Suffolk Bancorp, the holding company for Suffolk County National Bank, announced on Aug. 10 that it would not be filing its quarterly report for the period ending June 30 within the time allowed. Douglas Ian Shaw, the senior vice president and corporate secretary for the bank, attributed the delay to accounting issues.
The bank has not filed its first-quarter report yet either, for the same reason.
Because of the failure to file, the company has received a letter of noncompliance from the American Stock Exchange, “as expected,” according to a release.
This is the second notice the bank has received from NASDAQ. The exchange had given it until Aug. 31 to file its delinquent form for the first quarter. Now the company must submit an update no later than Friday, Aug. 26, to be in compliance, or face possible delisting from the exchange.
That is not a foregone conclusion, however. “Suffolk expects pretax earnings for the quarter ended June 30, 2011, of approximately $4.6 million, on $1.554 billion of average earning assets, compared to pretax earnings of $6.6 million during the second quarter of 2010,” the bank’s statement said. “The change from the second quarter of 2010 was attributable to reduced net interest income as well as greater expenses for the compliance, legal, and professional services.”
“Suffolk believes that its banking subsidiary remains well-capitalized.”
In a reserve account, Suffolk has an allowance for possible second-quarter loan losses of up to $49.6 million, or 4.68 percent of total loans. In last year’s second quarter, loan losses came in at $20.9 million, or 1.8 percent.
The numbers are based on a detailed review of about 65 percent of the commercial and industrial sectors, and commercial real estate loan portfolios.
“It’s really about what gets allocated into which period,” Mr. Shaw said. “It has to be exactly right, not approximately right.” Loan losses need to be adjusted in prior periods and this has led to the inability to file within the allotted time, he said.
The company is “working diligently” to put a plan together in time for the Aug. 26 deadline, he said. The plan will detail its progress on the first-quarter filing and its estimate of when the second-quarter filing will be submitted.
According to the press release, “Any additional exception to allow Suffolk to regain compliance with all delinquent filings will be limited to a maximum of 180 calendar days from the due date of the initial delinquent filing, which is Nov. 7, 2011.”
The Sarbanes Oxley Act of 2002, passed in the wake of corporate scandals at Enron, Tyco, and other companies, mandated stricter accounting guidelines and standards, causing many late Security and Exchange Commission filings in the following years.
Kevin Smith, a partner at Chadbourne & Parke in Manhattan and the author of “What Late S.E.C. Filers Need to Know,” specializes in securities law. “Late SEC filings can be a serious matter and can have a number of consequences,” Mr. Smith said this week. “However, they are not uncommon.”
“Increased S.E.C. regulations have been particularly burdensome on smaller companies with fewer resources, resulting in a higher level of late filings for smaller companies than larger companies,” he said. “Also, in the wake of the financial crisis, we have seen heightened scrutiny by regulators, including the S.E.C., of public companies and financial institutions in particular, and this too has resulted in more late filings.”
Most of these companies, he said, such as Suffolk Bancorp, “try to be up front about their reasons . . . and seek to put in place a plan for rectifying the issues as quickly as possible to avoid further negative consequences, such as a potential delisting or the inability to raise capital through a registered offering while filings are late.”
“These companies understand that investors, the S.E.C., and the relevant stock exchanges are all paying close attention,” Mr. Smith concluded.