<Page>

             FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the quarterly period ended          June 30, 2001
                                   -----------------------------------------
                                         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:                       0-14745
                       -------------------------------------------------------

                               SUN BANCORP, INC. (SUN)
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Pennsylvania                                  23-2233584
----------------------------------            --------------------------------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                   Identification No.)

    PO Box 57, Selinsgrove, Pennsylvania                     17870
------------------------------------------------------------------------------
   (Address of principal executive offices)                 (Zip code)

                                 (570) 374-1131
------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)

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.           /X/   Yes           / /    No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.                        / /   Yes           / /    No


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

  Common Stock, No Par Value                          7,151,003
--------------------------------        ------------------------------------
             Class                       Outstanding Shares At August 6, 2001

<Page>

SUN BANCORP, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001

CONTENTS

<Table>
<Caption>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements:

          Consolidated Balance Sheet as of June 30, 2001 (Unaudited)
              and December 31, 2000                                          3
          Consolidated Statement of Income for the Three and Six Months
              Ended June 30, 2001 and June 30, 2000 (Unaudited)              5
          Consolidated Statement of Cash Flows for the Six Months Ended
              June 30, 2001 and June 30, 2000 (Unaudited)                    7

          Notes to the Consolidated Financial Statements (Unaudited)         9

Item 2 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                         13

PART II - OTHER INFORMATION

Item 5 - Other Information                                                  20

Item 6 - Exhibits and Reports on Form 8-K                                   20

SIGNATURES                                                                  21
</Table>

                                     2
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

                                     SUN BANCORP, INC.
                                 CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
 (In Thousands, Except Share Data)        June 30, 2001          December 31, 2000
                                           (Unaudited)                (Note)
                                          -------------          ------------------
<S>                                       <C>                    <C>
ASSETS

Cash and due from banks                       $  23,763           $  13,138
Interest-bearing deposits in banks               52,612               2,139
                                              ---------           ---------
    Total cash and cash equivalents              76,375              15,277

Investment securities                           358,447             290,513
Loans, net of allowance for loan and lease
  losses of $5,987 in 2001 and $4,165 in 2000   507,506             406,775
Bank premises and equipment, net                 15,481              10,895
Intangible asset, goodwill-net                   23,954               8,682
Accrued interest and other assets                16,635              11,446
                                              ---------           ---------
    Total assets                               $998,398            $743,588
                                              =========           =========
</Table>


                                       3

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

                                   SUN BANCORP, INC.
                               CONSOLIDATED BALANCE SHEET

                                     (Continued)

<Table>
<Caption>
(In Thousands,, Except Share Data)               June 30, 2001   December 31, 2000
                                                  (Unaudited)         (Note)
                                                 -------------   -----------------
<S>                                              <C>             <C>
LIABILITIES & SHAREHOLDERS' EQUITY

Deposits
    Noninterest-bearing                            $  61,417         $ 39,164
    Interest-bearing                                 586,025          405,402
                                                   ---------        ---------
       Total deposits                                647,442          444,566

Short-term borrowings                                 15,497            9,582
Other borrowed funds                                 222,000          222,000
Subordinated debentures                               20,444                -
Accrued interest and other liabilities                20,854            4,913
                                                   ---------        ---------
       Total liabilities                             926,237          681,061
                                                   ---------        ---------

Shareholders' equity
    Common stock, no par value per share;
       Authorized 20,000,000 shares:
       issued 7,234,010 shares in 2001 and
       7,227,093 shares in 2000                       83,536           81,632
    Retained earnings (deficit)                      (10,296)         (11,177)
    Accumulated other comprehensive income (loss)        (86)          (1,591)
    Less:    Treasury stock, at cost,
             82,727 shares in 2001 and
             566,440 shares in 2000                     (993)          (6,337)
                                                   ---------        ---------

       Total shareholders' equity                     72,161           62,527
                                                   ---------        ---------

       Total liabilities and shareholders' equity   $998,398         $743,588
                                                   =========        =========
</Table>

Note:      The balance sheet at December 31, 2000 has been derived from
           the audited financial statements at that date but does not include
           all the information and footnotes required by accounting principles
           generally accepted in the United States of America for complete
           financial statements.

The accompanying notes are an integral part of these financial statements.

