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8-K - FORM 8-K - SUFFOLK BANCORPd8k.htm

Exhibit 99.1

PRESS RELEASE

 

 

FOR IMMEDIATE RELEASE   

LOGO

Contact:   

Douglas Ian Shaw

Corporate Secretary

(631) 727-5667

  

4 West Second Street

Riverhead, NY 11901

(631) 727-5667 (Voice) - (631) 727-3214 (FAX)

invest@suffolkbancorp.com

SUFFOLK BANCORP ANNOUNCES LOSS FOR THE FIRST QUARTER OF 2011

Riverhead, New York, April 12, 2011 — Suffolk Bancorp (NASDAQ - SUBK) today released the results of its operations during the first quarter of 2011. The loss-per-share was $1.33, in comparison to earnings of $0.16 during the comparable period of 2010. The net loss was $12,899,000, compared to net income of $1,532,000 during the first quarter of last year. A detailed financial summary follows the text. For the banking subsidiary, tier-1 leverage capital stands at 8.02 percent, tier-1 risk-based capital at 11.02 percent and total risk-based capital stands at 12.31 percent. Notwithstanding the quarterly loss, Suffolk remains “well-capitalized” as defined in 12 CFR 6.4, and continues to meet the individual minimum capital ratios as determined previously in agreement with regulators.

The key reason for the change in performance is a provision for loan losses of $29,700,000, an increase of 236.1 percent from a provision of $8,837,000 during the first quarter of 2010. This is a result of:

absence of recovery and increased weakness in the local economy reflected in an increasing number of stalled real-estate construction projects; decreasing strength of customers’ financial statements showing prolonged decline in customer liquidity, increasing numbers of multi-year losses, and increasing numbers of borrowers showing declining debt service coverage; a substantial increase quarter-to-quarter in the balance of non-performing loans; and a significant increase in past-due loans; and

internal refinement and standardization of the credit risk rating and classification system which resulted in a more stringent provision for unrealized and inherent loan losses.

In response to these challenges, we have taken and are taking steps to improve our business, including, among others, by:

hiring a new loan administrator and additional underwriting staff; contracting with a loan workout specialist and for an independent evaluation of loan concentrations; and undertaking expanded training of our lenders in all of these disciplines and directing them to work with our customers to resolve problems quickly and effectively;

re-appraising commercial real estate which secures loans in excess of $1 million that had not otherwise been reappraised during the last twelve months, and ordering appraisals for smaller properties as necessary;

making numerous changes to our credit policy to identify concentrations of risk, analyze the global cash flows of our customers, reappraise and otherwise evaluate collateral, and improve our credit-risk rating procedures and underwriting processes and standards;

exploring asset sales when they will eliminate unnecessary risk in the portfolio; and

hiring a new Chief Lending Officer, subject to regulatory approval.

J. Gordon Huszagh, President and Chief Executive Officer stated, “I am disappointed by these results. In the foregoing, we have explained what happened, and what we plan to do to restore Suffolk to profitability as soon as possible. This is and will be our highest priority for the foreseeable future.”

Mr. Huszagh continued, “As the economy has continued to drag in some of the sectors in which Suffolk has concentrations, our borrowers’ resources have continued to dwindle. Loans for real estate construction and commercial real estate have declined in quality as certain construction projects have stalled for lack of demand, certain established properties have not been fully rented, and certain owner-occupied properties have suffered from sustained declines in the owner’s underlying business. Further, in recent months, our portfolio of loans for residential real estate has shown greater delinquencies than in the past as their owners have depleted their


PRESS RELEASE

April 12, 2011

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reserves. New construction is nearly at a halt in our service area, and the prices of existing inventory continue to drop in most areas, and this has reduced the value of collateral generally, resulting in higher ratios of loan to value. Influencing these trends during the quarter as well was a particularly harsh winter in our service area. While there are encouraging signs in some sectors of the national economy, these have not yet improved our customers’ financial condition in any meaningful way. Further, as we have recognized the deterioration in our portfolio, we have also refined and tightened our procedures for computing the allowance for loan losses to account for the increased risk in our loan portfolio. While many of the loans for which we have added provisions are current and performing, during this quarter, we have determined that they have developed certain structural weaknesses which we must recognize in our allowance.”

