UPDATE: Sterne Agee Downgrades Sun Bancorp to Underperform on Elevated Credit Risks

In a report published Wednesday, Sterne Agee analyst Matthew Breese downgraded the rating on Sun Bancorp

from Neutral to Underperform, but reiterated the $2.50 price target. In the report, Breese noted, “In our view, current valuation does not properly reflect the potential for further credit deterioration or a potential capital raise. While we are positive on the company's accelerated problem asset disposition strategy with two bulk sales completed in 24 months, in order to continue this strategy, the company may need more capital given its 6.9% TCE/TA ratio and profitability outlook for 2013, in our view.” Sun Bancorp closed on Tuesday at $3.70.