                                     4
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

                                SUN BANCORP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<Table>
<Caption>
 (In Thousands, Except for Per Share Data)                      For the Three Months                 For the Six Months
                                                                     Ended June 30                         Ended June 30
                                                               --------------------------           -------------------------
                                                                  2001             2000                2001             2000
                                                               ---------        ---------           ---------        --------
<S>                                                            <C>              <C>                 <C>              <C>
Interest and dividend income:
    Interest and fees on loans                                 $ 9,233           $ 8,471            $17,902           $16,647
    Income from investment securities
       Taxable                                                   4,370             4,177              8,524             8,395
       Tax exempt                                                  276               224                516               476
       Dividends                                                   401               310                800               591
    Interest on deposits in banks                                  443                73                673                80
                                                               -------           -------            -------           -------
       Total interest and dividend income                       14,723            13,255             28,415            26,189
                                                               -------           -------            -------           -------

Interest expense:
    Interest on deposits                                         5,401             4,261             10,460             8,209
    Interest on short-term borrowings                               94               241                232               582
    Interest on other borrowed funds                             3,188             3,196              6,341             6,317
    Interest on subordinated debentures                            459                -                 627                -
                                                               -------           -------            -------           -------

       Total interest expense                                    9,142             7,698             17,660            15,108
                                                               -------           -------            -------           -------

Net interest income                                              5,581             5,557             10,755            11,081

Provision for loan and lease losses                                300               700                600             1,300
                                                               -------           -------            -------           -------

       Net interest income, after provision
       for loan and lease losses                               $ 5,281           $ 4,857            $10,155           $ 9,781
                                                               -------           -------            -------           -------
</Table>

                                       5

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

                                SUN BANCORP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)
                                   (Continued)

<Table>
<Caption>
 (In Thousands, Except for Per Share Data)                       For the Three Months                 For the Six Months
                                                                      Ended June 30                         Ended June 30
                                                                --------------------------           -------------------------
                                                                   2001             2000                2001             2000
                                                                ---------        ---------           ---------        --------
<S>                                                             <C>              <C>                 <C>              <C>
Other operating income:
    Service charges on deposit accounts                           $   437         $   332              $  766          $   646
    Trust income                                                      250             210                 500              420
    Net security gains (losses)                                        38          (2,265)                836           (2,250)
    Income from insurance subsidiary                                   20              60                  91              141
    Other income                                                      186             167                 346              268
                                                                ---------       ---------           ---------        ---------
Total other operating income (loss)                                   931          (1,496)              2,539             (775)
                                                                ---------       ---------           ---------        ---------

Other operating expense:
    Salaries and employee benefits                                  2,288           1,600               4,286            3,211
    Net occupancy expenses                                            220             166                 436              345
    Furniture and equipment expenses                                  452             296                 773              535
    Amortization of goodwill                                          345             188                 538              377
    Expenses of insurance subsidiary                                   45              47                 100               95
    Other expenses                                                  1,483           1,133               2,796            1,988
                                                                ---------       ---------           ---------        ---------
Total other operating expenses                                      4,833           3,430               8,929            6,551
                                                                ---------       ---------           ---------        ---------

Income (loss) before income tax provision (credit)                  1,379             (69)              3,765            2,455

Income tax provision (credit)                                         285            (155)                898              561
                                                                ---------       ---------           ---------        ---------
Net income                                                        $ 1,094         $    86             $ 2,867          $ 1,894
                                                                ---------       ---------           ---------        ---------

PER SHARE DATA

       Net income per share - Basic                                 $0.16           $0.01               $0.43            $0.28
                                                                =========       =========           =========        =========
       Weighted average number of shares
          outstanding - Basic                                   6,827,588       6,784,333           6,734,656        6,787,483
                                                                =========       =========           =========        =========

       Net income per share - Diluted                               $0.16           $0.01               $0.42            $0.28
                                                                =========       =========           =========        =========
       Weighted average number of shares
          outstanding - Diluted                                 6,841,998       6,805,255           6,749,401        6,806,506
                                                                =========       =========           =========        =========

       Dividends paid                                               $0.15           $0.24               $0.30            $0.48
                                                                =========       =========           =========        =========
</Table>

The accompanying notes are an integral part of these financial statements.