Mr. Huszagh then commented, “As previously disclosed, the staff continues to work diligently to address all articles of the agreement between the Suffolk County National Bank (“SCNB”) and the Office of the Comptroller of the Currency (“OCC”), signed on October 25, 2010 (the “Agreement”). SCNB believes that it has submitted the information required by the Agreement on a timely basis, and is currently in the process of evaluating responses from the OCC, and revising policies and procedures accordingly. Upon the completion of this process, we anticipate that the OCC will wish to observe the revised policies and procedures in operation for a period of time before taking further action with respect to the Agreement.”

He then addressed the matter of the dividend, “In response to numerous inquiries, Suffolk announced that it is the intention of the Board of Directors to pay a nominal dividend of a penny per share to owners of Suffolk’s common stock, to the extent that it is consistent with regulatory requirements, and maintains the safety and soundness of SCNB. Under the terms of the Agreement, SCNB has agreed to obtain a determination of no objection from the OCC prior to the declaration and payment of any dividends to the parent. Further, Suffolk Bancorp must also determine that the Federal Reserve Bank of New York, which regulates Suffolk Bancorp directly as a bank holding company, has no objection to payment of that dividend in turn to Suffolk Bancorp’s shareholders. Suffolk Bancorp announced that it is seeking those authorizations, although there can be no assurance that they will be granted or with regard to the timing or amount of any dividend.”

Suffolk Bancorp is a one-bank holding company engaged in the commercial banking business through SCNB, a full-service commercial bank headquartered in Riverhead, New York. Organized in 1890, SCNB has 30 offices in Suffolk County, New York.

Safe Harbor Statement Pursuant to the Private Securities Litigation Reform Act of 1995

This press release includes statements which look to the future. These can include remarks about Suffolk Bancorp, the banking industry, and the economy in general. These remarks are based on current plans and expectations. They are subject, however, to a variety of uncertainties that could cause future results to vary materially from Suffolk’s historical performance, or from current expectations. Factors affecting Suffolk Bancorp include particularly, but are not limited to: changes in interest rates; increases or decreases in retail and commercial economic activity in Suffolk’s market area; variations in the ability and propensity of consumers and businesses to borrow, repay, or deposit money, or to use other banking and financial services; results of regulatory examinations; any failure by us to comply with our written agreement with the OCC (the “Agreement”) or the individual minimum capital ratios for the Bank established by the OCC; the failure to obtain the required regulatory approvals to pay a dividend to Suffolk shareholders; the cost of compliance with the Agreement; larger-than-expected losses from the sale of assets; and the potential that net charge-offs are higher than expected or for further increases in our provision for loan losses. Further, it could take Suffolk longer than anticipated to implement its strategic plans to increase revenue and manage non-interest expense, or it may not be possible to implement those plans at all. Finally, legislation, regulation, or accounting standards may require Suffolk to change its practices in ways that materially change the results of operations.


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STATISTICAL SUMMARY

(unaudited, in thousands of dollars except for share and per share data)

 

      1st Qtr 2011     1st Qtr 2010     Change  
EARNINGS       

Earnings-Per-Share - Basic

   $ (1.33   $ 0.16        (931.3 %) 

Cash Dividends-Per-Share

     —          0.22        —     

Net Income

     (12,899     1,532        (942.0 %) 

Net Interest Income

     18,407        19,246        (4.4 %) 
AVERAGE BALANCES       

Average Assets

   $ 1,647,044      $ 1,725,399        (4.5 %) 

Average Net Loans

     1,113,812        1,149,479        (3.1 %) 

Average Investment Securities

     407,162        460,873        (11.7 %) 

Average Interest-Earning Assets

     1,555,324        1,612,741        (3.6 %) 

Average Deposits

     1,420,729        1,378,057        3.1

Average Borrowings

     43,263        167,497        (74.2 %) 

Average Interest -Bearing Liabilities

     970,365        1,079,064        (10.1 %) 

Average Equity

     145,472        137,738        5.6
RATIOS       

Return on Average Equity

     (35.47 %)      4.45     (897.1 %) 

