Bank boosts capital despite $20M loans loss
But the company also raised $25 million in a private sale of company stock, buttressing capital that had been reduced in the loan sale.
The banking company, based in Riverhead, said it sold a portfolio of loans in danger of default for $31 million; the loans had an original book value of $51 million.
The loan sale and the issuance of common stock "are expected to boost the company's capital base, resolve legacy credit issues at the bank, and strengthen the overall financial position of the company and the bank," Suffolk Bancorp said in a statement. The loan sale leaves $14 million in nonperforming loans, representing 1.8 percent of total loans, down from $81 million and 8.3 percent at the end of 2011, Suffolk said.
The company said it would book a one-time loss of $12 million after tax in the third quarter for disposition of the loans.
In the private placement, a group of institutional investors purchased 1,783,000 shares of common stock at a price of $13.50 per share. Some officers and directors purchased another $900,000 in stock.
Suffolk's shares closed Thursday at $15.19, down 91 cents, near the high end of its 52-week range of $7.55 to $16.90.
Howard Bluver, president and chief executive, said that even with the one-time loss on the disposition of the loans, the bank would have had plenty of capital without the stock sale. "The purpose of the capital raise was to further enhance the financial strength of the company and position it for future growth and diversification," he said through a spokeswoman.
Bluver took the reins at Suffolk Bancorp earlier this year after helping the company deal with a crisis as a consultant. The bank had faced a possible delisting from the Nasdaq exchange for turning in financial documents late.