                                     6
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1.  Financial Statements

                                SUN BANCORP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<Table>
<Caption>
 (In Thousands)                                                                         For the Six Months
                                                                                          Ended June 30
                                                                                     ------------------------
                                                                                        2001           2000
                                                                                     ----------      --------
<S>                                                                                  <C>             <C>
Cash flows from operating activities:
Net income                                                                           $    2,867      $  1,894
     Adjustments to reconcile net income to net cash
          provided by operating activities:
               Provision for loan and lease losses                                          600         1,300
               Provision for depreciation                                                   458           387
               Amortization of goodwill                                                     538           377
               Amortization and accretion of securities, net                                 71            84
               Net security (gains) losses                                                 (836)        2,250
               Increase in accrued interest and other assets                             (4,471)       (1,088)
               Gain on sale of bank premises and equipment                                  (71)           -
               Increase in accrued interest and other liabilities                        14,393           812
                                                                                     ----------      --------
                   Net cash provided by operating activities                             13,549         6,016
                                                                                     ----------      --------

Cash flows from investing activities:

     Proceeds from sales of investment securities                                        39,845        45,759
     Proceeds from maturities of investment securities                                   27,652        11,467
     Cash acquired from branch acquisitions                                              64,863            -
     Cash acquired from Guaranty Bank acquisition, net of
          $2,544 cash paid                                                               27,988            -
     Purchases of investment securities                                                (106,420)      (50,699)
     Net increase in loans                                                              (28,765)      (21,285)
     Proceeds from sales of bank premises and equipment                                     222            -
     Capital expenditures                                                                  (766)         (568)
                                                                                     ----------      --------
                   Net cash provided by (used in) investing activities                   24,619       (15,326)
                                                                                     ----------      --------

Cash flows from financing activities:

     Net increase in deposits                                                            10,501        24,246
     Net decrease in short-term borrowings                                               (1,135)      (18,378)
     Proceeds from other borrowed funds                                                      -         75,000
     Repayments of other borrowed funds                                                      -        (52,000)
     Proceeds from issuance of subordinated debentures                                   16,500            -
     Cash dividends paid                                                                 (1,986)       (3,258)
     Proceeds from sale of stock for employee benefits program                               94            90
     Purchase of treasury stock                                                          (1,044)         (280)
                                                                                     ----------      --------
                   Net cash provided by financing activities                             22,930        25,420
                                                                                     ----------      --------

Net increase in cash and cash equivalents                                                61,098        16,110
Cash and cash equivalents at beginning of period                                         15,277        16,059
                                                                                     ----------      --------
Cash and cash equivalents at end of period                                             $ 76,375       $32,169
                                                                                     ==========      ========
</Table>

                                     7
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

                                SUN BANCORP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                                   (Continued)

<Table>
<Caption>
(In Thousands)                                                                            For the Six Months
                                                                                              Ended June 30
                                                                                         ------------------------
                                                                                           2001             2000
                                                                                         -------          -------
<S>                                                                                      <C>              <C>
Supplemental disclosure of cash flow information:

    Cash paid during the period for:

         Interest                                                                        $16,568          $14,686
                                                                                         =======          =======

         Income taxes                                                                    $ 1,150          $ 1,639
                                                                                         =======          =======
</Table>

    Loans with an estimated value of $273,000 and $247,000 were reclassified to
      foreclosed assets held for sale during the six-month periods ended June
      30, 2001 and 2000, respectively.

    On May 31, 2001, Sun acquired all of the common stock of Guaranty Bank in
      exchange for cash, note, and shares of Sun's common stock. In conjunction
      with the acquisition, assets and liabilities were recorded as follows:

<Table>
         <S>                                                                                     <C>
         (In Thousands)

         Cash and cash equivalents acquired                                                      $  27,988
         Fair value of other assets acquired                                                       106,431
         Excess of cost over fair market value                                                       6,291
                                                                                                 ---------
                                                                                                   140,710
         Value of cash, note, and stock issued by Sun                                               14,686
                                                                                                 ---------
         Liabilities recorded                                                                    $ 126,024
                                                                                                 =========
</Table>

The accompanying notes are an integral part of these financial statements.

                                      8

<Page>

SUN BANCORP, INC.
FORM 10-Q

PART I

Item 1.  Financial Statements

                                SUN BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note 1 -- BASIS OF INTERIM PRESENTATION

     The consolidated financial statements include the accounts of Sun Bancorp,
Inc. (Sun), the parent company, and its wholly owned subsidiaries SunBank
(Bank), Pennsylvania Sun Life Insurance Company (Sun Life) and Sun Bancorp
Statutory Trust I. Sun also holds seventy-five percent ownership in Sun Abstract
and Settlement Services (Sun Abstract). The transactions of Sun Life and Sun
Abstract are not material to the consolidated financial statements. All
significant intercompany balances and transactions have been eliminated in
consolidation.

     The accompanying unaudited consolidated financial statements for the
interim periods do not include all of the information and footnotes required by
generally accepted accounting principles. However, in the opinion of management,
all adjustments necessary for a fair presentation of the results of the interim
period have been included. Operating results for the three and six months ended
June 30, 2001 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2001.

     The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies are
presented on pages 18 and 19 of the 2000 Annual Report to Shareholders.

