Suffolk Bancorp (the “Company”) (NASDAQ:SUBK), parent company of Suffolk County National Bank (the “Bank”), today reported a net loss for the third quarter of 2012 of $9.2 million, or ($0.94) per diluted common share, compared to net income of $3.1 million, or $0.32 per diluted common share, a year ago. For the nine-month period ended September 30, 2012, the Company recorded a net loss of $3.8 million, or ($0.39) per diluted common share, compared with a net loss of $1.2 million, or ($0.13) per diluted common share, in the September 2011 year-to-date period.
The decline in third quarter 2012 earnings was principally due to the impact of an $11.1 million increase in the provision for loan losses resulting from the Company’s successful execution of a previously announced bulk sale of non-performing loans in September 2012. The Company sold $51 million of loans at an aggregate price of 61% of book value resulting in a $19.6 million charge to the allowance for loan losses. Also contributing to the third quarter loss was an increase in total operating expenses of $3.0 million, largely the result of $2.5 million in non-recurring costs, and a reduction in net interest income of $2.9 million (16.7%). Partially offsetting these factors was a 6.7% improvement in non-interest income in third quarter 2012.
The reduction in net interest income resulted from a lower level of average interest-earning assets, primarily loans, coupled with a narrowing of the net interest margin in 2012 versus the comparable 2011 period. The decrease in the net interest margin was due to the continued low level of interest rates; a shift in the Company’s balance sheet mix from loans (average loans down 20.4% versus third quarter 2011) into lower-yielding overnight interest-bearing deposits which represented 21% of average interest-earning assets in third quarter 2012 versus 10% in third quarter 2011, due principally to ongoing loan workout activity; and the elevated level of non-accrual loans present throughout 2012.
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