BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC 20551

April 14, 2017

Patricia M. Schaubeck, Esq.
General Counsel

Sun Bancorp, Inc.

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

Dear Ms. Schaubeck:

This letter is in response to your request on behalf of Sun Bancorp,
Inc. (“Sun”), Mount Laurel, New Jersey, for an exemption from the prohibitions of
the Depository Institution Management Interlocks Act (“Interlocks Act”)! and
Regulation L? to permit Mr. James B. Lockhart III to become a director of Sun
while at the same time serving as a director on the boards of Cascade Bancorp
(“Cascade”) and its subsidiary state nonmember bank, Bank of the Cascades, both
of Bend, Oregon.

The Interlocks Act and Regulation L prohibit a management official
of a depository institution or a depository holding company with total assets
exceeding $2.5 billion (or of any affiliate of such an organization) from serving at
the same time as a management official of an unaffiliated depository organization
with total assets exceeding $1.5 billion (or of any affiliate of such an
organization), regardless of the location of the two depository organizations
(‘major assets prohibition”)? Sun, Cascade, and Bank of the Cascades each have
assets that exceed the applicable thresholds of the major assets prohibition.

Mr. Lockhart has served as a management official of Cascade and
Bank of the Cascades since 2011. Sun requests a general exemption to permit

1 12 U.S.C. § 3201 et seq.
2 12 CER part 212.
3 12 U.S.C. § 3203; 12 CFR 212.3(c).

www.federalreserve.gov


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Mr. Lockhart to be a director of Sun while serving as a management official of
Cascade and Bank of the Cascades.*

Under the general exemption provision of Regulation L, the Board
may permit an interlock that otherwise would be prohibited by the Interlocks Act
if the Board determines that the interlock would not result in a monopoly or in a
substantial lessening of competition and would not present safety and soundness
concerns.> While the Board applies a strong presumption against granting a
general exemption, the Board has granted exemptions in certain limited situations.
The Board has delegated to its General Counsel, in consultation with the Director
of the Division of Supervision and Regulation (“Director”), authority to grant
exemptions under this provision of Regulation L.

The proposed interlocks would not result in a monopoly or in a
substantial lessening of competition. The subsidiary depository institutions of Sun
and Cascade do not operate in the same local banking markets.® The interlocks
also would not have any substantial effect on competition with respect to the
nonbanking activities of Sun and Cascade.

In addition, the interlocks do not present safety and soundness
concerns. Sun contends that Mr. Lockhart will provide knowledge and advice
regarding the financial services industry, regulatory compliance, and corporate
governance as a representative on the board of Sun.

Based on all the facts of this case and for the reasons discussed
above, the General Counsel, acting pursuant to authority delegated by the Board
and after consultation with the Director, has granted an exemption to allow
Mr. Lockhart to serve as a director of Sun while also serving as a director of
Cascade and Bank of the Cascades.

4 Mr. Lockhart’s service as a management official of Sun Bank while at the same
time serving as a management official of Cascade and Bank of the Cascades is
also subject to approval by the Office of the Comptroller of the Currency
(“OCC”). The OCC approved Sun Bank’s request by letter dated March 10, 2017.

5 12 CFR 212.6(a).

§ Sun operates in New Jersey. Cascade operates in Idaho, Oregon, and
Washington. Sun represents that Cascade has agreed to merge with and into First
Interstate BancSystem, Inc. (“First Interstate”), Billings, Montana, at some point
in 2017. First Interstate operates in Montana, South Dakota, and Wyoming. Sun
does not have any overlapping banking markets with Cascade or First Interstate.


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The Board reserves the right to revoke the exemption should the
interlocks result in a monopoly or in a substantial lessening of competition or
present safety and soundness concerns.

Sincerely yours,
hy ark Ab

Margaret McCloskey Shanks
Deputy Secretary of the Board