                                       9

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

Note 2 - NET INCOME PER SHARE

    Net income per share is computed based on the weighted average number of
shares of stock outstanding for each period presented. Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," requires presentation of two
amounts, basic and diluted net income per share.

    The following data shows the amounts used in computing net income per share
and the weighted average number of shares of dilutive stock options for the
periods ended June 30, 2001 and 2000:

<Table>
<Caption>
                                                          For the Three Months Ended June 30
                                                     ----------------------------------------------
                                                                      Common                Net
                                                       Income          Shares            Income Per
                                                      Numerator      Denominator           Share
                                                     ----------      -----------         ----------
<S>                                                  <C>             <C>                 <C>
2001
    Net income per share - Basic                     $1,094,000        6,827,588          $0.16
                                                     ----------                           =====
    Dilutive effect of stock options                                      14,410
                                                                       ---------
    Net income per share - Diluted                   $1,094,000        6,841,998          $0.16
                                                     ==========        =========          =====

2000
    Net income per share - Basic                     $   86,000        6,784,333          $0.01
                                                     ----------                           =====
    Dilutive effect of stock options                                      20,922
                                                                       ---------
    Net income per share - Diluted                   $   86,000        6,805,255          $0.01
                                                     ==========        =========          =====

<Caption>
                                                           For the Six Months Ended June 30
                                                     ----------------------------------------------
                                                                      Common                Net
                                                       Income          Shares            Income Per
                                                      Numerator      Denominator           Share
                                                     ----------      -----------         ----------
<S>                                                  <C>             <C>                 <C>
2001
    Net income per share - Basic                     $2,867,000        6,734,656          $0.43
                                                     ----------                           =====
    Dilutive effect of stock options                                      14,745
                                                                       ---------
    Net income per share - Diluted                   $2,867,000        6,749,401          $0.42
                                                     ==========        =========          =====

2000

    Net income per share - Basic                     $1,894,000        6,787,483          $0.28
                                                     ----------                           =====
    Dilutive effect of stock options                                      19,023
                                                                       ---------
    Net income per share - Diluted                   $1,894,000        6,806,506          $0.28
                                                     ==========        =========          =====
</Table>

                                       10
<Page>

SUN BANCORP, INC.
FORM 10-Q

PART I

Item 1.  Financial Statements

Note 3 - CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

     The purpose of reporting comprehensive income is to report a measure of all
changes in Sun's equity resulting from economic events other than transactions
with shareholders in their capacity as shareholders. For Sun, "comprehensive
income" includes traditional income statement amounts as well as unrealized
gains and losses on certain investments in debt and equity securities (i.e.
available for sale securities). Because unrealized gains and losses are part of
comprehensive income, comprehensive income may vary substantially between
reporting periods due to fluctuations in the market prices of securities held.
This is evidenced by the fact that Sun's net income increased for the three and
six months ended June 30, 2001 compared to the corresponding periods in 2000,
but comprehensive income over the same periods has decreased.

<Table>
<Caption>
(In Thousands)                                       For the Three Months        For the Six Months
                                                        Ended June 30              Ended June 30
                                                     --------------------      --------------------
                                                       2001        2000          2001         2000
                                                     --------    --------      --------     -------
<S>                                                  <C>         <C>           <C>          <C>
Net income                                           $ 1,094      $    86       $ 2,867     $ 1,894
                                                     -------      -------       -------     -------
Other comprehensive income (loss):
   Unrealized holding gains (losses) on
       available for sale securities:
   Gains (losses) arising during the period           (1,148)        (418)        3,116       2,102
   Reclassification adjustment - realized
       (gains) losses included in net income             (38)       2,265          (836)      2,250
                                                     -------      -------       -------     -------
Other comprehensive income (loss)
   before income taxes                                (1,186)       1,847         2,280       4,352
Income tax (expense) benefit related to
   other comprehensive income (loss)                     403         (628)         (775)     (1,480)
                                                     -------      -------       -------     -------
Other comprehensive income (loss)                       (783)       1,219         1,505       2,872
                                                     -------      -------       -------     -------

Comprehensive income                                 $   311      $ 1,305       $ 4,372     $ 4,766
                                                     =======      =======       =======     =======
</Table>

                                        11
<Page>

SUN BANCORP, INC.
FORM 10-Q

PART I

Item 1.  Financial Statements

Note 4 - INVESTMENT SECURITIES

     The amortized cost and fair value of investment securities at June 30, 2001
and December 31, 2000 were as follows:

