Suffolk Bancorp Posts Big 3Q Loss to Clean Up Credit

Suffolk Bancorp (SUBK) in Riverhead, N.Y., made good on a pledge to aggressively address its credit issues, posting a large quarterly loss in the process.

The $1.6 billion-asset company lost $9.1 million in the third quarter, compared to a $3.1 million gain a year earlier. The biggest difference was credit: Suffolk recorded a $12 million loan-loss provision in the third quarter, compared with just $900,000 a year earlier.

During the third quarter, Suffolk sold $51 million of loans at an aggregate price of 61% of book value, resulting in a $19.6 million charge. Costs associated with other real estate owned totaled $781,000 in the third quarter, up from $182,000 a year earlier. The company also recorded a $162,000 securities loss from selling a pair of collateralized mortgage obligations.

The company had announced plans for the loan sales in September after it raised $25 million in capital. "We no longer have to look backward," Howard Bluver, the company’s chief executive, said in a Sept. 20 interview. "You will now see a growth and diversification story. It will take a little bit of time because we want to do it very carefully."

Net interest income, excluding the provision, fell 17% from a year earlier, to $14.2 million. Total loans fell 21% from a year earlier, to $766 million, while deposits edged up 1%, to $1.4 billion. The net interest margin compressed by 30 basis points from the second quarter and 58 basis points from a year earlier, to 4.09%.

Noninterest income increased 7% from a year earlier, to $2.6 million, including the securities loss. The company attributed the increase to improvements in deposit service charges, fiduciary fees and gains from selling mortgages.

Noninterest expenses rose 20% from a year earlier, to $17.9 million, including costs for selling nonperforming assets.

The quarter, while choppy, should help Suffolk further distance itself from a turbulent 2011, when it took big hits on real estate loans and had to delay reporting some of its financial results. Suffolk ended up revising or restating three quarters of results dating back to 2010. Suffolk hired Howard Bluver to become its chief executive in January, charging him with righting the ship.