valuations assumed no recovery on any defaulted collateral, no recovery on any deferring collateral and an additional 3.6% of defaults or deferrals’ every three years with no recovery rate. As of June 30, 2014, management concluded that an OTTI did not exist on the aforementioned security based upon its assessment. Management also concluded that it does not intend to sell the security, and that it is not more likely than not it will be required to sell the security, before its recovery, which may be maturity, and management expects to recover the entire amortized cost basis of this security.

The financial performance of the non-rated single issuer trust preferred security is monitored on a quarterly basis using data from the issuer’s most recent regulatory reports to assess the probability of cash flow impairment. Expected future cash flows are projected by incorporating the contractual cash flow of the security adjusted, if necessary, for potential changes in the amount or timing of cash flows due to the underlying creditworthiness of the issuer and covenants in the security.

In August 2009, the issuer of the non-rated single issuer trust preferred security elected to defer its normal quarterly dividend payment. As contractually permitted, the issuer may defer dividend payments up to five years with accumulated dividends, and interest on those deferred dividends, payable upon the resumption of its scheduled dividend payments. The issuer is currently operating under an agreement with its regulators. The agreement stipulates that the issuer must receive permission from its regulators prior to resuming its scheduled dividend payments. The Company anticipates that the deferred dividends will be paid by the issuer by September 1, 2014, which is the date the contractual deferred period for the issuer ends.

During the six months ended June 30, 2014, the Company did not record an OTTI credit-related charge related to this deferring single issuer trust preferred security. Based on the Company’s most recent evaluation, the Company does not expect the issuer to default on the security based primarily on the issuer’s subsidiary bank reporting that it meets the minimum regulatory requirements to be considered a “well capitalized” institution. The Company recognizes that the length of time the issuer has been in deferral, the difficult economic environment and some weakened performance measures, while recently improving, increased the probability that a full recovery of principal and anticipated dividends may not be realized. The cumulative OTTI on this security as of June 30, 2014 was $1.2 million. Based upon the current capital position of the issuer and recent improvements in the financial performance of the issuer, the Company concluded that an additional impairment charge was not warranted at June 30, 2014.

The pooled security was included in the non-exclusive list of issuers that meet the requirements of the interim final rule release by the agencies and therefore will not be required to be sold by the Company. The single issuer security is not subject to the provisions of the Volcker rule.

The amortized cost and estimated fair value of the investment securities, by contractual maturity, at June 30, 2014 and December 31, 2013 are shown below. Actual maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
June 30, 2014
Due in one year or less	$	19,314	$	19,314	$	—	$	—
Due after one year through five years		3,809		3,884		250		250
Due after five years through ten years		63,240		63,655		—		—
Due after ten years		54,192		51,909		—		—
Total investment securities, excluding mortgage-backed securities		140,555		138,762		250		250
U.S. Government agency mortgage-backed securities		296,732		297,992		386		395
Other mortgage-backed securities		271		273		—		—
Total investment securities	$	437,558	$	437,027	$	636	$	645
December 31, 2013
Due in one year or less	$	3,184	$	3,184	$	—	$	—
Due after one year through five years		3,430		3,490		250		250
Due after five years through ten years		35,452		35,460		—		—
Due after ten years		84,364		79,606		—		—
Total investment securities, excluding mortgage-backed securities		126,430		121,740		250		250
U.S. Government agency mortgage-backed securities		325,316		318,064		431		442
Other mortgage-backed securities		277		293		—		—
Total investment securities	$	452,023	$	440,097	$	681	$	692

At June 30, 2014, the Company had $44.2 million, amortized cost, and $46.2 million, estimated fair value, of investment securities pledged to secure public deposits. As of June 30, 2014, the Company had $175.6 million, amortized cost, and $177.1 million, estimated fair value, of investment securities pledged as collateral on secured borrowings.

XML

Branch Sale (Tables)

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Summary of Branch Assets and Liabilities Classified as Held-for-Sale

The following summarizes the branch assets and liabilities classified as held-for-sale at June 30, 2014 related to the Purchase Agreement:

Assets:
Cash	$	1,507
Loans held-for-sale		28,543
Properties and equipment, net		4,008
Total branch assets held-for-sale	$	34,058
Liabilities:
Deposits held-for-sale	$	160,769

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

(12) Fair Value of Financial Instruments

The Company accounts for fair value measurement in accordance with FASB ASC 820. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. FASB ASC 820 clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement and also clarifies the application of fair value measurement in a market that is not active.

FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

FASB ASC 820 requires the Company to disclose the fair value for financial assets on both a recurring and non-recurring basis. The assets and liabilities measured at fair value on a recurring basis are as follows:

			Category Used for Fair Value Measurement
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,502	$	2,502	$	—	$	—
U.S. Government agency securities		4,729		—		4,729		—
U.S. Government agency mortgage-backed securities		297,992		—		297,992		—
Other mortgage-backed securities		273		—		273		—
State and municipal securities		31,012		—		31,012		—
Trust preferred securities		9,473		—		—		9,473
Collateralized loan obligations		71,484		—		71,484		—
Other securities		19,562		19,562		—		—
Hedged commercial loans		17,838		—		17,838		—
Residential mortgage loans held-for-sale		9,410		—		9,410		—
Interest rate lock commitments on residential mortgages		225		—		—		225
Interest rate swaps		16,994		—		16,994		—

Interest rate floor		62		—		62		—
Liabilities:
Fair value interest rate swaps		1,137		—		1,137		—
Interest rate swaps		17,082		—		17,082		—
Interest rate floor		62		—		62		—
December 31, 2013
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	2,500	$	2,500	$	—	$	—
U.S. Government agency securities		4,407		—		4,407		—
U.S. Government agency mortgage-backed securities		318,064		—		318,064		—
Other mortgage-backed securities		293		—		293		—
State and municipal obligations		30,453		—		30,453		—
Trust preferred securities		7,967		—		—		7,967
Collateralized loan obligations		73,229		—		73,229		—
Other securities		3,184		3,184		—		—
Hedged commercial loans		22,435		—		22,435		—
Residential loans held-for-sale		20,662		—		20,662		—
Interest rate lock commitments on residential mortgages		119		—		—		119
Interest rate swaps		23,299		—		23,299		—
Interest rate floor		132		—		132		—
Liabilities:
Fair value interest rate swaps		1,635		—		1,635		—
Interest rate swaps		23,526		—		23,526		—
Interest rate floor		132		—		132		—

Level 1 Valuation Techniques and Inputs

U.S. Treasury securities. The Company reports U.S. Treasury securities at fair value utilizing Level 1 inputs. These securities are priced using observable quotations for the indicated security.

Other securities. The other securities category is comprised of money market mutual funds. Given the short maturity structure and the expectation that the investment can be redeemed at par value, the fair value of these investments is assumed to be the book value.

Level 2 Valuation Techniques and Inputs

The majority of the Company’s investment securities are reported at fair value utilizing Level 2 inputs. Prices of these securities are obtained through independent, third-party pricing services. Prices obtained through these sources include market derived quotations and matrix pricing and may include both observable and unobservable inputs. Fair market values take into consideration data such as dealer quotes, new issue pricing, trade prices for similar issues, prepayment estimates, cash flows, market credit spreads and other factors. The Company reviews the output from the third-party providers for reasonableness by the pricing consistency among securities with similar characteristics, where available, and by comparing values with other pricing sources available to the Company.

In general, the Level 2 valuation process uses the following significant inputs in determining the fair value of the Company’s different classes of investments:

U.S. Government agency securities. These securities are evaluated based on either a nominal spread basis for non-callable securities or on an option adjusted spread (“OAS”) basis for callable securities. The nominal spread and OAS levels are based on observations of identical or comparable securities actively trading in the markets.

U.S. Government agency mortgage-backed securities. The Company’s agency mortgage-backed securities generally fall into one of two categories, fixed-rate agency mortgage-backed pools or adjustable-rate agency mortgage-backed pools.

Fixed-rate agency mortgage-backed pools are valued based on spreads to actively traded To-Be-Announced (“TBA”) and seasoned securities, the pricing of which is provided by inter-dealer brokers, broker dealers and other contributing firms active in trading the security class. Further delineation is made by weighted average coupon (“WAC”) and weighted average maturity (“WAM”) with spreads on individual securities relative to actively traded securities as determined and quality controlled using OAS valuations.

Adjustable-rate agency mortgage-backed pools are valued on a bond equivalent effective margin (“BEEM”) basis obtained from broker-dealers and other contributing firms active in the market. BEEM levels are established for key sectors using characteristics such as month-to-roll, index, periodic and life caps and index margins and convertibility. Individual securities are then evaluated based on how their characteristics map to the sectors established.

Other mortgage-backed securities. The Company’s other mortgage-backed securities consist of whole loan, non-agency collateralized mortgage obligations (“CMOs,” individually, each a “CMO”). These securities are valued based on generic tranches and generic prepayment speed estimates of various types of collateral from contributing firms and broker/dealers in the whole loan CMO market.

State and municipal obligations. These securities are valued using information on identical or similar securities provided by market makers, broker/dealers and buy-side firms, new issue sales and bid-wanted lists. The individual securities are then priced based on mapping the characteristics of the security such as obligation type (general obligation, revenue, etc.), maturity, state discount and premiums, call features, taxability and other considerations.

Collateralized loan obligations. The fair value measurements for collateralized loan obligations are obtained through quotes obtained from broker/dealers based on similar actively traded securities. Those valuations are classified as Level 2.

Hedged commercial loans. The hedged commercial loans are one component of a declared hedging relationship as defined under FASB ASC 815. The interest rate swap component of the declared hedging relationship is carried at its fair value and the carrying value of the commercial loans included a similar change in fair values. The fair value of these loans is estimated through discounted cash flow analysis which utilizes available credit and interest rate market data on performance of similar loans. This is considered a Level 2 input.

Residential mortgage loans held-for-sale. The Company’s residential mortgage loans held-for-sale are recorded at fair value utilizing Level 2 measurements. This fair value measurement is determined based upon third party quotes obtained on similar loans. The Company believes the fair value measurement of such loans reduces certain timing differences between related revenue and expense recognition in the Company’s financial statements and better aligns with the management of the portfolio from a business perspective. The fair value option allows the Company to record the mortgage loans held-for-sale portfolio at fair market value as opposed to the lower of cost or market. The Company economically hedges its residential loans held for sale portfolio with forward sale agreements which are reported at fair value. A lower of cost or market accounting treatment would not allow the Company to record the excess of the fair market value over book value but would require the Company to record the corresponding reduction in value on the hedges. Both the loans and related hedges are carried at fair value which reduces earnings volatility. For loans held-for-sale for which the fair value option has been elected, the aggregate fair value exceeded the aggregate principal balance by $278 thousand as of June 30, 2014. Interest income on these loans is recognized in interest and fees on loans in the unaudited condensed consolidated statements of operations. There were no residential mortgage loans held-for-sale that were nonaccrual or 90 or more days past due as of June 30, 2014 or December 31, 2013.

Interest rate swaps. The Company’s interest rate swaps, including fair value interest rate swaps and small exposures in interest rate caps and floors, are reported at fair value utilizing models provided by an independent, third-party and observable market data. When entering into an interest rate swap agreement, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of our contract counterparty. Interest rate swaps are evaluated based on a zero coupon LIBOR curve created from readily observable data on LIBOR, interest rate futures and the interest rate swap markets. The zero coupon curve is used to discount the projected cash flows on each individual interest rate swap. In addition, the Company has developed a methodology to value the nonperformance risk based on internal credit risk metrics and the unique characteristic of derivative instruments, which include notional exposure rather than principal at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk. Interest rate caps and floors are evaluated using industry standard options pricing models and observed market data on LIBOR and Eurodollar option and cap/floor volatilities.

Level 3 Valuation Techniques and Inputs

Trust preferred securities. The trust preferred securities are evaluated on a quarterly basis based on whether the security is an obligation of a single issuer or part of a securitization pool. For single issuer obligations, the Company uses discounted cash flow models which incorporate the contractual cash flow for each issue adjusted as necessary for any potential changes in amount or timing of cash flows. The cash flow model of a pooled issue incorporates anticipated loss rates and severities of the underlying collateral as well as credit support provided within the securitization. At least quarterly, the Company’s Treasury personnel reviews the modeling assumptions which include default assumptions, discount and forward rates. Changes in those assumptions could potentially have a significant impact on the fair value of the trust preferred securities.