Return on Average Assets

     (3.13 %)      0.36     (969.4 %) 

Average Equity/Average Assets

     8.83     7.98     10.7

Net Interest Margin (FTE)

     4.99     5.02     (0.6 %) 

Efficiency Ratio

     65.35     54.62     19.6

Tier 1 Leverage Ratio Mar. 31

     8.16     7.99     2.1

Tier 1 Risk-based Capital Ratio Mar. 31

     11.26     10.72     5.0

Total Risk-based Capital Ratio Mar. 31

     12.54     11.97     4.8
ASSET QUALITY       
during period:       

Net Charge-offs

   $ 4,094      $ 88        4,552.3

Net Charge-offs/Average Net Loans (annualized)

     1.47     0.03     4,800.0

at end of period:

      

Total Non-performing Loans

     53,026        31,731        67.1

Foreclosed Real Estate (“OREO”)

     3,077        —          100.0

Total Non-performing Assets

     56,103        31,731        76.8

Allowance/Non-performing Loans

     88.43     66.60     32.8

Allowance/Loans, Net of Discount

     4.25     1.80     136.0

Net Loans/Deposits

     74.67     83.49     (10.6 %) 
EQUITY       

Shares Outstanding

     9,712,070        9,643,694        0.7

Common Equity

   $ 134,095      $ 138,866        (3.4 %) 

Book Value Per Common Share

     13.81        14.40        (4.1 %) 

Tangible Common Equity

     133,281        138,052        (3.5 %) 

Tangible Book Value Per Common Share

     13.72        14.32        (4.2 %) 
LOAN DISTRIBUTION       
at end of period:       

Commercial, Financial & Agricultural Loans

   $ 258,433      $ 279,374        (7.5 %) 

Commercial Real Estate Mortgages

     437,890        389,904        12.3

Real Estate-Construction Loans

     78,513        126,678        (38.0 %) 

Residential Mortgages (1st and 2nd Liens)

     183,971        214,611        (14.3 %) 

Home Equity Loans

     83,167        83,919        (0.9 %) 

Consumer Loans

     61,644        78,588        (21.6 %) 

Other Loans

     487        937        (48.0 %) 
                  

Total Loans (Net of Unearned Discounts)

   $ 1,104,105      $ 1,174,011        (6.0 %) 


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CONSOLIDATED STATEMENTS OF CONDITION

(unaudited, in thousands of dollars except for share data)

 

     March 31,        
     2011     2010     Change  

ASSETS

      

Cash & Due From Banks

   $ 82,117      $ 39,758        106.5

Federal Reserve Bank Stock

     652        652        0.0

Federal Home Loan Bank Stock

     3,531        9,227        (61.7 %) 

Investment Securities:

      

Available for Sale, at Fair Value

     391,072        443,530        (11.8 %) 

Obligations of States & Political Subdivisions, Held to Maturity

     9,713        10,009        (3.0 %) 

Corporate Bonds & Other Securities

     80        100        (20.0 %) 
                  

Total Investment Securities

     400,865        453,639        (11.6 %) 

Total Loans

     1,104,105        1,174,011        (6.0 %) 

Allowance for Loan Losses

     46,893        21,132        121.9
                  

Net Loans

     1,057,212        1,152,879        (8.3 %) 

Premises & Equipment, Net

     25,219        22,889        10.2

Other Real Estate Owned, Net

     3,077        —          100.0

Accrued Interest Receivable, Net

     7,946        7,968        (0.3 %) 

Goodwill

     814        814        0.0

Other Assets

     40,194        24,193        66.1
                  

TOTAL ASSETS

   $ 1,621,627      $ 1,712,019        (5.3 %) 
                  

LIABILITIES & STOCKHOLDERS’ EQUITY

      

Demand Deposits

   $ 482,995      $ 458,930        5.2

Saving, N.O.W. & Money Market Deposits

     629,369        587,425        7.1

Time Certificates of $100,000 or More

     208,739        228,285        (8.6 %) 

Other Time Deposits

     94,810        106,232        (10.8 %) 
                  

