Suffolk Bancorp in Riverhead, N.Y., is slowly making its way through accounting and regulatory issues that hung over the company for more than year.

Suffolk on Monday reported a third-quarter profit of $3.1 million, largely because of a 4.73% net interest margin that offset higher net chargeoffs in the company's shrinking loan portfolio.

Doug Shaw, the company's corporate secretary, said in an interview that Suffolk is making progress complying with the formal agreement it reached with the Office of the Comptroller of the Currency in October. The agreement required Suffolk to establish programs tied to internal audit, maintaining an adequate allowance for loan losses, real property appraisal and credit risk management, among other things.

Suffolk, the parent of the $1.58 billion-asset Suffolk County Bank of Riverhead, is also in the midst of restating several quarters of results, including the third quarter of 2010, and it is facing a class-action from shareholders.

"We're chugging along," Shaw said. "We've certainly had our problems over the last year, with accounting being the greatest among them. We have made all the required submissions on time for our formal agreement with the OCC." Since reaching the agreement with the OCC, Suffolk has hired a chief lending officer and made improvements to its credit administration. The company has shrunk its balance sheet, which has boosted capital ratios and reflects an effort to "make sure that new lending is to creditworthy borrowers," Shaw said. At Sept. 30, Suffolk's Tier 1 leverage ratio stood at 8.57% and its Tier 1 risk-based capital ratio was 12.6%. The OCC has mandated that Suffolk keep those ratios above 8% and 10.5%. Suffolk still has more work ahead. It posted a $1.3 million loss for the first nine months of 2011.

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