The cash flow model for the pooled issue owned by the Company at June 30, 2014 assumes no recovery on defaulted collateral, no recovery on securities in deferral and an additional 3.6% future default rate assumption on the remaining performing collateral every three years with no recovery rate.

For trust preferred securities, projected cash flows are discounted at a rate based on a trading group of similar securities quoted on the New York Stock Exchange (“NYSE”) or over-the-counter markets which is reviewed for market data points such as credit rating, maturity, price and liquidity. The Company indexes the securities to a comparable maturity interest rate swap to determine the market spread, which is then used as the discount rate in the cash flow models. As of the reporting date, the market spreads were 3.0% for the pooled security and 7.50% for the single issuer that is currently deferring interest payments. An increase or decrease of 3% in the discount rate on the pooled issue would result in a decrease of $1.9 million or an increase of $2.9 million in the security fair value, respectively. An increase or decrease of 3% in the discount on the single issuer would result in a decrease of $569 thousand or an increase of $910 thousand in the security fair value, respectively.

The following provides details of the Level 3 fair value measurement activity for the three and six months ended June 30, 2014 and 2013:

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Investment Securities

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	8,616	$	16,803
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		857		1,372
Purchases		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers out of Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675
	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	7,967	$	5,882
Total gains, realized/unrealized:
Included in earnings		—		—
Included in accumulated other comprehensive income		1,506		1,793
Purchases		—		10,500
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		(10,500	)
Balance, end of period	$	9,473	$	7,675

There were no transfers between the three levels for the three months ended June 30, 2014. There was a transfer between Level 3 and Level 2 of the fair value hierarchy during the six months ended June 30, 2013 for a change in valuation method of collateralized loan obligation investment securities. The valuation method used as of March 31, 2013 was a third party pricing service that utilized model-based valuations, whereby the inputs could change based on changes in market indices, selling prices of similar securities, management’s assumptions related to the credit rating of the security, prepayment assumptions and other factors such as credit loss assumptions and management’s assertion of the current market conditions. The transfer occurred on April 1, 2013 and the fair value valuation method was changed as of that same date to utilize market-based broker quotes, which is deemed a Level 2 input. The Company evaluates its hierarchy on a quarterly basis to ensure proper classification.

Interest rate lock commitments on residential mortgages. The determination of the fair value of interest rate lock commitments is based on agreed upon pricing with the respective investor on each loan and includes a pull through percentage. The pull through percentage represents an estimate of loans in the pipeline to be delivered to an investor versus the total loans committed for delivery. Significant changes in this input could result in a significantly higher or lower fair value measurement. As the pull through percentage is a significant unobservable input, this is deemed a Level 3 valuation input. The pull through percentage, which is based upon historical experience, was 75% as of June 30, 2014 and December 31, 2013, respectively. An increase or decrease of 20% in the pull through assumption would result in a positive or negative change of $60 thousand in the fair value of interest rate lock commitments at June 30, 2014. The fair value of interest rate lock commitments was $225 thousand at June 30, 2014 and $119 thousand at December 31, 2013.

Fair Value Measurements Using Significant Unobservable Inputs-Level 3

Interest Rate Lock Commitments on Residential Mortgages

	For the Three Months Ended June 30,
	2014		2013
Balance, beginning of period	$	115	$	633
Total gains, realized/unrealized:
Included in earnings(1)		110		171
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

(1) Amount included in mortgage banking revenue, net on the consolidated statements of operations.

	For the Six Months Ended June 30,
	2014		2013
Balance, beginning of period	$	119	$	847
Total gains, realized/unrealized:
Included in earnings(1)		106		(43	)
Included in accumulated other comprehensive income		—		—
Purchases		—		—
Maturities		—		—
Prepayments		—		—
Calls		—		—
Transfers into Level 3		—		—
Balance, end of period	$	225	$	804

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures impaired loans, Small Business Administration (“SBA”) servicing assets, restricted equity investments, goodwill, loans held-for-sale, and loans or bank properties transferred into other real estate owned at fair value on a non-recurring basis. At June 30, 2014 and 2013, these assets were valued in accordance with GAAP and, except for impaired loans, loans held-for-sale, and real estate owned included in the following table, did not require fair value disclosure under the provisions of FASB ASC 820. The related changes in fair value for the six months ended June 30, 2014 and 2013 are as follows:

			Category Used for Fair Value Measurement						Total Losses Or Changes in Net Assets / Liabilities
	Total		Level 1		Level 2		Level 3
June 30, 2014
Assets:
Impaired loans	$	2,962	$	—	$	—	$	2,962	$	(3,961	)
Loans held-for-sale		6,355				6,355				(4,685	)

Real estate owned		294		—		—		294		(265	)
June 30, 2013
Assets:
Impaired loans	$	63,093	$	—	$	—	$	63,093	$	(7,127	)
Real estate owned		347		—		—		347		(380	)

Under FASB ASC 310, the fair value of collateral dependent impaired loans is based on the fair value of the underlying collateral, typically real estate, which is based on valuations. It is the policy of the Company to obtain a current appraisal or evaluation when a loan has been identified as non-performing. The type of appraisal obtained will be commensurate with the size and complexity of the loan. The resulting value will be adjusted for the potential cost of liquidation and decline of values in the market. New appraisals will be obtained on an annual basis until the loan is repaid in full, liquidated, or returns to performing status.

While the loan policy dictates that a loan be assigned to the special assets department when it is placed on non-accrual status, there is a need for loan officers to consistently and accurately determine collateral values when a loan is initially designated as criticized or classified. The most effective means of determining the fair value of real estate collateral at a point in time is by obtaining a current appraisal or evaluation of the property. In anticipation of the receipt of a current appraisal or evaluation, the Company has provided for an alternative and interim means of determining the fair value of the real estate collateral.

The most recent appraisal or reported value of the collateral securing a loan, net of a discount for the estimated cost of liquidation, is the Company’s basis for determining fair value.

The following table summarizes the Company’s appraisal approach based upon loan category.

Loan Category Used for Impairment Review	Method of Determining the Value
Loans less than $1 million	Evaluation report or restricted use appraisal
Loans $1 million or greater
Existing appraisal 18 months or less	Restricted use appraisal
Existing appraisal greater than 18 months	Summary form appraisal
Commercial loans secured primarily by residential real estate
Loans less than $1 million	Automated valuation model
Loans $1 million or greater	Summary form appraisal
Non-commercial loans secured primarily by residential real estate
Loans less than $250 thousand	Automated valuation model or summary form appraisal
Loans $250 thousand or greater	Summary form appraisal

An evaluation report, as defined by the OCC, is a written report prepared by an appraiser that describes the real estate collateral, its condition, current and projected uses and sources of information used in the analysis, and provides an estimate of value in situations when an appraisal is not required.

A restricted use appraisal is defined as a written report prepared under the Uniform Standards of Professional Appraisal Practice (“USPAP”). A restricted use appraisal is for the Company’s use only and should contain a brief statement of information significant to the determination of the value of the collateral under review. This report can be used for ongoing collateral monitoring.

A summary form appraisal is defined as a written report prepared under the USPAP which contains a detailed summary of all information significant to the determination of the collateral valuation. This report is more detailed than a restricted use report and provides sufficient information to enable the user to understand the rationale for the opinions and conclusions in the report.

An automated valuation model is an internal computer program that estimates a property’s market value based on market, economic, and demographic factors.

On a quarterly basis, or more frequently as necessary, the Company will review the circumstances of each collateral dependent loan and real estate owned property. A collateral dependent loan is defined as one that relies solely on the operation or the sale of the collateral for repayment. Adjustments to any specific reserve relating to a collateral shortfall, as compared to the outstanding loan balance, will be made if justified by appraisals, market conditions or current events concerning the loan.

All appraisals received which are utilized to determine valuations for criticized and classified loans or properties placed in real estate owned are provided under an “as is” value. Partially charged off loans are measured for impairment upon receipt of an updated appraisal based on the relationship between the remaining balance of the charged down loan and the discounted appraised value. Such loans will remain on non-accrual status unless performance by the borrower warrants a return to accrual status. Recognition of non-accrual status occurs at the time a loan can no longer support principal and interest payments in accordance with the original terms and conditions of the loan documents. When impairment is determined, a specific reserve reflecting any calculated shortfall between the value of the collateral and the outstanding balance of the loan is recorded. Subsequent adjustments, prior to receipt of a new appraisal, to any related specific reserve will be made if justified by market conditions or current events concerning the loan. If an internal discount-based evaluation is being used, the discount percentage may be adjusted to reflect market changes, changes to the collateral value of similar loans or circumstances of the individual loan itself. The amount of the charge-off is determined by calculating the difference between the current loan balance and the current collateral valuation, plus estimated cost to liquidate.

Impaired loan fair value measurements are based upon unobservable inputs, and therefore, are categorized as a Level 3 measurement. There were no impaired loans with specific reserves at June 30, 2014. Impaired loans with an aggregate gross carrying amount of $9.2 million at June 30, 2013, included specific reserves in the allowance for loan losses of $3.3 million as the collateral underlying these loans had a fair value of $6.0 million. There were no charge-offs recorded on impaired loans with a specific reserve during the six months ended June 30, 2014, and June 30, 2013. Impaired loans held-for-investment with an aggregate carrying amount of $3.0 million and $57.1 million at June 30, 2014 and 2013, respectively, did not include specific reserves as the value of the underlying collateral was not below the carrying amount. However, these loans did include charge-offs of $4.0 million, of which $3.7 million related to loans that were fully charged off at June 30, 2014 and $3.9 million, of which $670 thousand related to loans which were fully charged off at June 30, 2013.

Loans held-for-sale with an aggregate carrying amount of $6.4 million at June 30, 2014, included charge-offs of $4.7 million to reduce the balance of the loans to fair value. The fair value of these loans was determined through the use of broker quotes based on market data; therefore, this is a level 2 input.

Once a loan is determined to be uncollectible, the underlying collateral is repossessed and reclassified as other real estate owned. The balance of other real estate owned also includes bank properties transferred from operations. These assets are carried at lower of cost or fair value of the collateral, less cost to sell. In some cases, adjustments are made to the appraised values for various factors including age of the appraisal, age of comparable properties included in the appraisal, and known changes in the market and the collateral. During the three months ended June 30, 2014 and 2013, the Company recorded a decrease in fair value on commercial properties of $197 thousand and $58 thousand, respectively, $68 thousand and $0 on consumer properties, respectively, and $0 and $322 thousand on bank properties, respectively. These adjustments were based upon unobservable inputs, and therefore categorized as Level 3 measurements.

Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities

	June 30, 2014				December 31, 2013
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and due from banks	$	49,384	$	49,384	$	38,075	$	38,075
Interest-earning bank balances		281,056		281,056		229,687		229,687
Restricted cash		26,000		26,000		26,000		26,000
Investment securities available for sale		437,027		437,027		440,097		440,097
Investment securities held-to-maturity		636		645		681		692
Loans receivable, net		1,809,886		1,735,087		2,079,732		1,964,856
Loans held-for-sale, at fair value		9,410		9,410		20,662		20,662
Loans held-for-sale, at lower of cost or market		19,761		20,924		—		—
Hedged commercial loans(1)		17,838		17,838		22,435		22,435
Branch assets held-for-sale		34,058		34,058		—		—
Restricted equity investments		16,388		16,388		17,019		17,019
Interest rate lock commitments on residential mortgages		225		225		119		119

Interest rate swaps	16,994	16,994	23,299	23,299
Interest rate floor	62	62	132	132
Liabilities:
Demand deposits	1,505,172	1,537,452	1,740,298	1,795,685
Savings deposits	241,420	245,147	266,573	272,264
Time deposits	526,173	525,890	614,700	615,735
Deposits held-for-sale	160,769	174,860	—	—
Securities sold under agreements to repurchase – customers	670	670	478	478
Advances from FHLBNY	60,873	60,971	60,956	61,072
Junior subordinated debentures	92,786	64,060	92,786	63,747
Fair value interest rate swaps	1,138	1,138	1,632	1,632
Interest rate swaps	17,082	17,082	23,526	23,526
Interest rate floor	62	62	132	132

(1) Includes positive market value adjustment of $1.1 million and $1.6 million at June 30, 2014 and December 31, 2013, respectively, which is equal to the change in value of related interest rate swaps designated as fair value hedges of these hedged loans in accordance with FASB ASC 815.