<Table>
<Caption>
(In Thousands)                                                                      June 30, 2001
                                                                 ------------------------------------------------------
                                                                                    Gross           Gross
                                                                 Amortized        Unrealized    Unrealized      Fair
                                                                    Cost             Gains         Losses        Value
                                                                 ----------       ----------    -----------    --------
<S>                                                              <C>              <C>           <C>            <C>
Debt securities:
     Obligations of U.S. government agencies                       $306,969          $2,146       $(2,066)     $307,049
     Obligations of states and political subdivisions                25,833             454           (63)       26,224
     Other corporate                                                  9,665             229            (3)        9,891
                                                                   --------          ------       -------      --------
     Total debt securities                                          342,467           2,829        (2,132)      343,164
                                                                   --------          ------       -------      --------

Equity securities:
     Marketable equity securities                                     4,997              46          (874)        4,169
     Restricted equity securities                                    11,114               -             -        11,114
                                                                   --------          ------       -------      --------
     Total equity securities                                         16,111              46          (874)       15,283
                                                                   --------          ------       -------      --------
        Total                                                      $358,578          $2,875       $(3,006)     $358,447
                                                                   ========          ======       =======      ========

<Caption>
                                                                                    December 31, 2000
                                                                 ------------------------------------------------------
                                                                                    Gross           Gross
                                                                 Amortized        Unrealized    Unrealized      Fair
                                                                    Cost             Gains         Losses        Value
                                                                 ----------       ----------    -----------    --------
<S>                                                              <C>              <C>           <C>            <C>
Debt securities:
     Obligations of U.S. government agencies                       $251,300          $1,301       $(2,353)     $250,248
     Obligations of states and political subdivisions                18,341             445           (33)       18,753
     Other corporate                                                  5,277              87          (227)        5,137
                                                                   --------          ------       -------      --------
     Total debt securities                                          274,918           1,833        (2,613)      274,138
                                                                   --------          ------       -------      --------

Equity securities:
     Marketable equity securities                                     5,376               9        (1,640)        3,745
     Restricted equity securities                                    12,630               -             -        12,630
                                                                   --------          ------       -------      --------
     Total equity securities                                         18,006               9        (1,640)       16,375
                                                                   --------          ------       -------      --------
         Total                                                     $292,924          $1,842       $(4,253)     $290,513
                                                                   ========          ======       =======      ========
</Table>

                                        12

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

     The following is management's discussion and analysis of the significant
changes in the results of operations, capital resources, and liquidity presented
in its accompanying consolidated financial statements for Sun Bancorp, Inc.
(Sun), a bank holding company, and its wholly-owned subsidiaries, SunBank
(Bank), Pennsylvania Sun Life Insurance Company and Sun Bancorp Statutory Trust
I. Sun also holds seventy-five percent ownership in Sun Abstract and Settlement
Services (Sun Abstract). Sun's consolidated financial condition and results of
operations consist almost entirely of the Bank's financial condition and results
of operations. This discussion should be read in conjunction with the 2000
Annual Report. Current performance does not guarantee or assure similar
performance in the future, and may not be indicative of future results.

     Sun's second quarter earnings of $0.16 for June 30, 2001 were an increase
of $0.15 from the second quarter of 2000. The quarter ended June 30, 2001
included $337,000 of one time charges related to the acquisitions of two Mellon
branches and Guaranty Bank while the second quarter of 2000 included an
investment portfolio restructuring charge of $2,265,000. Sun's net income for
the six months ended June 30, 2001 was $2,867,000 ($0.43 per share basic and
$0.42 diluted) as compared to $1,894,000 for the six months ended June 30, 2000
($0.28 per share basic and diluted). The earnings resulted in annualized return
on average assets (ROA) for the six months ended June 30, 2001 of 0.69% as
compared to 0.52% for the six months ended June 30, 2000. Annualized return on
average equity (ROE) for the six months ended June 30, 2001 was 8.99% as
compared to 6.64% for the six months ended June 30, 2000.

