Troubled loans and a squeeze on net interest income took a bite out of third quarter earnings, two Long Island banks said Wednesday.
Suffolk Bancorp said it lost $9.2 million in the third quarter, mostly on the sale of bad loans.
First of Long Island Corp. reported lower profits for the quarter on lower net interest income and other factors, including setting aside more money for loan losses.
Riverhead-based Suffolk Bancorp, parent of the 30-branch Suffolk County National Bank, said it swung to a net loss of 94 cents a share from net income of $3.1 million, or 32 cents a share, a year earlier.
The bank attributed the loss mostly to an $11.1-million increase in the provision for loan losses, to $19.6 million, from a previously announced bulk sale of $51 million in nonperforming loans at 61 percent of book value, done in September.
Other factors cited were a $3-million increase in operating expenses and a 16.7 percent drop in net interest income. Partly offsetting them was a 6.7 percent improvement in noninterest income, Suffolk said.
President and CEO Howard C. Bluver said in a statement the bank had "strengthened our overall financial position, substantially increased our capital levels and put ourselves in the position to start managing the Bank with a forward focus." The bank sold stock to raise capital during the quarter.
Net interest margin -- the difference between the interest a bank earns on its assets such as loans and investments, and what it pays out to depositors -- decreased slightly in the third quarter.
Suffolk said total assets rose by 5.7 percent from a year earlier to $1.57 billion.
Glen Head-based First of Long Island, parent of 35- branch First National Bank of Long Island, said net income for the three months ended Sept. 30 was $4.8 million, or 53 cents a share, down 9.4 percent and 11.7 percent respectively. It attributed the increased provision for loan losses to loan growth and a $413,000 charge-off for one loan.
It attributed the drop in net interest income to a 24 basis point decline in net interest margin. First of Long Island said net interest income fell by 1.2 percent to $181,000. The provision for loan losses rose by $438,000 or 4.8 percent. The bank said the impact of both was partly offset by lower income tax and an increase in noninterest income.
The bank said it plans to open a new branch in Lindenhurst in the current quarter.
It warned of a further decline in profitability from low interest rates and tough price competition in the loan market.
It said total assets were more than $2 billion at the end of the third quarter.