Cash and cash equivalents. For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value. This is a Level 1 fair value input.

Restricted cash. For restricted cash, the carrying amount is a reasonable estimate of fair value. This is a Level 1 fair value input.

Investment securities. For investment securities, fair values are based on a combination of quoted prices for identical assets in active markets, quoted prices for similar assets in markets that are either actively or not actively traded and price models, discounted cash flow methodologies, or similar techniques that may contain unobservable inputs that are supported by little or no market activity and require significant judgment. The fair value of available-for-sale securities is measured utilizing Level 1, Level 2, and Level 3 inputs. The fair value of held-to-maturity securities is measured utilizing Level 2 inputs.

Loans receivable. The fair value of loans receivable is estimated using discounted cash flow analysis. Projected future cash flows are calculated using loan characteristics, and assumptions of voluntary and involuntary prepayment speeds. For performing loans, Level 2 inputs are utilized as the cash flow analysis is performed using available market data on the performance of similar loans. Projected cash flows are prepared using discount rates believed to represent current market rates. For non-performing loans, the cash flow assumptions are considered Level 3 inputs as market data is not readily available.

Loans held-for-sale, at fair value. Loans held-for-sale, at fair value generally includes residential mortgage loans that are originated with the intent to sell. These loans are recorded at fair value under FASB ASC 825. The fair value of loans held-for-sale is valued using the quoted market price of such loans, which is a Level 2 input.

Loans held-for-sale, at lower of cost or market. Loans held-for-sale, at lower of cost or market includes consumer loans identified for sale out of the portfolio. These loans are recorded at lower of cost or market. The fair value of these loans is determined through the use of broker quotes based on market data; therefore, this is a level 2 input.

Hedged commercial loans. The hedged commercial loans are one component of a declared hedging relationship as defined under FASB ASC 815. The interest rate swap component of the declared hedging relationship is carried at its fair value and the carrying value of the commercial loans includes a similar change in fair values. The fair value of these loans is measured utilizing Level 2 inputs.

Branch assets held-for-sale. This category includes loans receivable, fixed assets and cash balances, identified (at certain branches) for sale. As these assets are under agreement of sale at net book value, the carrying value is deemed to equal fair value. This is a level 2 fair value input.

Restricted equity securities. Ownership in equity securities of Federal Reserve Bank of Philadelphia (the “Federal Reserve Bank”), FHLBNY and Atlantic Central Bankers Bank is restricted and there is no established market for their resale. The carrying amount is a reasonable estimate of fair value. The fair value is based on Level 2 inputs.

Interest rate lock commitments on residential mortgages. The fair value of interest rate lock commitments is estimated using pricing from existing purchase commitments on each loan in the pipeline. This value is adjusted for a pull through estimate which is determined based on historical experience with loan deliveries from the residential mortgage pipeline. As this estimate is unobservable and can result in significant fluctuation in the fair value determination, this is considered a Level 3 input under the fair value hierarchy.

Interest rate swaps/floors and fair value interest rate swaps. The Company’s derivative financial instruments are not exchange-traded and therefore are valued utilizing models with the primary input being readily observable market parameters, specifically the LIBOR swap curve. In addition, the Company incorporates a qualitative fair value adjustment related to credit quality variations between counterparties as required by FASB ASC 820. This is a level 2 input.

Demand deposits, savings deposits and time deposits. The fair value of demand deposits and savings deposits is determined by projecting future cash flows using an estimated economic life based on account characteristics, a Level 2 input. The resulting cash flow is discounted using rates available on alternative funding sources. The fair value of time deposits is estimated using the rate and maturity characteristics of the deposits to estimate their cash flow. This cash flow is discounted at rates for similar term wholesale funding.

Deposits held-for-sale. The fair value is determined by applying the agreed upon deposit premium per a branch sale agreement. This is a level 2 input.

Securities sold under agreements to repurchase – customer. The fair value is estimated to be the amount payable at the reporting date. This is considered a Level 2 input.

Securities sold under agreements to repurchase – FHLBNY advances. The fair value is estimated through Level 2 inputs by determining the cost or benefit for early termination of the individual borrowing.

Junior subordinated debentures. The fair value was estimated by discounting approximate cash flows of the borrowings by yields estimating the fair value of similar issues. The valuation model considers current market spreads, known and anticipated credit issues of the underlying collateral, term and reinvestment period and market transactions of similar issues, if available. This is a Level 3 input under the fair value hierarchy.

The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2014 and December 31, 2013. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these condensed consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amount presented herein.

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Derivative Financial Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2014

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Hedging Activities

(8) Derivative Financial Instruments and Hedging Activities

The Company is exposed, to varying degrees, to interest rate, market and credit risk through the use of derivative financial instruments. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures. The Company seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. In general, the derivative transactions entered into by the Company fall into one of two types: a fair value hedge of a specific fixed-rate loan agreement and an economic hedge of a derivative offering to a Bank customer. The Company does not use derivative financial instruments for trading purposes.

Fair Value Hedges – Interest Rate Swaps. The Company utilizes interest rate swap agreements to hedge interest rate risk. The designated hedged items are subordinated notes related to commercial loans that provide a fixed interest receipt for the Company. The interest rate risk is the uncertainty of future interest rate levels and the impact of changes in rates on the fair value of the loans. The hedging of interest rate risk is intended to reduce the volatility of the fair value of the loans due to changes in the interest rate market.

The Company previously entered into interest rate swaps with a counterparty whereby the Company makes payments based on a fixed interest rate and receives payments from the counterparty based on a floating interest rate, both calculated based on the principal amount of the underlying subordinated note, without the exchange of the underlying principal. The Company no longer enters into these interest rate swap transactions, the last of which occurred in August 2007. The interest rate swaps are designated as fair value hedges under FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”). The critical terms assessed by the Company for each hedge of subordinated notes include the notional amounts of the swap compared to the principal amount of the notes, expiration/maturity dates, benchmark interest rate, prepayment terms and cash payment dates. At June 30, 2014 and December 31, 2013, the total outstanding notional amount of these swaps was $16.6 million and $21.2 million, respectively. For each of these swap agreements, the floating rate is based on the one-month London Interbank Offered Rate (“LIBOR”) paid on the first day of the month which matches the interest payment date on each subordinated note. The expiration dates for these swap agreements range from August 1, 2014 to August 1, 2022 and are consistent with the underlying subordinated note maturities and the swaps had a fair value of $0 at inception. At hedge inception and on an ongoing basis, conditions supporting hedge effectiveness are evaluated. The Company believes that all conditions required in paragraph ASC 815-20-25-104 have been met, as all terms of the subordinated note and the interest rate swap match. Because the Company’s evaluations have concluded that the critical terms of the subordinated notes and the interest rate swaps meet the criteria outlined in ASC 815-20-25-104, the “short-cut” method of accounting is applied, which assumes there is no ineffectiveness of a hedging arrangement’s ability to hedge risk as changes in the interest rate component of the swaps’ fair value are expected to exactly offset the corresponding changes in the fair value of the underlying subordinated notes, as described above. Because the hedging arrangement is considered perfectly effective, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in a net impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”). The fair value adjustments related to credit quality were not material as of June 30, 2014 and December 31, 2013.

The following tables provide information pertaining to interest rate swaps designated as fair value hedges under FASB ASC 815 at June 30, 2014 and December 31, 2013:

Summary of Interest Rate Swaps Designated As Fair Value Hedges

	June 30, 2014					December 31, 2013
Balance Sheet Location	Notional		Fair Value			Notional		Fair Value
Other liabilities	$	16,644	$	(1,137	)	$	21,172	$	(1,632	)

Summary of Interest Rate Swap Components

	June 30, 2014			December 31, 2013
Weighted average pay rate		6.96	%		6.94	%
Weighted average receive rate		2.01	%		2.04	%
Weighted average maturity in years		1.66			1.9

Customer Derivatives – Interest Rate Swaps/Floors. The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure on the variable and fixed components of the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. The Company recognized $113 thousand and $419 thousand in fair value adjustment charges during the six months ended June 30, 2014 and 2013, respectively, which were included in the derivative credit valuation adjustment in the unaudited condensed consolidated statements of operations as a reduction to other income.

	June 30, 2014						December 31, 2013
Balance Sheet Location	Notional			Fair Value			Notional		Fair Value
Other assets	$	213,619		$	16,994		$	251,207	$	23,299
Other liabilities		(213,619	)		(17,144	)		251,207		(23,526	)

In addition, the Company has entered into an interest rate floor sale transaction with one commercial customer. The Company entered into corresponding interest rate floor purchase transactions with a third party in order to offset its exposure on the variable and fixed components of the customer agreements. As the interest rate floors with both the customer and the third party are not designated as hedges under FASB ASC 815, the instruments are marked to market through earnings. As the interest rate floors are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in a net impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There were no fair value adjustments for the interest rate floor transactions for the three and six months ended June 30, 2014 and 2013. The combined notional amount of the two interest rate floors was $14.8 million and $15.2 million at June 30, 2014 and December 31, 2013, respectively. These transactions are recorded in other assets in the unaudited condensed consolidated statements of financial condition.

Interest rate lock commitments on residential mortgages. As a part of its normal residential mortgage operations, the Bank will enter into an interest rate lock commitment with a potential borrower. The Bank enters into a corresponding commitment to an investor to sell that loan at a specific price shortly after origination. In accordance with FASB ASC 820, adjustments are recorded through earnings in mortgage banking revenue, net in the unaudited condensed consolidated statements of operations to account for the net change in fair value of these transactions. For the three and six months ended June 30, 2014, the Company recognized an increase of $110 thousand and $106 thousand, respectively, compared to an increase $171 thousand and a decrease of $43 thousand for the three and six months ended June 30, 2013, respectively, in fair value adjustments. The interest rate lock commitments are recorded at fair value in other assets in the unaudited condensed consolidated statements of financial condition. The fair value of the interest rate lock commitments was $225 thousand and $119 thousand at June 30, 2014 and December 31, 2013, respectively. The interest rate lock commitments had a total notional amount of $26.9 million for the held-for-sale pipeline at June 30, 2014.

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Real Estate Owned - Schedule of Real Estate Owned (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Real Estate By Property [Line Items]
Real estate owned	$ 1,327	$ 2,503
Commercial Real Estate Loans [Member]
Real Estate By Property [Line Items]
Real estate owned	1,030	1,227
Residential Properties [Member]
Real Estate By Property [Line Items]
Real estate owned	297	1,276
Bank Properties [Member]
Real Estate By Property [Line Items]
Real estate owned

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Allowance for Loan Losses

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Allowance for Loan Losses

(6) Allowance for Loan Losses

Changes in the allowance for loan losses were as follows:

Allowance for Loan Losses and Recorded Investment in Financing Receivables

	For the Six Months Ended June 30, 2014
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	27,828		$	3,375		$	2,898		$	1,436		$	35,537
Charge-offs		(16,300	)		(2,319	)		(1,425	)		(3,260	)		(23,304	)
Recoveries		1,078			144			6			128			1,356
Net charge-offs		(15,222	)		(2,175	)		(1,419	)		(3,132	)		(21,948	)
Provision for loan losses		8,410			2,321			1,922			2,150			14,803
Ending balance	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Financing Receivables:
Ending balance	$	1,363,900		$	186,953		$	298,063		$	7,200		$	1,856,116
Ending balance: individually evaluated for impairment	$	5,447		$	2,905		$	5,609		$	10		$	13,971
Ending balance: collectively evaluated for impairment	$	1,358,453		$	184,048		$	292,454		$	7,190		$	1,842,145

(1) Amount includes both home equity lines of credit and term loans.

(2) Includes the unallocated portion of the allowance for loan losses.