      Goodwill has been acquired through the acquisitions of Bucktail Bank and
Trust Company, Guaranty Bank N.A., and three Mellon branches. Generally accepted
accounting principles require management to reflect the effects of goodwill
amortization expense on Sun's financial statements. Excluding goodwill, Sun's
ROA would be 0.83% and ROE would be 13.28%. For the same period in 2000,
excluding goodwill would have resulted in ROA of 0.64% and ROE would be 9.47%

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 AND 2000

      Net interest income increased to $5,581,000 for the three months ended
June 30, 2001 as compared to $5,557,000 for the same period of 2000. Total
interest and dividend income increased $1,468,000 to $14,723,000 for the three
months ended June 30, 2001 as compared to 2000. A majority of the increase,
$762,000, is the result of Sun's continued growth of the loan portfolio.
Interest on deposits in banks has increased $370,000 to $443,000 for the three
months ended June 30, 2001 due to the cash acquired by Sun from the purchases of
three Mellon branches and Guaranty Bank. Total interest expense increased
$1,444,000 to $9,142,000 for the three months ended June 30, 2001, as compared
to 2000. The increase is the result of the growth in deposits along with the
issuance of $20,444,000 in subordinated debentures related to the issuance of
trust-preferred securities and the purchase of Guaranty Bank. The provision for
loan and lease losses decreased 57.1% to $300,000 for the three months ended
June 30, 2001. The decrease is the result of Sun's continued emphasis on credit
quality. The loan delinquency ratio increased slightly to 1.48% at June 30, 2001
as compared to 1.27% at June 30, 2000. However,

                                      13

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

this increase in past dues was the result of the recent Guaranty Bank
acquisition, but was offset by the addition of the Allowance for Loan and Lease
Losses of Guaranty Bank.

     Total other operating income increased $124,000, excluding security gains,
for the three months ended June 30, 2001, compared to the same period of 2000.
Service charges on deposit accounts increased 16.1% to $437,000 for the three
months ended June 30, 2001. The increase is the result of Sun updating its fee
structure along with the addition of eleven branches since June 30, 2000. Trust
income increased 19.0% to $250,000 for the three months ended June 30, 2001.
Other income increased $19,000 to $186,000 for the three months ended June 30,
2001. The increase if the result of Sun beginning a new retail investment sales
program to offer mutual funds, annuities, and other services through investment
representatives in the branch network which accounted for $23,000 in new fee
income. This increase in other income was offset by decreased gains on other
real estate sold.

      Other operating expenses increased to $4,833,000 for the three months
ended June 30, 2001, compared to $3,430,000 in the same period of 2000. The main
reason for Sun's $1,403,000 increase in other operating expenses for the three
months ended June 30, 2001 as compared to the three months ended June 30, 2000
is expansion. Over the past year Sun has added eleven branches, 42.3% of the
current 26 branch network, through internal growth and acquisitions. Salaries
and employee benefits increased 43.0% to $2,288,000 for the three months ended
June 30, 2001 as Sun continues to attract new employees to expand Sun's market
area coverage. This is evidenced by Sun increasing the number of full time
equivalent employees by 62.3% to 317 at June 30, 2001 as compared to June 30,
2000. Net occupancy and furniture and equipment expenses increased 45.5% to
$210,000. The increase is due to Sun investing in infrastructure improvements in
conjunction with the before mentioned acquisitions and to prepare for any future
expansion. Other expenses increased $350,000 to $1,483,000 for the three months
ended June 30, 2001. The increase is the result of several factors. First, Sun
has employed consultants to advise management with regard to expanding Sun's
infrastructure to pursue future opportunities. Secondly, there have been slight
increases in other normal business activities (including the FDIC assessment and
the Pennsylvania Shares Tax).

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 AND 2000

      Net interest income for the six months ended June 30, 2001, decreased
$326,000, or 2.9%, over the same period in 2000, principally do to higher
cost certificates of deposit being booked in the second half of 2000 coupled
with prime rate reductions during 2001, which have a quicker impact on loan
yields versus deposit yields. Over the same time period, Sun has been able to
reduce the provision for loan and lease losses by $700,000 while increasing
the Allowance for Loan and Lease Losses (ALLL) to 1.17% from 1.00% at June
30, 2000. Net interest income after the provision for loan and lease losses
increased 3.8% to $10,155,000 at June 30, 2001. Other operating income
increased $228,000, excluding security gains (losses), for the six months
ended June 30, 2001, compared to the same period of 2000. Increases in trust
income and service charges on deposit accounts were offset by a decrease in
income from Sun's captive insurance subsidiary. Other operating expenses
increased $2,378,000, or 36.3%, for the six months ended

                                     14
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

June 30, 2001, compared to the same period in 2000 primarily due to the reasons
described above in the results of operations for three months ended June 30.

