North Fork Bancorp has acquired a 2% stake in Suffolk Bancorp, officials with the companies confirmed.
The Mattituck, N.Y.-based North Fork spent more than $2 million over the last two months acquiring the Suffolk shares, said Kevin O'Connor, a senior vice president with North Fork Bank.
Mr. O'Connor said North Fork bought the shares because management believes Suffolk is undervalued.
"We've had a nice return," Mr. O'Connor said. "It shares were much lower when we started purchasing." The stock closed Tuesday at a 52-week high of $25.75, up from a low, over the same period, of $21 a share.
North Fork's investment is part of a trend in New York and New England where large banks are snapping up sizable positions of smaller institutions. They reason the smaller banks are good investments because they are likely to be acquired.
Mr. O'Connor said Suffolk could be an acquisition target. But North Fork isn't "staking out" Suffolk to acquire It, although he acknowledged the rival bank would make a good fit with its $800 million m assets and 21 branches.
"They have a nice niche business," Mr. O'Connor said.
Mr. O'Connor said North Fork, a $1.9-billion-asset banking company, has investments in four other banks, so there is nothing unusual about its latest investment.
"We have . . . been making investments in banks for a number of years," he said. "We understand the market for bank stocks."
North Fork, too, also has attracted interest from even larger institutions, Mr. O'Connor said. "We know there are people who have stakeout positions in us," he said.
Edward J. Merz, president and chief executive of Suffolk, said he was aware North Fork had acquired the shares, but wasn't troubled by the move because its a small position. "We are a good investment," he said. "We are certainly not for sale."
Suffolk earned $1.6 million in the second quarter, down 15.6% from the prior year.
Earnings were affected by the company's $12.3 million stockand-cash deal of Hamptons Baneshares Inc., which was closed last April.
Mr. Merz said the company wants to "make sure everything is put to bed" with the Hamptons deal before it makes another acquisition. Then, the company may start looking to do other deals.
"We would consider ourselves offensive and not defensive," he said.