	For the Six Months Ended June 30, 2013
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	33,197		$	2,734		$	3,333		$	6,609		$	45,873
Charge-offs		(4,294	)		(989	)		(81	)		(422	)		(5,786	)
Recoveries		9,195			305			7			125			9,632
Net charge-offs		4,901			(684	)		(74	)		(297	)		3,846
Provision for loan losses		1,168			2,530			(752	)		(4,658	)		(1,712	)
Ending balance	$	39,266		$	4,580		$	2,507		$	1,654		$	48,007
Ending balance: individually evaluated for impairment	$	3,086		$	38		$	98		$	35		$	3,257
Ending balance: collectively evaluated for impairment	$	36,180		$	4,542		$	2,409		$	1,619		$	44,750
Financing Receivables:
Ending balance	$	1,676,133		$	223,214		$	225,147		$	34,298		$	2,158,792
Ending balance: individually evaluated for impairment	$	60,825		$	4,825		$	5,309		$	656		$	71,615
Ending balance: collectively evaluated for impairment	$	1,615,308		$	218,389		$	219,838		$	33,642		$	2,087,177

(1) Amount includes both home equity lines of credit and term loans

(2) Includes the unallocated portion of the allowance for loan losses.

Risk Characteristics

Commercial Loans. Included in this segment is commercial and industrial, commercial real estate owner occupied, commercial real estate non-owner occupied, and land and development. Many of the Company’s commercial and industrial loans have a real estate component as part of the collateral securing the accommodation. Commercial real estate owner occupied loans rely on the cash flow from the successful operation of the borrower’s business to make repayment. If the operating company experiences difficulties in terms of sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Commercial real estate non-owner occupied loans rely on the payment of rent by third-party tenants. The borrower’s ability to repay the loan or sell the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit. Commercial and industrial loans are primarily secured by assets of the business, such as accounts receivable and inventory. Due to the nature of the collateral securing these loans, the liquidation of these assets may be problematic and costly. Commercial real estate owner occupied and non-owner occupied loans are secured by the underlying properties. The local economy and real estate market affect the appraised value of these properties which may impact the ultimate repayment of these loans. Land and development loans are primarily repaid by the sale of the developed properties or by conversion to a permanent term loan. These loans are dependent upon the completion of the project on time and within budget, which may be impacted by general economic conditions. The Company requires cash collateral in an interest reserve in order to extend credit on construction projects to mitigate the credit risk.

Home Equity Loans. This segment consists of both home equity lines of credit and home equity term loans on single family residences. These loans rely on the personal income of the borrower for repayment which may be impacted by economic conditions, such as unemployment levels, interest rates and the housing market. These loans are primarily secured by second liens on properties. The secondary source of repayment may be impaired by the real estate market and local regulations.

Residential Real Estate Loans. Included in this segment are residential mortgages on single family residences. These loans rely on the personal income of the borrower for repayment which may be impacted by economic conditions, such as unemployment levels, interest rates and the housing market. These loans are primarily secured by liens on the underlying properties. The secondary source of repayment may be impaired by the real estate market and local regulations.

Other Loans. Other loans consist of personal credit lines, mobile home loans and consumer installment loans. These loans rely on the borrowers’ personal income for repayment and are either unsecured or secured by personal use assets and mobile homes. These loans may be impacted by economic conditions such as unemployment levels. The liquidation of the assets securing these loans may be difficult and costly.

The allowance for loan losses was $28.4 million and $35.5 million at June 30, 2014 and December 31, 2013, respectively. The ratio of allowance for loan losses to gross loans held-for-investment was 1.53% at June 30, 2014 and 1.66% at December 31, 2013.

The provision for loan losses charged to expense is based upon historical loan loss and recovery experience, a series of qualitative factors and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC 310, Receivables (“FASB ASC 310”). Values assigned to the qualitative factors and those developed from historic loss and recovery experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans that continue to perform.

A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in a loan being identified as impaired. For this purpose, delays less than 90 days are considered to be insignificant. Impairment losses are included in the provision for loan losses in the unaudited condensed consolidated statements of operations. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historical loss and recovery experience and qualitative factors. Such loans generally include consumer loans, residential real estate loans and small business loans. In determining the appropriate level of the general pooled allowance, management makes estimates based on internal risk ratings, which take into account such factors as debt service coverage, loan-to-value ratios, management’s abilities and external factors.

The following table presents the Company’s components of impaired loans receivable, segregated by class of loans. Commercial and consumer loans that were collectively evaluated for impairment are not included in the data that follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Accrued Interest Income Recognized		Cash Interest Income Recognized
For the Six Months Ended June 30, 2014
With no related allowance:
Commercial:
Commercial & industrial	$	2,761	$	3,264	$	—	$	180	$	19	$	—
CRE owner occupied		2,502		3,127		—		2,068		—		—
CRE non-owner occupied		—		—		—		—		—		—
Land and development		184		223		—		364		—		—
Consumer:
Home equity lines of credit		2,325		3,255		—		2,166		—		—
Home equity lines of credit, held-for-sale		1,947		3,428		—		2,154		—		—
Home equity term loans		578		649		—		518		—		—
Home equity term loans, held-for-sale		354		610		—		497		—		—
Residential real estate		5,609		6,388		—		4,262		—		45
Residential real estate, held-for-sale		1,322		2,334		—		1,041		—		—
Other		10		14		—		10		—		—
Other, held-for-sale		463		1,752		—		460		—		—
Total commercial	$	5,447	$	6,614	$	—	$	2,612	$	19	$	—
Total consumer	$	12,608	$	18,430	$	—	$	11,108	$	—	$	45
For the Year Ended December 31, 2013
With no related allowance:
Commercial:
Commercial & industrial	$	3,206	$	3,281	$	—	$	1,884	$	—	$	—
CRE owner occupied		18,503		27,367		—		13,528		—		—
CRE non-owner occupied		1,969		2,251		—		66		—		—
Land and development		2,512		2,549		—		2,669		—		—
Consumer:
Residential real estate		2,569		3,135		—		1,689		—		—
Home Equity Lines of Credit		3,749		5,051		—		3,132		—		—
Home Equity Term Loans		1,238		1,456		—		918		—		—
Other		560		1,567		—		481		—		—
With an allowance recorded:
Commercial:
Commercial & industrial	$	423	$	425	$	423	$	73	$	—	$	—
CRE owner occupied		2,164		2,164		494		47		—		—
Consumer:
Other		26		27		17		16		—		—
Total commercial	$	28,777	$	38,037	$	917	$	18,267	$	—	$	—
Total consumer	$	8,142	$	11,236	$	17	$	6,236	$	—	$	—

In accordance with FASB ASC 310, those impaired loans which are collateral dependent do not result in a specific allowance for loan losses. Included in impaired loans at June 30, 2014 were three TDRs, all of which were collateral dependent. In addition, one of the TDRs at June 30, 2014 included a commitment to lend additional funds of $35 thousand as of June 30, 2014.

There were no new TDR agreements entered into during the six months ended June 30, 2014. The following table presents an analysis of the Company’s TDR agreements entered into during the three and six months ended June 30, 2013.

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
Residential real estate	1		199		197

The following tables present information regarding the types of concessions granted on loans that were restructured during the three and six months ended June 30, 2013:

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Commercial and industrial	1	Modified principal repayment terms.
CRE Owner occupied	1	Interest rate concession.
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Residential real estate	1	Modified term debt to interest only for six month period.

During the three and six months ended June 30, 2014 and June 30, 2013, the Company did not have any TDR agreements that had subsequently defaulted that were entered into within the respective preceding twelve months. All TDRs are currently on non-accrual status.

The following table presents the Company’s distribution of risk ratings within the held-for-investment loan portfolio, segregated by class, as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators by Internally Assigned Grade

	Commercial & industrial		CRE owner occupied		CRE non-owner occupied		Land and development		Home Equity Lines of Credit		Home Equity Term Loans		Residential Real Estate		Other
As of June 30, 2014
Grade:
Pass	$	362,498	$	346,899	$	547,951	$	67,950	$	161,572	$	20,684	$	292,454	$	7,187
Special Mention		5,556		10,519		3,532		483		—		—		—		—
Substandard		5,187		8,767		4,346		212		4,099		598		5,609		13
Doubtful		—		—		—		—		—		—		—		—
Total	$	373,241	$	366,185	$	555,829	$	68,645	$	165,671	$	21,282	$	298,063	$	7,200
As of December 31, 2013
Grade:
Pass	$	415,875	$	407,486	$	550,426	$	61,303	$	181,796	$	24,016	$	299,625	$	29,994
Special Mention		37,064		17,741		9,464		494		—		—		—		—
Substandard		25,372		41,051		16,194		2,509		6,682		1,263		5,927		809
Doubtful		423		2,164		—		—		—		—		—		26
Total	$	478,734	$	468,442	$	576,084	$	64,306	$	188,478	$	25,279	$	305,552	$	30,829

The Company’s primary tool for assessing risk when evaluating a loan in terms of its underwriting, structure, documentation and eventual collectability is a risk rating system where the loan is assigned a numeric value. Behind each numeric category is a defined set of characteristics reflective of the particular level of risk.

The risk rating system is based on a fourteen point grade using a two-digit scale. The upper seven grades are for “pass” categories, the middle grade is for the “criticized” category, while the lower six grades represent “classified” categories which are equivalent to the guidelines utilized by the OCC.

The portfolio manager is responsible for assigning, maintaining, and documenting accurate risk ratings for all commercial loans and commercial real estate loans. The portfolio manager assigns a risk rating at the inception of the loan, reaffirms it annually, and adjusts the rating based on the performance of the loan. As part of the loan review process, a regional credit officer will review risk ratings for accuracy. The portfolio manager’s risk rating will also be reviewed periodically by the loan review department and the Bank’s regulators.

To calculate risk ratings in a consistent fashion, the Company uses a Risk Rating Methodology that assesses quantitative and qualitative components which include elements of its financial condition, abilities of management, position in the market, collateral and guarantor support and the impact of changing conditions. When combined with professional judgment, an overall risk rating is assigned.

Aging of Receivables

	30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Total Past Due		Current		Total Financing Receivables		Loans 90 Days Past Due and Accruing
As of June 30, 2014
Commercial:
Commercial & industrial	$	232	$	3	$	270	$	505	$	372,736	$	373,241	$	—
CRE owner occupied		528		29		1,626		2,183		364,002		366,185		—
CRE non-owner occupied		59		352		—		411		555,418		555,829		—
Land and development		—		—		184		184		68,461		68,645		—
Consumer:														—
Home equity lines of credit		1,742		702		1,357		3,801		161,870		165,671
Home equity term loans		392		172		136		700		20,582		21,282		—
Residential real estate		4,643		1,608		3,417		9,668		288,395		298,063		—

Other		42		6		11		59		7,141		7,200		—
Total	$	7,638	$	2,872	$	7,001	$	17,511	$	1,838,605	$	1,856,116	$	—
As of December 31, 2013
Commercial:
Commercial & industrial	$	9,149	$	2,726	$	3,452	$	15,327	$	463,407	$	478,734	$	—
CRE owner occupied		4,901		5,865		3,753		14,519		453,923		468,442		—
CRE non-owner occupied		899		4,661		1,070		6,630		569,454		576,084		—
Land and development		—		—		2,512		2,512		61,794		64,306		—
Consumer:
Home equity lines of credit		3,030		1,457		2,324		6,811		181,667		188,478		—
Home equity term loans		1,032		223		825		2,080		23,199		25,279		—
Residential real estate		12,776		1.927		1,086		15,789		289,763		305,552		—
Other		340		202		378		920		29,909		30,829		—
Total	$	32,127	$	17,061	$	15,400	$	64,588	$	2,073,116	$	2,137,704	$	—

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Real Estate Owned

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Real Estate Owned

(7) Real Estate Owned

Real estate owned at June 30, 2014 and December 31, 2013 was as follows:

	June 30, 2014		December 31, 2013
Commercial properties	$	1,030	$	1,227
Residential properties		297		1,276
Bank properties		—		—
Total	$	1,327	$	2,503

Summary of Real Estate Owned Activity

	Commercial Properties			Residential Properties			Bank Properties		Total
Beginning balance, January 1, 2014	$	1,227		$	1,276		$	—	$	2,503
Transfers into real estate owned		—			567			—		567
Sale of real estate owned		—			(1,478	)		—		(1,478	)
Reserve for losses in real estate owned		(197	)		(68	)		—		(265	)
Ending balance, June 30, 2014	$	1,030			297			—		1,327

