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Shore lender buys Sun Bank from Wilbur Ross, Brown family for $487M

The deal appears profitable for Sun's largest shareholder, the U.S. commerce secretary, who invested $50 million that recapitalized the bank in 2010.

Billionaire investor and U.S. Commerce Secretary Wilbur Ross is Sun National Bank’s largest shareholder
Billionaire investor and U.S. Commerce Secretary Wilbur Ross is Sun National Bank’s largest shareholderRead moreAP (Andrew Harnik, File)

OceanFirst Financial Corp., based in Toms River on the New Jersey Shore, says it has agreed to pay $487 million, or $25.27 a share —  $3.78 in cash, the rest in OceanFirst stock — to purchase Sun Bancorp Inc. of Mount Laurel, which operates the shrunken Sun National Bank and its 33 branches. Nearly half of Sun's offices are within three miles of an OceanFirst branch, and the buyer plans to cut Sun expenses by more than half.

The sale price is within Sun's recent trading range. Investors had expected a sale following the bank's downsizing and return to profitability since 2014. The price marks a recovery from Sun's low of $11 a share after the recession, though it's only about one-quarter what Sun was worth at its high in 2004.

The deal appears profitable for Sun's largest shareholder, billionaire investor and U.S. Commerce Secretary Wilbur Ross, who invested $67 million in specially priced Sun shares in 2010-11. Ross' companies stand to collect more than $100 million from the sale. His investment recapitalized the troubled bank, which had been slammed by bank examiners for "unsafe and unsound" practices.

Sun's major shareholders also include its longtime controlling investors, members of the Brown family, one of South Jersey's most prominent business dynasties and owners of $1 billion-plus NFI Industries, a Cherry Hill-based trucking and logistics company.

"This is an extraordinary opportunity for OceanFirst," chief executive and chairman Christopher D. Maher said in a statement. OceanFirst expects to cut Sun's operating expenses by more than half. Sun employed 332 at the end of last year, down from 730 six years ago, according to Federal Deposit Insurance Corp. data.

Sun CEO Thomas M. O'Brien called OceanFirst an "ideal partner." He said in his statement that Sun investors will get a piece of OceanFirst's much higher profits and dividends; Sun customers will be offered OceanFirst's longer menu of banking products for sale; and Sun employees may apply for jobs at OceanFirst offices.

In the mid-2000s, Sun, then based in Vineland, N.J., operated more than 70 branches across South Jersey and Delaware, and had an outpost in Center City. But the bank was censured by federal regulators and had to write down a wave of bad loans in the late 2000s financial downturn. The company lost more than $300 million between 2008 and 2014 and has been modestly profitable since.

Sun manages about $1.6 billion in loans and $1.7 billion in deposits, down from $2.7 billion in loans and $2.9 billion in deposits at the start of 2010. It has a small commercial-loan production network in the New York area, though it shut its former Philadelphia office.

Pending shareholder and regulatory approvals, the deal will give OceanFirst a total of $5.9 billion in deposits and $5.4 billion in loans. OceanFirst previously acquired the former Cape Bancorp Inc. and Ocean Shore Holding Co., boosting its presence along the Jersey Shore, before moving inland with Sun. Maher said the deal also moves his bank toward the Philadelphia and New York metro markets.

The price works out to 169 percent of Sun's recent tangible book value, a 12.7-cent premium per dollar of core deposits, and 14.5 times Sun's expected 2018 earnings, including projected cost cuts.