Feds order Suffolk bank to fix 'unsafe' practices

Suffolk County National Bank's federal regulator has ordered it to correct "unsafe and unsound banking practices" concerning its management, the quality of its loans and other issues.

"We take it very seriously," said Douglas Shaw, corporate secretary for Suffolk Bancorp, the Riverhead company that owns the bank. "They want us to take a harder look at how we manage risk."

The bank and the federal agency, the Office of the Comptroller of the Currency, signed a written agreement that requires the bank to take steps to better comply with regulatory rules. Many are aimed at ensuring that the bank has a plan to remain strong financially.

Those steps include:

Evaluating the experience and skills of certain senior managers, including president and chief executive J. Gordon Huszagh, and providing further training if necessary.

Adopting a strategic plan to grow and manage risk.

Identifying how the bank will keep enough capital, and paying a dividend only when capital levels are high enough and regulators don't object.

Adopting a plan to determine how much money needs to be set aside for potential bad loans. Six months ago regulators ordered the bank to increase that allowance from $14.9 million to $21.1 million.

Avoiding concentrating too much of its business in any one area, such as commercial real estate loans.

Evaluating the strength of its computer security. About a year ago, a hacker gained access to login information for more than 8,000 customers, but did not steal any money.

Despite the regulatory issues, the bank remains profitable. Last month it reported earnings of $4.7 million, though that was 22.2 percent less than in the same period from a year before, mostly because of having to set aside more money to cover potential bad loans.

The same regulator also found reason to praise the bank. Last week it rated the bank "outstanding" in its efforts to serve the community, noting the bank does a good job of helping low- and middle-income communities by providing home mortgages and small-business loans and participating in economic development efforts.

"We're very proud of that," Shaw said. "Community banking is our niche. It's our forte."