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Deposits

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Deposits

(9) Deposits

Deposits consist of the following major classifications:

	June 30, 2014		December 31, 2013
Interest-bearing demand deposits	$	977,549	$	1,179,292
Non-interest-bearing demand deposits		537,023		561,006
Savings deposits		232,018		266,573
Time certificates under $100,000		250,066		300,309
Time certificates $100,000 or more		172,568		206,461
Brokered time deposits		103,541		107,930
Total	$	2,272,765	$	2,621,571

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Derivative Financial Instruments and Hedging Activities - Summary of Interest Rate Swap Components (Detail)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Offsetting [Abstract]
Weighted average pay rate	6.96%	6.94%
Weighted average receive rate	2.01%	2.04%
Weighted average maturity in years	1 year 7 months 28 days	1 year 10 months 24 days

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Deposits - Major Classifications of Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Banking And Thrift [Abstract]
Interest-bearing demand deposits	$ 977,549	$ 1,179,292
Non-interest-bearing demand deposits	537,023	561,006
Savings deposits	232,018	266,573
Time certificates under $100,000	250,066	300,309
Time certificates $100,000 or more	172,568	206,461
Brokered time deposits	103,541	107,930
Total deposits	$ 2,272,765	$ 2,621,571

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Derivative Financial Instruments and Hedging Activities - Summary of Interest Rate Swaps Designated as Fair Value Hedges (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Notional	$ (213,619)	$ 251,207
Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Notional	16,600	21,200
Designated as Hedging Instrument [Member] | Interest Rate Swaps [Member] | Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Notional	16,644	21,172
Fair Value	$ (1,137)	$ (1,632)

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Summary of Significant Accounting Policies - Impact of Revisions to Consolidated Statements of Cash Flows (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Summary Of Significant Accounting Policies [Line Items]
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	$ 330,440	$ 267,762	$ 416,239	$ 143,616
CASH AND CASH EQUIVALENTS, END OF PERIOD	330,440	267,762	416,239	143,616
Revised [Member]
Summary Of Significant Accounting Policies [Line Items]
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			416,239	143,616
CASH AND CASH EQUIVALENTS, END OF PERIOD			416,239	143,616
As Reported [Member]
Summary Of Significant Accounting Policies [Line Items]
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			442,239	169,616
CASH AND CASH EQUIVALENTS, END OF PERIOD			$ 442,239	$ 169,616

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Loans - Loans on Non-Accrual Status (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	$ 17,556	$ 29,814
Troubled debt restructuring, non-accrual	583	8,163
Commercial Loans [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	2,773	2,358
Commercial Loans [Member] | CRE Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	2,373	14,408
Commercial Loans [Member] | CRE Non-Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans		1,969
Commercial Loans [Member] | Land and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans		2,158
Consumer Loans [Member] | Home Equity Lines of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	2,327	3,749
Consumer Loans [Member] | Home Equity Lines of Credit Held for Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	1,947
Consumer Loans [Member] | Home Equity Term Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	580	1,240
Consumer Loans [Member] | Home Equity Term Loans Held for Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	354
Consumer Loans [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	5,406	3,341
Consumer Loans [Member] | Residential Real Estate Held For Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	1,322
Consumer Loans [Member] | Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	11	591
Consumer Loans [Member] | Other Held For Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total non-accrual loans	$ 463

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”).

All normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Annual Report on Form 10-K of Sun Bancorp, Inc. (the “Company”) for the year ended December 31, 2013. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other period. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The significant estimates include the allowance for loan losses, other-than-temporary impairment on investment securities, goodwill, intangible assets, income taxes, stock-based compensation and the fair value of financial instruments. Actual results may differ from these estimates under different assumptions or conditions.

Prior Period Revision

Prior Period Revision. Previously, the Company presented restricted cash, with respect to amounts held as collateral against letters of credit, in “Cash and due from banks” on the consolidated statements of financial condition. During the fourth quarter of 2013, the Company identified that certain of these balances should be classified as restricted cash. The table below reports the impact of these revisions to the consolidated statements of cash flows for the six months ended June 30, 2013:

Six Months Ended June 30,	Revised 2013		As reported 2013
Cash and cash equivalents, beginning of year	$	143,616	$	169,616
Cash and cash equivalents, end of period		416,239		442,239

Basis of Consolidation

Basis of Consolidation. The unaudited condensed consolidated financial statements include, after all intercompany balances and transactions have been eliminated, the accounts of the Company, its principal wholly-owned subsidiary, Sun National Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Sun Financial Services, L.L.C., 2020 Properties, L.L.C., and 4040 Properties, L.L.C. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 810-10, Consolidation, Sun Capital Trust V, Sun Capital Trust VI, Sun Capital Trust VII, Sun Statutory Trust VII, and Sun Capital Trust VIII, collectively, the “Issuing Trusts”, are presented on a deconsolidated basis.

Segment Information

Segment Information. As defined in accordance with FASB ASC 280, Segment Reporting, the Company has one reportable and operating segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, lending is dependent upon the ability of the Company to fund itself with deposits and other borrowings and manage interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

Loans Held-for-Sale

Loans Held-For-Sale. Loans held-for-sale totaled $29.2 million and $20.7 million at June 30, 2014 and December 31, 2013, respectively. The balance at June 30, 2014 and December 31, 2013 includes $9.4 million and $20.7 million, respectively, of residential mortgages originated with the intent to sell which were recorded at fair value. At June 30, 2014, loans held-for-sale also includes $19.8 million of consumer loans identified for sale out of the portfolio and recorded at lower of cost or market.

Allowance for Loan Losses

Allowance for Loan Losses. The allowance for loan losses is determined by management based upon past experience, evaluation of estimated loss and impairment in the loan portfolio, current economic conditions and other pertinent factors. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

The provision for loan losses is based upon historical loan loss experience, a series of qualitative factors and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC 310, Receivables (“FASB ASC 310”). Values assigned to the qualitative factors and those developed from historic loss experience provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans that continue to perform. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. For this purpose, delays of less than 90 days are considered to be insignificant. Impairment losses are included in the provision for loan losses. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historic loss experience and qualitative factors. Included in these qualitative factors are:

• Levels of past due, classified and non-accrual loans, and troubled debt restructurings;

• Nature, volume, and concentration of loans;

• Historical loss trends;

• Changes in lending policies and procedures, underwriting standards, collections, and for commercial loans, the level of loans being approved with exceptions to policy;

• Experience, ability and depth of management and staff;

• National and local economic and business conditions, including various market segments;

• Quality of the Company’s loan review system and degree of Board oversight; and

• Effect of external factors, including the deterioration of collateral values, on the level of estimated credit losses in the current portfolio.

Commercial loans, including commercial real estate loans, are placed on non-accrual status at the time the loan has been delinquent for 90 days unless the loan is well secured and in the process of collection. Generally, commercial loans and commercial real estate loans are charged-off no later than 180 days after becoming delinquent unless the loan is well secured and in the process of collection, or other extenuating circumstances support collection. Residential real estate loans are typically placed on non-accrual status at the time the loan has been delinquent for 90 days. Other consumer loans are typically charged-off at 180 days delinquent. In all cases, loans must be placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Goodwill and Intangible Assets

Goodwill and Intangible Assets. Goodwill is the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tests goodwill for impairment annually as of December 31, unless circumstances indicate that a test is required at an earlier date. The Company elected to not apply the qualitative evaluation option permitted under Accounting Standards Update (“ASU”) 2011-8, Intangibles – Goodwill and Other (Topic 35): Testing Goodwill for Impairment issued in September 2011. Therefore, the Company utilizes the two-step goodwill impairment test outlined in FASB ASC 350, Intangibles – Goodwill and Other (“FASB ASC 350”). Step one, which is used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. A reporting unit is an operating segment, or one level below an operating segment, as defined in FASB ASC 280. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired and step two is therefore unnecessary. If the carrying amount of the reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment loss, if any. At December 31, 2013, the Company performed its annual goodwill impairment test, and step one of the analysis indicated that the Company’s fair value was greater than its carrying value; therefore, the Company’s goodwill was not impaired at December 31, 2013. Nothing has occurred since that time to suggest that an impairment exists at June 30, 2014. The carrying amount of goodwill totaled $38.2 million at June 30, 2014 and December 31, 2013.

Intangible assets, net on the consolidated statements of financial condition, consist of core deposit intangibles, net of accumulated amortization from the Bank’s previous acquisitions. Core deposit intangibles are amortized using the straight-line method based on the characteristics of the particular deposit type and are evaluated annually for impairment.

Bank Owned Life Insurance ("BOLI")

Bank Owned Life Insurance (“BOLI”). The Company has purchased life insurance policies on certain key employees. These policies are recorded at their cash surrender value, or the amount that can be realized in accordance with FASB ASC 325-30, Investments in Insurance Contracts. At June 30, 2014, the Company had $26.6 million invested in a general account and $51.6 million in a separate account, for a total BOLI cash surrender value of $78.2 million. The BOLI separate account is invested in a mortgage-backed securities fund, which is managed by an independent investment firm. Pricing volatility of these underlying instruments may have an impact on investment income; however, the fluctuations would be partially mitigated by a stable value wrap agreement which is a component of the separate account. Income from these policies and changes in the cash surrender value are recorded in BOLI income of the unaudited condensed consolidated statements of operations.

Income Taxes

Income Taxes. The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management exercises significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based upon changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the unaudited condensed consolidated statements of operations. Assessment of uncertain tax positions under FASB ASC 740 requires careful consideration of the technical merits of a position based on management’s analysis of tax regulations and interpretations. Significant judgment is applied when addressing the requirements of FASB ASC 740. At June 30, 2014, the Company had a valuation allowance of $131.0 million against its gross deferred tax asset. As the Company remained in a cumulative loss position, the deferred tax valuation allowance is still appropriate at June 30, 2014. The net deferred tax liability of $796 thousand in the unaudited condensed consolidated statements of financial condition at June 30, 2014 primarily represents the tax liability created from the goodwill amortization recorded for tax purposes and not for book. For those securities in an unrealized loss position, the Company intends to hold these securities until maturity or until such time that they are in an unrealized gain position and therefore, the deferred tax asset is considered appropriate.

Mortgage Banking Revenue, Net

Mortgage Banking Revenue, Net. Mortgage banking revenue, net includes revenues associated with the sale of residential mortgage loans originated with the intent to sell, net of recourse liability provision as well as gain on bulk sales of jumbo residential mortgage loans. The components of this line item are as follows:

	For the Six Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	1,418		$	7,924
Gain on bulk sale of jumbo residential mortgage loans		134			2,363
Market value adjustment on loans held-for-sale		(34	)		(1,039	)
Fair value adjustment on interest rate lock commitments		106			(43	)
Recourse liability provision		(460	)		(200	)
Mortgage banking revenue, net	$	1,164		$	9,005
	For the Three Months Ended June 30,
	2014			2013
Gains on the sale of residential mortgage loans	$	649		$	3,818
Gain on bulk sale of jumbo residential mortgage loans		131			1,507
Market value adjustment on loans held-for-sale		70			205
Fair value adjustment on interest rate lock commitments		110			171
Recourse liability provision		(430	)		(100	)
Mortgage banking revenue, net	$	530		$	5,601

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income. The Company classifies items of accumulated comprehensive income by their nature and displays the details of other comprehensive income in the unaudited condensed consolidated statements of comprehensive income. Amounts categorized as comprehensive loss/income represent net unrealized gains or losses on investment securities available for sale, net of tax and the non-credit portion of any other-than-temporary impairment (“OTTI”) loss not recorded in earnings. Reclassifications are made to avoid double counting items which are displayed as part of net income (loss) for the period. These reclassifications for the three and six months ended June 30, 2014 and 2013 were as follows:

	For the Three Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	2,695	$	(1,102	)	$	1,593	$	(6,904	)	$	2,820	$	(4,084	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(9	)		4		(5	)
Net unrealized gain on securities available for sale	$	2,745	$	(1,122	)	$	1,623	$	(6,913	)	$	2,824	$	(4,089	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

	For the Six Months Ended June 30,
	2014							2013
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Unrealized holding gain (loss) on securities available for sale during the period	$	11,345	$	(4,635	)	$	6,710	$	(5,127	)	$	2,094	$	(3,033	)
Reclassification adjustment for net gains included in net income(1)		50		(20	)		30		(3,452	)		1,410		(2,042	)
Net unrealized gain on securities available for sale	$	11,395	$	(4,655	)	$	6,740	$	(8,579	)	$	3,504	$	(5,075	)

(1) All amounts are included in gain on sale of investment securities in the unaudited condensed consolidated statements of operations.

