Suffolk Bancorp posts $12.9M loss

Suffolk Bancorp lost $12.9 million in the first quarter of the year as it set aside tens of millions for expected loan losses, the company reported on Tuesday.

The Riverhead-based bank's losses contrast with a $1.5 million profit posted during the same period last year.

"I am disappointed by these results," said Suffolk Bancorp President and chief executive J. Gordon Huszagh in a news release. "As the economy has continued to drag in some of the sectors in which Suffolk has concentrations, our borrowers' resources have continued to dwindle."

Stalled real estate projects caused by lack of demand eroded the quality of construction loans, exposing Suffolk Bancorp to greater losses, the company reported.

The bank's residential loan portfolio also has suffered from "greater delinquencies than in the past as their owners depleted their reserves."

The bank set aside $29.7 million for loan losses in the first quarter, compared to $8.8 million in the first quarter of 2010, in part because of a rising number of nonperforming loans and delinquent loans, according to an SEC filing. By comparison, the company set aside $377,000 for nonperforming loans for all of 2007, before the real estate bubble burst.

Earning per share fell by 931.3 percent to -$1.33 in the quarter compared to $0.16 during the same period last year, the company disclosed.

New residential housing starts in Suffolk County fell to 40 in February from 66 in the same month a year earlier, according to the most recent U.S. Census statistics.

"The state of construction on the Island right now is limited," said Mitchell Pally, chief executive of the Long Island Builders Institute, a trade group. "Many projects which have been approved have still had difficulty getting all of their financing in place, so they have not moved forward."

Single-family home construction is down and though the Island has seen some new commercial construction, there is very little building being done on spec and vacancies are still high, Pally said.

The bank plans to add a new loan administrator and additional underwriting staff. It also plans to reappraise commercial real estate that secures loans greater than $1 million that have not been reappraised in the past 12 months.

Even before the earnings decline, the bank was already working to comply with an agreement with the U.S. Comptroller of the Currency, which last year "found unsafe and unsound banking practices relating to asset quality, compliance and management."

Suffolk Bancorp's stock price fell $1.05, or 5.7 percent, to $17.45 Wednesday.