BALANCE SHEET - JUNE 30, 2001 AND DECEMBER 31, 2000

      Total assets were $998,398,000 at June 30, 2001, an increase of
$254,810,000 from $743,588,000 at December 31, 2000. Cash and cash equivalents
increased $61,098,000 or 399.9% from $15,277,000 at December 31, 2000. The
majority of the increase is the result of cash acquired from the purchase of
three Mellon branches and the acquisition of Guaranty Bank. The remaining
increase is the result of continued deposit growth along with the proceeds from
the issuance of trust-preferred securities. Investment securities increased
$67,934,000 with $25,963,000 of the increase occurring from the acquisition of
Guaranty Bank with the remaining increase the result of Sun investing the cash
received from the before mentioned acquisitions. The intangible asset, goodwill,
was increased to $23,954,000 at June 30, 2001 as Sun incurred goodwill of
$15,810,000 in acquiring the three former Mellon branches and Guaranty Bank.
Total liabilities increased $245,176,000, or 36.0% to $926,237,000 at June 30,
2001. Total deposits increased $202,876,000 or 45.6% to $647,442,000 at June 30,
2001. The before mentioned acquisitions represented $192,375,000 of the
$202,876,000 deposit increase. Total borrowed funds increased $26,359,000 to
$257,941,000 at June 30, 2001, with subordinated debentures representing
$20,444,000 of the increase. The majority of the subordinated debentures are the
result of Sun issuing $16,500,000 in trust preferred securities in a private
placement offering that yields 10.2% and matures in thirty years and is callable
in ten years. The remaining $3,944,000 was issued as part of the purchase of
Guaranty Bank. In addition, the subordinated debentures are accounted for as
capital under regulatory capital guidelines. Sun's total shareholders' equity
increased $9,634,000 from December 31, 2000 to June 30, 2001. The increase in
shareholders' equity is primarily the result of 553,558 shares of treasury stock
being issued for the acquisition of Guaranty Bank. In addition, Sun purchased
69,845 shares of treasury stock with a cost of $1,044,000 over the past six
months.

                                       15

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

ALLOWANCE FOR LOAN AND LEASE LOSSES

     Losses on loans and leases are charged against the allowance in the period
in which they have been determined to be uncollectible. Recoveries of loans and
leases previously charged off are credited to the allowance as they are
received.

     The allowance for loan and lease losses is evaluated based on management's
assessment of the losses inherent in the loan portfolio. Factors used in this
evaluation include historical data on losses by loan type, the composition of
the loan portfolio, current economic conditions, and possible losses related to
specific loans. The monthly analysis of losses includes identifying loans where
the internal credit rating is at or below a predetermined level and includes
management's assumptions as to the ability of the borrowers to service the
loans. During this review, it is decided when certain loans should be charged
off and if additions to the allowance are necessary.

         The allowance consists of two components, the specific allocation and
the general allocation. The specific allocation reflects expected losses
resulting from the analysis of individual loans with internal credit ratings
below a predetermined level. The general allocation reflects management's
evaluation of the other factors, such as historical losses and current economic
conditions in the markets served by Sun. The general allocation also includes
management's determination of the amounts necessary for concentrations and
changes in the mix and volume of the loan portfolio. In addition to the
management review, Sun engages a consulting firm to perform an annual
independent credit review of loan relationships in excess of $250,000, and
considers the results of this review in determining the allowance.

     At June 30, 2001, management deems the allowance to be adequate; however,
future additions may be necessary based on economic, market, or other
unforeseeable conditions, or if required by banking regulatory agencies.
Although management makes its best estimate as to the additions to the
allowance, there can be no assurance future material additions may not be
needed.

                                     16
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

EQUITY SECURITIES RISK

     Sun's equity securities portfolio consists of restricted stock (FHLB),
investments in stocks of other banks and bank holding companies, mainly based in
Pennsylvania, and several holdings of non-bank companies.

     FHLB stock can only be sold back to the FHLB. Accordingly, Sun's investment
in FHLB stock is carried at cost, which equals par value, and is evaluated for
impairment. Factors that might cause FHLB stock to become impaired (decline in
value on an other than temporary basis) are primarily regulatory in nature and
are related to potential problems in the residential lending market; for
example, the FHLB may be required to make dividend or other payments to the
Financing Corporation, the Resolution Funding Corporation, or other entities, in
amounts that could exceed the FHLB's total equity.

     Investments in bank stocks are subject to the risk that factors affecting
the banking industry generally, including competition from non-bank entities,
credit risk, interest rate risk, and other factors, could result in a decline in
market prices. Also, losses could occur in individual stocks held by Sun because
of specific circumstances related to each bank. Further, because of the
concentration of its holdings in Pennsylvania banks, these investments could
decline in value if there were a downturn in the state's economy. Sun's
management continually monitors its risk associated with its equity securities.