Recent Accounting Principles

Recent Accounting Principles.

In June 2014, the FASB issued ASU 2014-11: Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The accounting changes in the amendment affect all entities that enter into repurchase-to-maturity transactions or repurchase financings. The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting and for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty which will result in secured borrowing accounting for the repurchase agreement. All entities are subject to new disclosure requirements for certain transactions that involve a transfer of a financial asset accounted for as a sale. The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In May 2014, the FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606): Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40), Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables, Background Information and Basis for Conclusions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the considerations to which the entity expects to be entitled in exchange for those goods or services. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In January 2014, the FASB issued ASU 2014-4, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For public entities, the amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently evaluating the impact of the adoption of this accounting standards update on its financial statements.

In July 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this update seek to eliminate the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists by presenting the unrecognized tax benefit, or a portion of the unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset. To the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward are not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. The Company has evaluated the impact of the adoption of this accounting standards update on its financial statements and determined that there currently is no impact to the Company’s presentation.

Stock-Based Compensation

The Company accounts for stock-based compensation issued to employees, and when appropriate, non-employees, in accordance with the fair value recognition provisions of FASB ASC 718, Compensation – Stock Compensation, (“FASB ASC 718”). Under the fair value provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and it is recognized as expense over the appropriate vesting period using the straight-line method. However, consistent with FASB ASC 718, the amount of stock-based compensation cost recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date and, as a result, it may be necessary to recognize the expense using a ratable method. Although the provisions of FASB ASC 718 should generally be applied to non-employees, FASB ASC 505-50, Equity-Based Payments to Non-Employees, is used in determining the measurement date of the compensation expense for non-employees.

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Loans (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Loan Components

Loan Components

	June 30, 2014			December 31, 2013
Commercial:
Commercial and industrial	$	373,241		$	478,734
CRE owner occupied		366,185			468,442
CRE non-owner occupied		555,829			576,084
Land and development		68,645			64,306
Consumer:
Home equity lines of credit		165,671			188,478
Home equity term loans		21,282			25,279
Residential real estate		298,063			305,552
Other		7,200			30,829
Total gross loans held-for-investment		1,856,116			2,137,704
Allowance for loan losses		(28,392	)		(35,537	)
Net loans held-for-investment	$	1,827,724		$	2,102,167

Loans on Non-Accrual Status

Loans on Non-Accrual Status

	June 30, 2014		December 31, 2013
Commercial:
Commercial & industrial	$	2,773	$	2,358
CRE owner occupied		2,373		14,408
CRE non-owner occupied		—		1,969
Land and development		—		2,158
Consumer:
Home equity lines of credit		2,327		3,749
Home equity lines of credit, held-for-sale		1,947
Home equity term loans		580		1,240
Home equity term loans, held-for-sale		354
Residential real estate		5,406		3,341
Residential real estate, held-for-sale		1,322
Other		11		591
Other, held-for-sale		463
Total non-accrual loans	$	17,556	$	29,814
Troubled debt restructuring, non-accrual	$	583	$	8,163

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Investment Securities - Contractual Maturities of Investment Securities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Due in one year or less, Amortized Cost	$ 19,314	$ 3,184
Due after one year through five years, Amortized Cost	3,809	3,430
Due after five years through ten years, Amortized Cost	63,240	35,452
Due after ten years, Amortized Cost	54,192	84,364
Total investment securities, excluding mortgage-backed securities, Amortized Cost	140,555	126,430
Total investment securities, Amortized Cost	437,558	452,023
Due in one year or less, Estimated Fair Value	19,314	3,184
Due after one year through five years, Estimated Fair Value	3,884	3,490
Due after five years through ten years, Estimated Fair Value	63,655	35,460
Due after ten years, Estimated Fair Value	51,909	79,606
Total investment securities, excluding mortgage-backed securities, Estimated Fair Value	138,762	121,740
Total investment securities, Estimated Fair Value	437,027	440,097
Due in one year or less, Amortized Cost
Due after one year through five years, Amortized Cost	250	250
Due after five years through ten years, Amortized Cost
Due after ten years, Amortized Cost
Total investment securities, excluding mortgage-backed securities, Amortized Cost	250	250
Total investment securities, Amortized Cost	636	681
Due in one year or less, Estimated Fair Value
Due after one year through five years, Estimated Fair Value	250	250
Due after five years through ten years, Estimated Fair Value
Due after ten years, Estimated Fair Value
Total investment securities, excluding mortgage-backed securities, Estimated Fair Value	250	250
Total investment securities, Estimated Fair Value	645	692
U.S. Government Agency Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Total investment securities, Amortized Cost	296,732	325,316
Total investment securities, Estimated Fair Value	297,992	318,064
Total investment securities, Amortized Cost	386	431
Total investment securities, Estimated Fair Value	395	442
Other Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity [Line Items]
Total investment securities, Amortized Cost	271	277
Total investment securities, Estimated Fair Value	273	293
Total investment securities, Amortized Cost
Total investment securities, Estimated Fair Value

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Stock-Based Compensation - Summary of Stock Options Activity (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Options, Beginning Balance	1,491,538	1,785,157
Number of Options, Granted	215,972	83,610
Number of Options, Exercised	(617)
Number of Options, Forfeited	(70,570)	(13,698)
Number of Options, Expired	(439,436)
Number of Options, Ending Balance	1,196,887	1,855,069
Number of Options, Options vested or expected to vest	1,130,575	1,814,294
Weighted Average Exercise Price, Beginning Balance	$ 7.36	$ 7.35
Weighted Average Exercise Price, Granted	$ 3.35	$ 3.57
Weighted Average Exercise Price, Exercised	$ 3.10
Weighted Average Exercise Price, Forfeited	$ 3.40	$ 3.64
Weighted Average Exercise Price, Expired	$ 8.78
Weighted Average Exercise Price, Ending Balance	$ 6.35	$ 7.21
Weighted Average Exercise Price, Stock Options vested or expected to vest	$ 6.52	$ 7.28
Number of Options Exercisable, Beginning Balance	1,249,267	1,178,775
Number of Options Exercisable, Granted
Number of Options Exercisable, Exercised
Number of Options Exercisable, Forfeited
Number of Options Exercisable, Expired
Number of Options Exercisable, Ending Balance	855,308	1,336,893
Number of Options Exercisable, Stock Options vested or expected to vest

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Condensed Consolidated Statements of Comprehensive (Loss) Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement Of Income And Comprehensive Income [Abstract]
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ (24,248)	$ 678	$ (26,154)	$ 3,131
Unrealized (losses) gains on securities:
Unrealized holding gains (losses) arising during period	1,593	(4,084)	6,710	(3,033)
Less: reclassification adjustment for gains included in net income	30	(5)	30	(2,042)
Other comprehensive (loss) income	1,623	(4,089)	6,740	(5,075)
COMPREHENSIVE (LOSS) INCOME	$ (22,625)	$ (3,411)	$ (32,894)	$ (1,944)

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

(3) Stock-Based Compensation

The Company accounts for stock-based compensation issued to employees, and when appropriate, non-employees, in accordance with the fair value recognition provisions of FASB ASC 718, Compensation – Stock Compensation, (“FASB ASC 718”). Under the fair value provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and it is recognized as expense over the appropriate vesting period using the straight-line method. However, consistent with FASB ASC 718, the amount of stock-based compensation cost recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date and, as a result, it may be necessary to recognize the expense using a ratable method. Although the provisions of FASB ASC 718 should generally be applied to non-employees, FASB ASC 505-50, Equity-Based Payments to Non-Employees, is used in determining the measurement date of the compensation expense for non-employees.

Determining the fair value of stock-based awards at measurement date requires judgment, including estimating the expected term of the stock options and the expected volatility of the Company’s stock. In addition, judgment is required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates or different key assumptions were used, it could have a material effect on the Company’s unaudited condensed consolidated financial statements.

The Company’s stock-based incentive plans authorize the issuance of shares of common stock pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”). The purpose of the Company’s stock-based incentive plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, advisory directors, employees and other persons to promote the success of the Company. Under the Company’s stock-based incentive plans, Options generally expire ten years after the date of grant, unless terminated earlier under the Option’s terms. A committee of non-employee directors has the authority to determine the conditions upon which the Options granted will vest. Options are granted at the then fair market value of the Company’s stock. All or a portion of any Stock Awards earned as compensation by a director may be deferred under the Company’s Directors’ Deferred Fee Plan.

Activity in the stock option plans for the six months ended June 30, 2014 and June 30, 2013 was as follows:

Summary of Options Activity

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2014		1,491,538		$	7.36		1,249,267
Granted		215,972			3.35		—
Exercised		(617	)		3.10		—
Forfeited		(70,570	)		3.40		—
Expired		(439,436	)		8.78		—
June 30, 2014		1,196,887		$	6.35		855,308
Options vested or expected to vest(1)		1,130,575		$	6.52		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

	Number of Options			Weighted Average Exercise Price		Number of Options Exercisable
January 1, 2013		1,785,157		$	7.35		1,178,775
Granted		83,610			3.57		—
Exercised		—			—		—
Forfeited		(13,698	)		3.64		—
Expired		—			—		—
June 30, 2013		1,855,069		$	7.21		1,336,893
Options vested or expected to vest(1)		1,814,294		$	7.28		—

(1) Includes vested shares and nonvested shares after the application of a forfeiture rate, which is based upon historical data.

The weighted average remaining contractual term was approximately 6.1 years for Options outstanding and 5.0 years for Options exercisable as of June 30, 2014.

At June 30, 2014, the aggregate intrinsic value was $278 thousand for Options outstanding and $64 thousand for Options exercisable.

During the six months ended June 30, 2014 and 2013, the Company granted 215,972 Options and 83,610 Options, respectively. In accordance with FASB ASC 718, the fair value of the Options granted are estimated on the date of grant using the Black-Scholes option pricing model which uses the assumptions in the table below. The expected term of an Option is estimated using historical exercise behavior of employees at a particular level of management who were granted Options with a comparable term. The Options have historically been granted with a 10 year term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility is based on the historical volatility of the Company’s stock price.

Significant weighted average assumptions used to calculate the fair value of the Options for the six months ended June 30, 2014 and 2013 are as follows:

	For the Six Months Ended June 30,
	2014			2013
Weighted average fair value of Options granted	$	1.45		$	1.84
Weighted average risk-free rate of return		1.16	%		0.76	%
Weighted average expected option life in months		49			59
Weighted average expected volatility		55	%		62	%
Expected dividends(1)	$	—		$	—

(1) To date, the Company has not paid cash dividends on its common stock.

A summary of the Company’s nonvested Stock Award activity during the six months ended June 30, 2014 and June 30, 2013 are presented in the following tables:

Summary of Nonvested Stock Award Activity

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2014		431,834		$	3.13
Issued		112,180			3.43
Vested		(20,643	)		3.39
Forfeited		(47,188	)		3.06
Nonvested Stock Awards outstanding, June 30, 2014		476,183		$	3.19
	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Awards outstanding, January 1, 2013		639,037		$	3.30
Issued		20,643			3.39
Vested		(73,336	)		4.60
Forfeited		(28,733	)		3.03
Nonvested Stock Awards outstanding, June 30, 2013		557,611		$	3.14

There were 112,180 shares of nonvested Stock Awards issued during the six months ended June 30, 2014 and 20,643 nonvested Stock Awards issued during the six months ended June 30, 2013. The value of these shares is based upon the closing price of the common stock on the date of grant. Compensation expense is recognized on a straight-line basis over the service period for all of the nonvested Stock Awards issued.