Total Deposits

     1,415,913        1,380,872        2.5

Federal Home Loan Bank Borrowings

     40,000        170,400        (76.5 %) 

Dividend Payable on Common Stock

     —          2,122        (100.0 %) 

Accrued Interest Payable

     561        681        (17.6 %) 

Other Liabilities

     31,058        19,078        62.8
                  

TOTAL LIABILITIES

     1,487,532        1,573,153        (5.4 %) 
                  

STOCKHOLDERS’ EQUITY

      

Common Stock (par value $2.50; 15,000,000 shares authorized; 9,712,070 and 9,643,694 shares outstanding at March 31, 2011 and 2010, respectively)

     34,293        34,115        0.5

Surplus

     23,789        22,212        7.1

Treasury Stock at Par (4,005,270 and 4,002,158 shares, respectively)

     (10,013     (10,005     0.1

Retained Earnings

     87,245        92,430        (5.6 %) 
                  
     135,314        138,752        (2.5 %) 

Accumulated Other Comprehensive Income (Loss), Net of Tax

     (1,219     114        (1,169.3 %) 
                  

TOTAL STOCKHOLDERS’ EQUITY

     134,095        138,866        (3.4 %) 
                  

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

   $ 1,621,627      $ 1,712,019        (5.3 %) 
                  


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CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands of dollars except for share and per share data)

 

     For the 3 Months Ended        
     March 31, 2011     March 31, 2010     Change  

INTEREST INCOME

      

Federal Funds Sold & Interest from Bank Deposits

   $ 16      $ 2        700.0

United States Treasury Securities

     70        71        (1.4 %) 

Obligations of States & Political Subdivisions

     1,911        1,879        1.7

Mortgage-Backed Securities

     1,636        2,090        (21.7 %) 

U.S. Government Agency Obligations

     154        202        (23.8 %) 

Corporate Bonds & Other Securities

     84        100        (16.0 %) 

Loans

     16,448        17,573        (6.4 %) 
                  

Total Interest Income

     20,319        21,917        (7.3 %) 

INTEREST EXPENSE

      

Saving, N.O.W. & Money Market Deposits

     634        860        (26.3 %) 

Time Certificates of $100,000 or more

     582        801        (27.3 %) 

Other Time Deposits

     357        476        (25.0 %) 

Federal Funds Purchased & Repurchase Agreements

     —          1        (100.0 %) 

Borrowings

     339        533        (36.4 %) 
                  

Total Interest Expense

     1,912        2,671        (28.4 %) 

Net Interest Income

     18,407        19,246        (4.4 %) 

Provision for Loan Losses

     29,700        8,837        236.1
                  

Net Interest Income After Provision

     (11,293     10,409        (208.5 %) 

OTHER INCOME

      

Service Charges on Deposit Accounts

     1,005        1,266        (20.6 %) 

Other Service Charges, Commissions & Fees

     667        664        0.5

Fiduciary Fees

     225        307        (26.7 %) 

Gain on Sale of Other Real Estate Owned (“OREO”)

     448        —          100.0

Other Operating Income

     324        271        19.6
                  

Total Other Income

     2,669        2,508        6.4

OTHER EXPENSE

      

Salaries & Employee Benefits

     7,545        7,032        7.3

Net Occupancy Expense

     1,534        1,428        7.4

Equipment Expense

     482        533        (9.6 %) 

FDIC Assessments

     1,131        603        87.6

OREO Expense

     140        —          100.0

Other Operating Expense

     2,941        2,287        28.6
                  

Total Other Expense

     13,773        11,883        15.9

Income Before Provision for Income Taxes

     (22,397     1,034        (2,266.1 %) 

Provision for Income Taxes

     (9,498     (498     1,807.2
                  

NET INCOME

   $ (12,899   $ 1,532        (942.0 %) 
                  

Average: Common Shares Outstanding

     9,705,888        9,634,156        0.7

Dilutive Stock Options

     —          6,665        (100.0 %) 
                  

Average Total

     9,705,888        9,640,821        0.7

EARNINGS PER COMMON SHARE Basic

   $ (1.33   $ 0.16        (931.3 %) 

Diluted

   $ (1.33   $ 0.16        (931.3 %)