     Equity securities held as of June 30, 2001 and December 31, 2000

<Table>
<Caption>
                                                                     June 30, 2001
                                                               -------------------------
                                                                                  Fair
                                                                 Cost            Value
                                                               --------         --------
<S>                                                            <C>              <C>
Banks and bank holding companies                               $  4,910         $  4,092
FHLB stock                                                       11,114           11,114
Non-bank companies                                                   87               77
                                                               --------         --------
      Total                                                    $ 16,111         $ 15,283
                                                               ========         ========

<Caption>
                                                                    December 31, 2000
                                                               -------------------------
                                                                                  Fair
                                                                 Cost            Value
                                                               --------         --------
<S>                                                            <C>              <C>
Banks and bank holding companies                               $  5,289         $  3,651
FHLB stock                                                       12,630           12,630
Non-bank companies                                                   87               94
                                                               --------         --------
      Total                                                    $ 18,006         $ 16,375
                                                               ========         ========
</Table>

                                      17

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

CAPITAL ADEQUACY

     Sun's strong capital position is evidenced by the following capital ratios,
which are well above the regulatory minimum levels.

<Table>
<Caption>
(In Thousands)
                                                                                        For Capital
                                                           Actual                    Adequacy Purposes
                                                   ----------------------            -----------------
                                                   Amount           Ratio                   Ratio
                                                   -------          -----            -----------------
<S>                                                <C>              <C>              <C>
As of June 30, 2001:
Total Capital                                      $74,048          13.8%                     8.0%
   (to Risk Weighted Assets)
Tier I Capital                                     $47,617           8.8%                     4.0%
   (to Risk Weighted Assets)
Tier I Capital                                     $47,617           5.9%                     4.0%
   (to Average Assets)

As of December 31, 2000:
Total Capital                                      $59,303          15.0%                     8.0%
   (to Risk Weighted Assets)
Tier I Capital                                     $54,356          13.7%                     4.0%
   (to Risk Weighted Assets)
Tier I Capital                                     $54,356           7.5%                     4.0%
   (to Average Assets)
</Table>

                                       18

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART I

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

REGULATORY AND INDUSTRY MERGER ACTIVITY

     From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of Sun and SunBank. It cannot be predicted whether such legislation
will be adopted or, if adopted, how such legislation would affect the business
of Sun and SunBank. As a consequence of the extensive regulation of commercial
banking activities in the United States, Sun's and SunBank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the costs of doing business. Except as
specifically described above, management believes the effect of the provisions
of legislation on the liquidity, capital resources, and results of operations of
Sun will be immaterial. Future recommendations by regulatory authorities or
proposed legislation, which if they were implemented, would have a material
adverse effect upon the liquidity, capital resources, or results of operations,
although the general cost of compliance with numerous and multiple federal and
state laws and regulations does have, and in the future may have, a negative
impact on Sun's results of operations.

     Further, the business of Sun is also affected by the state of the financial
services industry in general. As a result of legal and industry changes,
management predicts the industry will continue to experience an increase in
consolidations and mergers as the financial services industry strives for
greater cost efficiencies and market share. Management also expects increased
diversification of financial products and services offered by SunBank and its
competitors. Management believes such consolidations and mergers, and
diversification of products and services may enhance its competitive position as
a community bank.

                                       19
<Page>

SUN BANCORP, INC.
FORM 10-Q
PART II

Items 1, 2, 3, and 4 -- Omitted pursuant to instructions to Part II

Item 5 -- Other information

    On July 26, 2001, the Board of Directors approved a quarterly dividend
payment of $.15 per share for shareholders of record August 31, 2001, payable
September 14, 2001.

Item 6 -- Exhibits and Reports on Form 8-K

     a.  On June 1, 2001 the Registrant filed an 8-K announcing the completion
         of the acquisition of Guaranty Bank, N.A. through a merger of Guaranty
         with, into, and under the charter of SunBank.

     b.  On June 1, 2001 the Registrant filed an 8-K announcing the completion
         of the acquisition of the Mill Hall and Lock Haven offices of Mellon
         Bank.

                                      20

<Page>

SUN BANCORP, INC.
FORM 10-Q
PART II

                                   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.

Date   8/13/01                              /s/  Robert J. McCormack
     -----------                         ---------------------------------------
                                                  Robert J. McCormack
                                          President and Chief Executive Officer
                                              (Principal Executive Officer)

                                              /s/ Jonathan J. Hullick
                                         ---------------------------------------
                                                Jonathan J. Hullick
                                          Exec. V.P. & Chief Financial Officer
                                            (Principal Financial Officer and
                                             Principal Accounting Officer)

Sun Bancorp, Inc.
PO Box 57
Selinsgrove, PA  17870
(570) 374-1131

                                        21