Total compensation expense recognized related to Options and nonvested Stock Awards, including that for non-employee directors, during the three and six months ended June 30, 2014 was $102 thousand and $232 thousand, respectively, as compared to $218 thousand and $456 thousand, respectively, for the three and six months ended June 30, 2013. As of June 30, 2014, there was approximately $387 thousand and $1.1 million of total unrecognized compensation cost related to Options and nonvested Stock Awards, respectively. The cost of the Options and Stock Awards is expected to be recognized over a weighted average period of 3.7 years and 2.5 years, respectively.

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Allowance for Loan Losses - Company's Distribution of Risk Ratings within Held-for-Investment Loan Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	$ 1,856,116	$ 2,137,704	$ 2,158,792
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	373,241	478,734
Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	362,498	415,875
Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	5,556	37,064
Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	5,187	25,372
Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans		423
CRE Owner Occupied [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	366,185	468,442
CRE Owner Occupied [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	346,899	407,486
CRE Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	10,519	17,741
CRE Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	8,767	41,051
CRE Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans		2,164
CRE Non-Owner Occupied [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	555,829	576,084
CRE Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	547,951	550,426
CRE Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	3,532	9,464
CRE Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	4,346	16,194
CRE Non-Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Land and Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	68,645	64,306
Land and Development [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	67,950	61,303
Land and Development [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	483	494
Land and Development [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	212	2,509
Land and Development [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Home Equity Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	165,671	188,478
Home Equity Lines of Credit [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	161,572	181,796
Home Equity Lines of Credit [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Home Equity Lines of Credit [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	4,099	6,682
Home Equity Lines of Credit [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Home Equity Term Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	21,282	25,279
Home Equity Term Loans [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	20,684	24,016
Home Equity Term Loans [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Home Equity Term Loans [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	598	1,263
Home Equity Term Loans [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	298,063	305,552
Residential Real Estate [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	292,454	299,625
Residential Real Estate [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Residential Real Estate [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	5,609	5,927
Residential Real Estate [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	7,200	30,829
Other [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	7,187	29,994
Other [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans
Other [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans	13	809
Other [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Carrying amount of loans		$ 26

XML

(Loss) Earnings Per Share - Summary of Pro-Forma (Loss) Earnings Per Share Computation (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net (loss) income	$ (24,248)	$ 678	$ (26,154)	$ 3,131
Pro-forma average common shares outstanding	17,417,829	17,264,620	17,383,192	17,256,865
Pro-forma net effect of dilutive common stock equivalents		6,739		14,729
Pro-forma adjusted average shares outstanding - dilutive	17,417,829	17,271,359	17,383,192	17,271,594
Pro-forma basic (loss) earnings per share	$ (1.39)	$ 0.04	$ (1.50)	$ 0.18
Pro-forma diluted (loss) earnings per share	$ (1.39)	$ 0.04	$ (1.50)	$ 0.18

XML

Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Allowance for Loan Losses and Recorded Investment in Financing Receivables

Changes in the allowance for loan losses were as follows:

Allowance for Loan Losses and Recorded Investment in Financing Receivables

	For the Six Months Ended June 30, 2014
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	27,828		$	3,375		$	2,898		$	1,436		$	35,537
Charge-offs		(16,300	)		(2,319	)		(1,425	)		(3,260	)		(23,304	)
Recoveries		1,078			144			6			128			1,356
Net charge-offs		(15,222	)		(2,175	)		(1,419	)		(3,132	)		(21,948	)
Provision for loan losses		8,410			2,321			1,922			2,150			14,803
Ending balance	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment	$	21,016		$	3,521		$	3,401		$	454		$	28,392
Financing Receivables:
Ending balance	$	1,363,900		$	186,953		$	298,063		$	7,200		$	1,856,116
Ending balance: individually evaluated for impairment	$	5,447		$	2,905		$	5,609		$	10		$	13,971
Ending balance: collectively evaluated for impairment	$	1,358,453		$	184,048		$	292,454		$	7,190		$	1,842,145

(1) Amount includes both home equity lines of credit and term loans.

(2) Includes the unallocated portion of the allowance for loan losses.

	For the Six Months Ended June 30, 2013
	Commercial			Home Equity(1)			Residential Real Estate			Other(2)			Total
Allowance for loan losses:
Beginning balance	$	33,197		$	2,734		$	3,333		$	6,609		$	45,873
Charge-offs		(4,294	)		(989	)		(81	)		(422	)		(5,786	)
Recoveries		9,195			305			7			125			9,632
Net charge-offs		4,901			(684	)		(74	)		(297	)		3,846
Provision for loan losses		1,168			2,530			(752	)		(4,658	)		(1,712	)
Ending balance	$	39,266		$	4,580		$	2,507		$	1,654		$	48,007
Ending balance: individually evaluated for impairment	$	3,086		$	38		$	98		$	35		$	3,257
Ending balance: collectively evaluated for impairment	$	36,180		$	4,542		$	2,409		$	1,619		$	44,750
Financing Receivables:
Ending balance	$	1,676,133		$	223,214		$	225,147		$	34,298		$	2,158,792
Ending balance: individually evaluated for impairment	$	60,825		$	4,825		$	5,309		$	656		$	71,615
Ending balance: collectively evaluated for impairment	$	1,615,308		$	218,389		$	219,838		$	33,642		$	2,087,177

(1) Amount includes both home equity lines of credit and term loans

(2) Includes the unallocated portion of the allowance for loan losses.

Components of Impaired Loans Held-for-Investment

The following table presents the Company’s components of impaired loans receivable, segregated by class of loans. Commercial and consumer loans that were collectively evaluated for impairment are not included in the data that follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Accrued Interest Income Recognized		Cash Interest Income Recognized
For the Six Months Ended June 30, 2014
With no related allowance:
Commercial:
Commercial & industrial	$	2,761	$	3,264	$	—	$	180	$	19	$	—
CRE owner occupied		2,502		3,127		—		2,068		—		—
CRE non-owner occupied		—		—		—		—		—		—
Land and development		184		223		—		364		—		—
Consumer:
Home equity lines of credit		2,325		3,255		—		2,166		—		—
Home equity lines of credit, held-for-sale		1,947		3,428		—		2,154		—		—
Home equity term loans		578		649		—		518		—		—
Home equity term loans, held-for-sale		354		610		—		497		—		—
Residential real estate		5,609		6,388		—		4,262		—		45
Residential real estate, held-for-sale		1,322		2,334		—		1,041		—		—
Other		10		14		—		10		—		—
Other, held-for-sale		463		1,752		—		460		—		—
Total commercial	$	5,447	$	6,614	$	—	$	2,612	$	19	$	—
Total consumer	$	12,608	$	18,430	$	—	$	11,108	$	—	$	45
For the Year Ended December 31, 2013
With no related allowance:
Commercial:
Commercial & industrial	$	3,206	$	3,281	$	—	$	1,884	$	—	$	—
CRE owner occupied		18,503		27,367		—		13,528		—		—
CRE non-owner occupied		1,969		2,251		—		66		—		—
Land and development		2,512		2,549		—		2,669		—		—
Consumer:
Residential real estate		2,569		3,135		—		1,689		—		—
Home Equity Lines of Credit		3,749		5,051		—		3,132		—		—
Home Equity Term Loans		1,238		1,456		—		918		—		—
Other		560		1,567		—		481		—		—
With an allowance recorded:
Commercial:
Commercial & industrial	$	423	$	425	$	423	$	73	$	—	$	—
CRE owner occupied		2,164		2,164		494		47		—		—
Consumer:
Other		26		27		17		16		—		—
Total commercial	$	28,777	$	38,037	$	917	$	18,267	$	—	$	—
Total consumer	$	8,142	$	11,236	$	17	$	6,236	$	—	$	—

Analysis of Company's TDR Agreements

The following table presents an analysis of the Company’s TDR agreements entered into during the three and six months ended June 30, 2013.

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	1,417		1,392
CRE Owner occupied	1		413		406
Residential real estate	1		199		197

Information Regarding Types of Concessions Granted on Loans

The following tables present information regarding the types of concessions granted on loans that were restructured during the three and six months ended June 30, 2013:

	Troubled Debt Restructurings
	For the Three Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Commercial and industrial	1	Modified principal repayment terms.
CRE Owner occupied	1	Interest rate concession.
	Troubled Debt Restructurings
	For the Six Months Ended June 30, 2013
	Number of Contracts	Concession Granted
Residential real estate	1	Modified term debt to interest only for six month period.

Company's Distribution of Risk Ratings within Held-for-Investment Loan Portfolio

The following table presents the Company’s distribution of risk ratings within the held-for-investment loan portfolio, segregated by class, as of June 30, 2014 and December 31, 2013:

Credit Quality Indicators by Internally Assigned Grade

	Commercial & industrial		CRE owner occupied		CRE non-owner occupied		Land and development		Home Equity Lines of Credit		Home Equity Term Loans		Residential Real Estate		Other
As of June 30, 2014
Grade:
Pass	$	362,498	$	346,899	$	547,951	$	67,950	$	161,572	$	20,684	$	292,454	$	7,187
Special Mention		5,556		10,519		3,532		483		—		—		—		—
Substandard		5,187		8,767		4,346		212		4,099		598		5,609		13
Doubtful		—		—		—		—		—		—		—		—
Total	$	373,241	$	366,185	$	555,829	$	68,645	$	165,671	$	21,282	$	298,063	$	7,200
As of December 31, 2013
Grade:
Pass	$	415,875	$	407,486	$	550,426	$	61,303	$	181,796	$	24,016	$	299,625	$	29,994
Special Mention		37,064		17,741		9,464		494		—		—		—		—
Substandard		25,372		41,051		16,194		2,509		6,682		1,263		5,927		809
Doubtful		423		2,164		—		—		—		—		—		26
Total	$	478,734	$	468,442	$	576,084	$	64,306	$	188,478	$	25,279	$	305,552	$	30,829

Company's Analysis of Past Due Held-for-Investment Loans

Aging of Receivables

	30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Total Past Due		Current		Total Financing Receivables		Loans 90 Days Past Due and Accruing
As of June 30, 2014
Commercial:
Commercial & industrial	$	232	$	3	$	270	$	505	$	372,736	$	373,241	$	—
CRE owner occupied		528		29		1,626		2,183		364,002		366,185		—
CRE non-owner occupied		59		352		—		411		555,418		555,829		—
Land and development		—		—		184		184		68,461		68,645		—
Consumer:														—
Home equity lines of credit		1,742		702		1,357		3,801		161,870		165,671
Home equity term loans		392		172		136		700		20,582		21,282		—
Residential real estate		4,643		1,608		3,417		9,668		288,395		298,063		—

Other		42		6		11		59		7,141		7,200		—
Total	$	7,638	$	2,872	$	7,001	$	17,511	$	1,838,605	$	1,856,116	$	—
As of December 31, 2013
Commercial:
Commercial & industrial	$	9,149	$	2,726	$	3,452	$	15,327	$	463,407	$	478,734	$	—
CRE owner occupied		4,901		5,865		3,753		14,519		453,923		468,442		—
CRE non-owner occupied		899		4,661		1,070		6,630		569,454		576,084		—
Land and development		—		—		2,512		2,512		61,794		64,306		—
Consumer:
Home equity lines of credit		3,030		1,457		2,324		6,811		181,667		188,478		—
Home equity term loans		1,032		223		825		2,080		23,199		25,279		—
Residential real estate		12,776		1.927		1,086		15,789		289,763		305,552		—
Other		340		202		378		920		29,909		30,829		—
Total	$	32,127	$	17,061	$	15,400	$	64,588	$	2,073,116	$	2,137,704	$	—

XML

Fair Value of Financial Instruments - Summary of Assets Measured at Fair Value on Non Recurring Basis (Detail) (Non-Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Jun. 30, 2013
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fair Value of Impaired loans	$ 2,962	$ 63,093
Total Losses Or Changes in Net Assets/Liabilities, Impaired loans	(3,961)	(7,127)
Fair value of Loans held-for-sale	6,355
Total Losses Or Changes in Net Assets/Liabilities, loans held- for-sale	(4,685)
Fair Value of Real estate owned	294	347
Total Losses Or Changes in Net Assets, Real estate owned	(265)	(380)
Level 1 [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fair Value of Impaired loans
Fair value of Loans held-for-sale
Fair Value of Real estate owned
Level 2 [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fair Value of Impaired loans
Fair value of Loans held-for-sale	6,355
Fair Value of Real estate owned
Level 3 [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fair Value of Impaired loans	2,962	63,093
Fair value of Loans held-for-sale
Fair Value of Real estate owned	$ 294	$ 347

XML

Branch Sale - Additional Information (Detail) (Subsequent Event [Member])	Jul. 02, 2014
Subsequent Event [Member]
Long Lived Assets Held-for-sale [Line Items]
Deposit premium, Percentage	8.765%

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Regulatory Matters

6 Months Ended

Jun. 30, 2014

Banking And Thrift [Abstract]

Regulatory Matters

(13) Regulatory Matters

The Company is subject to risk-based capital guidelines adopted by the FRB for bank holding companies. The Bank is also subject to similar capital requirements adopted by the OCC. Under the requirements the federal bank regulatory agencies have established quantitative measures to ensure that minimum thresholds for Total Capital, Tier 1 Capital and Leverage (Tier 1 Capital divided by average assets) ratios (set forth in the table below) are maintained. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets and certain off-balance sheet items as calculated under regulatory practices.

