Suffolk Bancorp, the Riverhead-based parent parent company of Suffolk County National Bank has reported a 35.7 percent increase in second-quarter earnings compared to last year.
The company announced second-quarter net income of $5.1 million, or 43 cents per diluted common share, compared to $3.8 million, or 32 cents per diluted common share a year ago. For the six months ended June 30, 2015, the company recorded net income of $9.1 million, or 77 cents per diluted common share, versus $7.5 million, or 64 per diluted common share for the first six months of 2014.
“I am very pleased to report what was truly a phenomenal second quarter,” Suffolk Bancorp president and CEO Howard Bluver said in a press release issued by the company last week. “It is gratifying to see our expansion strategies and company-wide focus on high-quality execution result in strong financial performance across the board.”
Bluver said Suffolk Bancorp’s lending business continues to perform “exceedingly well,” showing “high-quality loan growth.” Loan demand has strengthened as the local economy has improved, he said in the bank’s traditional markets on the East End, as well as in its new markets in Nassau County and New York City.
“More significantly, it is clear that our core strategy of recruiting experienced bankers with established customer relationships and locating them in attractive business markets as we expand west is working exactly as envisioned,” Bluver said, with new loan production offices in Melville, Garden City, and Long Island City “contributing substantially” to the company’s results. “We are clearly picking up market share as we expand west into markets with an abundance of the small and middle market businesses that are our lifeblood,” he said.
The bank’s “deposit businesses had an absolutely remarkable second quarter,” Bluver said, “allowing us to fund all of our quarterly loan production through deposit growth.”
Total deposits grew approximately $127 million, or 8 percent, during the quarter, the bank said, and at June 30 represented a 9.6 percent increase from the comparable quarter a year ago. Sixty-six percent of the second quarter’s deposit growth came from increases in non-interest bearing demand deposits, which grew $84 million in the quarter, from $682 million on March 31 to $766 million on June 30, a 12.3 percent increase.
“We are clearly benefitting from a robust start to the summer season in our traditional markets on the East End of Long Island, including the Hamptons, as well as significant deposit generation coming from new lending customers as we expand west,” Bluver said.
Credit quality improved dramatically during the second quarter, according to the bank president. “As we have previously emphasized, a substantial majority of our non-accrual portfolio consists of loans that we affirmatively chose not to include in a series of discounted bulk sales completed in 2012, because we believed such loans were well collateralized and could eventually be resolved at little or no discount. That is exactly what occurred in the second quarter. As a result of the successful workout of several large relationships during the quarter, total non-accrual loans at June 30, 2015 declined to $5.5 million, or 0.37 percent of total loans, compared to $12.3 million, or 0.89 percent of total loans, at March 31, 2015.
“In addition, since these workouts were completed at or near 100 cents on the dollar, we were able to book net recoveries during the quarter of $726 thousand, thereby eliminating the need to take a loan loss provision that otherwise may have been necessary to account for quarterly loan growth. The strategy of working closely with cooperative borrowers who own solid businesses, but who ran into temporary trouble because of events such as Hurricane Sandy, has now been successfully realized,” he said.
“Finally, we continue to be vigilant in controlling operating expenses and improving our efficiency. The expansion strategies that have resulted in strong overall financial results during the last three years require significant investment, particularly in attracting the best lending and credit professionals to drive performance,” Bluver said. “Nevertheless, we have been successful in finding ways to fund these investments by reducing expenses in other areas.
“As a prime example, we note that total operating expenses of $13.2 million incurred in the second quarter of 2015 were flat compared to the comparable quarter a year ago, notwithstanding the significant revenue enhancing investments that were funded during the last year, such as costs associated with opening the Long Island City loan production office.”
Suffolk Bancorp shares closed today at $29.20, near the stock’s 52-week high of $29.99, and up 39.7 percent over its value one year ago.
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