The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the federal bank regulators about components, risk weightings and other factors. The Company’s and the Bank’s risk-based capital ratios have been computed in accordance with regulatory practices. The Company and the Bank were in compliance with these regulatory capital requirements of the FRB and the OCC as of June 30, 2014. As discussed below and elsewhere herein, additional capital requirements have been imposed on the Bank by the OCC, which the Bank was also in full compliance with as of June 30, 2014 and December 31, 2013.

On April 15, 2010, the Bank entered into a written agreement with the OCC (the “OCC Agreement”) which contained requirements to develop and implement a profitability and capital plan which provides for the maintenance of adequate capital to support the Bank’s risk profile in the current economic environment. The capital plan was also required to contain a dividend policy allowing dividends only if the Bank is in compliance with the capital plan, and obtains prior approval from the OCC. During the second quarter of 2010, the Company delivered its profit and capital plans to the OCC. Updated profit and capital plans were subsequently submitted as required.

The Bank also agreed to: (a) implement a program to protect the Bank’s interest in criticized or classified assets, (b) review and revise the Bank’s loan review program; (c) implement a program for the maintenance of an adequate allowance for loan losses; and (d) revise the Bank’s credit administration policies. During the second quarter of 2010, the Company revised and implemented changes to policies and procedures pursuant to the OCC Agreement. The Bank initially agreed that its brokered deposits would not exceed 3.5% of its total liabilities unless approved by the OCC. However, effective October 18, 2012, the OCC approved an increase to this limit to 6.0%. Management does not expect this restriction will limit its access to liquidity as the Bank does not rely on brokered deposits as a major source of funding. As of June 30, 2014, the Bank’s brokered deposits represented 3.9% of its total liabilities.

In addition, the Company is required to seek the prior approval of the Federal Reserve Bank before paying interest, principal or other sums on trust preferred securities or any related subordinated debentures, declaring or paying cash dividends or taking dividends from the Bank, repurchasing outstanding stock or incurring indebtedness. The Company is also required to take certain remedial steps and submit plans and progress reports to the Federal Reserve Bank.

The Bank is also subject to individual minimum capital ratios established by the OCC requiring the Bank to continue to maintain a Leverage ratio at least equal to 8.50% of adjusted total assets, to continue to maintain Tier 1 Capital ratio at least equal to 9.50% of risk-weighted assets and to maintain a Total Capital ratio at least equal to 11.50% of risk-weighted assets. At June 30, 2014, the Bank met all of the three capital ratios established by the OCC as its Leverage ratio was 9.12%, its Tier 1 Capital ratio was 13.20%, and its Total Capital ratio was 14.45%.

The following table provides both the Company’s and the Bank’s risk-based capital ratios as of June 30, 2014 and December 31, 2013.

Regulatory Capital Levels

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective  Action Provision(1)
	Amount		Ratio			Amount		Ratio			Amount			Ratio
June 30, 2014
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	304,987		15.00	%	$	162,675		8.00	%			N/A
Sun National Bank		293,434		14.45			162,403		8.00		$	203,003			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		252,788		12.43			81,338		4.00				N/A
Sun National Bank		268,016		13.20			81,201		4.00			121,802			6.00
Leverage ratio:
Sun Bancorp, Inc.		252,788		8.59			117,764		4.00				N/A
Sun National Bank		268,016		9.12			117,571		4.00			146,964			5.00
December 31, 2013
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.	$	332,295		14.41	%	$	184,494		8.00	%			N/A
Sun National Bank		314,107		13.65			184,070		8.00		$	230,088			10.00	%
Tier I capital (to risk-weighted assets):
Sun Bancorp, Inc.		284,781		12.34			92,247		4.00				N/A
Sun National Bank		285,257		12.40			92,035		4.00			138,053			6.00
Leverage ratio:
Sun Bancorp, Inc.		284,781		8.99			126,682		4.00				N/A
Sun National Bank		285,257		9.02			126,479		4.00			158,099			5.00

(1) Not applicable for bank holding companies.

On June 30, 2014, for regulatory capital purposes, the Company contributed $7.5 million in additional capital to the Bank.

At June 30, 2014 and December 31, 2013, although the Company and the Bank exceeded the regulatory minimum ratios for classification as “well capitalized,” due to the fact that it was subject to the OCC Agreement, it cannot be deemed “well capitalized.”

On July 2, 2013, the federal banking regulatory agencies, including the FRB and the OCC, approved the final Basel III capital rules for U.S. banking institutions.

The ability of the Bank to pay dividends to the Company is controlled by certain regulatory restrictions. Generally, dividends declared in a given year by a national bank are limited to its net profit, as defined by regulatory agencies, for that year, combined with its retained net income for the preceding two years, less any required transfer to surplus or to fund for the retirement of any preferred stock. In addition, a national bank may not pay any dividends in an amount greater than its undivided profits and a national bank may not declare any dividends if such declaration would leave the bank inadequately capitalized. Therefore, the ability of the Bank to declare dividends will depend on its future net income and capital requirements. Also, banking regulators have indicated that national banks should generally pay dividends only out of current operating earnings. Following this guidance, the Bank would not be able to pay a dividend to the Company at June 30, 2014. Moreover, per the OCC Agreement and the Federal Reserve Bank requirements referenced above, a dividend may only be declared if it is in accordance with the approved capital plan, the Bank remains in compliance with the capital plan following the payment of the dividend and the dividend is approved by the OCC and the Federal Reserve Bank.

The Company’s capital securities qualify as Tier 1 capital under federal regulatory guidelines. These instruments are subject to a 25% capital limitation under risk-based capital guidelines developed by the FRB. Under FRB rules, restricted core capital elements, which are qualifying trust preferred securities, qualifying cumulative perpetual preferred stock (and related surplus) and certain minority interests in consolidated subsidiaries, are limited in the aggregate to no more than 25% of a bank holding company’s core capital elements (including restricted core capital elements), net of goodwill less any associated deferred tax liability. However, under the Dodd-Frank Act, bank holding companies are prohibited from including in their Tier 1 capital hybrid debt and equity securities, including trust preferred securities, issued on or after May 19, 2010. Any such instruments issued before May 19, 2010 by a bank holding company, such as the Company, with total consolidated assets of less than $15 billion as of December 31, 2009, may continue to be included as Tier 1 capital (subject to the 25% limitation). The portion that exceeds the 25 percent capital limitation qualifies as Tier 2, or supplementary capital of the Company. At June 30, 2014, $63.3 million of a total of $90.0 million in capital securities qualified as Tier 1 with $26.7 million qualifying as Tier 2.

On December 10, 2013, the FRB, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule, which prohibits an insured depository institution and its affiliates from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds. On January 14, 2014, these five federal agencies approved a related interim final rule pertaining to the ability of banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities.

The Bank’s deposits are insured to applicable limits by the FDIC. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Federal Deposit Insurance Act was amended to increase the maximum deposit insurance amount from $100,000 to $250,000.

FDIC assessment expense of $944 thousand and $1.1 million was recognized during the three months ended June 30, 2014 and 2013, respectively, and $2.0 million and $2.2 million during the six months ended June 30, 2014 and 2013, respectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q of the Company and the documents incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We are including this statement for the purpose of invoking those safe harbor provisions. Forward-looking statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These forward-looking statements may include, among other things:

• statements and assumptions relating to financial performance;

• statements relating to the anticipated effects on results of operations or financial condition from recent or future developments or events;

• statements relating to our business and growth strategies and our regulatory capital levels;

• statements relating to potential sales of our criticized and classified assets; and

• any other statements, projections or assumptions that are not historical facts.

Actual future results may differ materially from our forward-looking statements, and we qualify all forward-looking statements by various risks and uncertainties we face, some of which are beyond our control, as well as the assumptions underlying the statements, including, among others, the following factors:

• the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

• market volatility;

• the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs;

• the overall quality of the composition of our loan and securities portfolios;

• the market for criticized and classified assets that we may sell;

• legislative and regulatory changes, including the Dodd-Frank Act and impending regulations, changes in banking, securities and tax laws and regulations and their application by our regulators and changes in the scope and cost of FDIC insurance and other coverages;

• the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the FRB;

• inflation, interest rate, market and monetary fluctuations;

• fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas;

• the effect of and our compliance with the terms of the OCC Agreement and the Federal Reserve Bank requirements as well as compliance with the individual minimum capital ratios established for the Bank by the OCC;

• the results of examinations of us by the Federal Reserve Bank and of the Bank by the OCC, including the possibility that the OCC may, among other things, require the Bank to increase its allowance for loan losses or to write-down assets;

• our ability to control operating costs and expenses;

• our ability to manage delinquency rates;

• our ability to retain key members of our senior management team;

• the costs of litigation, including settlements and judgments;

• the increased competitive pressures among financial services companies;

• the timely development of and acceptance of new products and services and the perceived overall value of these products and services by businesses and consumers, including the features, pricing and quality compared to our competitors’ products and services;

• technological changes;

• acquisitions;

• changes in consumer and business spending, borrowing and saving habits and demand for financial services in our market area;

• adverse changes in securities markets;

• the inability of key third-party providers to perform their obligations to us;

• changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Financial Accounting Standards Board;

• war or terrorist activities;

• other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere herein or in the documents incorporated by reference herein and our other filings with the SEC; and

• our success at managing the risks involved in the foregoing.

Some of these and other factors are discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and in this Quarterly Report on Form 10-Q, under “Item 1A Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as such sections may be amended or supplemented herein or in other filings pursuant to the Exchange Act. The development of any or all of these factors could have an adverse impact on our financial position and results of operations.

Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference herein or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, unless otherwise required to do so by law or regulation. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed herein or in the documents incorporated by reference herein might not occur, and you should not put undue reliance on any forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q of the Company contains financial information prepared pursuant to methods other than in accordance with GAAP. Management uses these “non-GAAP” measures in their analysis of the Company’s performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period. The Company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management uses these measures to evaluate the underlying performance and efficiency of operations. Management believes these measures reflect core trends of the business.

Tax Equivalent Net Interest Income:

This Quarterly Report on Form 10-Q references tax-equivalent interest income. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three and six months ended June 30, 2014 were $166 thousand and $333 thousand, respectively. The fully taxable equivalent adjustment for the three and six months ended June 30, 2013 were $175 thousand and $387 thousand, respectively, for June 30, 2013. Tax-equivalent net interest income is net interest income plus the taxes that would have been paid had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax liabilities. The following table provides a reconciliation of tax equivalent net interest income to GAAP net interest income using a 35% tax rate:

For the Three Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	20,612	$	21,776
Effect of tax-exempt income		166		175
Net interest income, tax equivalent	$	20,778	$	21,951

For the Six Months Ended:

June 30,	2014		2013
Net interest income, as presented	$	42,004	$	44,854
Effect of tax-exempt income		333		387
Net interest income, tax equivalent	$	42,337	$	45,241

Core Deposits:

Core deposits is calculated by excluding time deposits and brokered deposits from total deposits. The following table provides a reconciliation of core deposits to GAAP total deposits at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Total deposits	$	2,272,765	$	2,621,571
Less: Time deposits		422,634		506,770
Less: Brokered deposits		103,541		107,930
Core deposits	$	1,746,590	$	2,006,871