UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

Commission file number 0-13580

SUFFOLK BANCORP

(Exact Name of Registrant as Specified in Its Charter)

New York State	11-2708279
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
4 West Second Street, Riverhead, New York	11901
(Address of Principal Executive Offices)	(Zip Code)

(631) 727-5667

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  ¨ Accelerated Filer  x Non-Accelerated Filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

9,582,699 SHARES OF COMMON STOCK OUTSTANDING AS OF November 3, 2008

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SUFFOLK BANCORP AND SUBSIDIARIES

	Page
Part I - Financial Information (unaudited)
Item 1. Financial Statements
Consolidated Statements of Condition	4
Consolidated Statements of Income, For the Three Months Ended September 30, 2008 and 2007	5
Consolidated Statements of Income, For the Nine Months Ended September 30, 2008 and 2007	6
Consolidated Statements of Cash Flows, For the Nine Months Ended September 30, 2008 and 2007	7
Notes to the Un-audited Consolidated Financial Statements	8
(1) Basis of Presentation	8
(2) Stock-based Compensation	8
(3) Income Taxes	9
(4) Investments	9
(5) Retirement Plan	11
(6) Recent Accounting Pronouncements	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk	20
Item 4. Controls and Procedures	20
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6. Exhibits and Reports on Form 8-K	21
Signatures	22
Certifications of Periodic Report – Exhibit 31.1
Exhibit 32.1

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SUFFOLK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

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

	September 30, 2008			December 31, 2007
	unaudited
ASSETS
Cash & Due From Banks	$	57,043		$	56,633
Federal Funds Sold		61,800			2,700
Investment Securities:
Available for Sale, at Fair Value		387,404			392,796
Held to Maturity (Fair Value of $20,258 and $18,199, respectively)
Obligations of States & Political Subdivisions		11,415			9,055
Federal Reserve Bank Stock		638			638
Federal Home Loan Bank Stock		7,697			7,818
Corporate Bonds & Other Securities		100			100
Total Investment Securities		407,254			410,407
Total Loans		1,061,658			958,800
Less: Allowance for Loan Losses		7,970			7,672
Net Loans		1,053,688			951,128
Premises & Equipment, Net		22,047			22,143
Accrued Interest Receivable, Net		7,537			7,359
Excess of Cost Over Fair Value of Net Assets Acquired		814			814
Other Assets		16,909			19,397
TOTAL ASSETS	$	1,627,092		$	1,470,581
LIABILITIES & STOCKHOLDERS’ EQUITY
Demand Deposits	$	452,781		$	423,225
Saving, N.O.W. & Money Market Deposits		538,641			404,457
Time Certificates of $100,000 or more		147,709			116,795
Other Time Deposits		175,438			198,898
Total Deposits		1,314,569			1,143,375
Federal Home Loan Bank Borrowings		140,000			143,500
Repurchase Agreements		37,620			54,820
Dividend Payable on Common Stock		2,107			2,121
Accrued Interest Payable		2,246			2,247
Other Liabilities		13,170			15,537
TOTAL LIABILITIES		1,509,712			1,361,600
STOCKHOLDERS’ EQUITY
Common Stock (par value $2.50; 15,000,000 shares authorized; 9,576,354 and 9,610,730 shares outstanding at September 30, 2008 and December 31, 2007, respectively)		33,930			33,911
Surplus		20,515			20,172
Treasury Stock at Par (3,995,661 and 3,953,661 shares, respectively)		(9,989	)		(9,884	)
Retained Earnings		75,458			63,939
		119,914			108,138
Accumulated Other Comprehensive (Loss) Income, Net of Tax		(2,534	)		843
TOTAL STOCKHOLDERS’ EQUITY		117,380			108,981
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	1,627,092		$	1,470,581

See accompanying notes to consolidated financial statements.

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SUFFOLK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

	For the Three Months Ended
	September 30, 2008		September 30, 2007
	unaudited		unaudited
INTEREST INCOME
Federal Funds Sold	$	262	$	53
United States Treasury Securities		100		99
Obligations of States & Political Subdivisions		1,595		1,407
Mortgage-Backed Securities		2,029		1,891
U.S. Government Agency Obligations		855		1,083
Corporate Bonds & Other Securities		119		96
Loans		17,494		17,845
Total Interest Income		22,454		22,474
INTEREST EXPENSE
Saving, N.O.W. & Money Market Deposits		2,085		1,221
Time Certificates of $100,000 or more		1,030		1,408
Other Time Deposits		1,307		2,076
Federal Funds Purchased and Repurchase Agreements		295		739
Interest on Other Borrowings		1,052		983
Total Interest Expense		5,769		6,427
Net-interest Income		16,685		16,047
Provision for Loan Losses		300		22
Net-interest Income After Provision for Loan Losses		16,385		16,025
OTHER INCOME
Service Charges on Deposit Accounts		1,402		1,339
Other Service Charges, Commissions & Fees		904		784
Fiduciary Fees		366		363
Other Operating Income		129		270
Total Other Income		2,801		2,756
OTHER EXPENSE
Salaries & Employee Benefits		6,520		6,062
Net Occupancy Expense		1,289		1,061
Equipment Expense		534		515
Other Operating Expense		3,002		2,269
Total Other Expense		11,345		9,907
Income Before Provision for Income Taxes		7,841		8,874
Provision for Income Taxes		2,168		2,831
NET INCOME	$	5,673	$	6,043
Average: Common Shares Outstanding		9,575,691		9,765,095
Dilutive Stock Options		27,742		15,118
Average Total Common Shares and Dilutive Options		9,603,433		9,780,213
EARNINGS PER COMMON SHARE Basic	$	0.59	$	0.61
Diluted	$	0.59	$	0.61
DIVIDENDS PER COMMON SHARE	$	0.22	$	0.22

See accompanying notes to consolidated financial statements.

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SUFFOLK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

	For the Nine Months Ended
	September 30, 2008		September 30, 2007
	unaudited		unaudited
INTEREST INCOME
Federal Funds Sold	$	265	$	136
United States Treasury Securities		298		297
Obligations of States & Political Subdivisions		4,643		3,955
Mortgage-Backed Securities		5,994		5,878
U.S. Government Agency Obligations		2,948		3,518
Corporate Bonds & Other Securities		500		304
Loans		51,759		52,782
Total Interest Income		66,407		66,870
INTEREST EXPENSE
Saving, N.O.W. & Money Market Deposits		4,841		3,632
Time Certificates of $100,000 or more		3,163		3,751
Other Time Deposits		4,641		6,097
Federal Funds Purchased and Repurchase Agreements		1,181		2,180
Interest on Other Borrowings		3,595		3,096
Total Interest Expense		17,421		18,756
Net-interest Income		48,986		48,114
Provision for Loan Losses		825		152
Net-interest Income After Provision		48,161		47,962
OTHER INCOME
Service Charges on Deposit Accounts		4,208		4,015
Other Service Charges, Commissions & Fees		2,350		2,199
Fiduciary Fees		1,114		1,022
Net Security Gains		3,737		—
Other Operating Income		434		449
Total Other Income		11,843		7,685
OTHER EXPENSE
Salaries & Employee Benefits		19,179		18,396
Net Occupancy Expense		3,463		3,065
Equipment Expense		1,580		1,660
Other Operating Expense		7,912		7,428
Total Other Expense		32,134		30,549
Income Before Provision for Income Taxes		27,870		25,098
Provision for Income Taxes		8,924		8,574
NET INCOME	$	18,946	$	16,524
Average: Common Shares Outstanding		9,579,312		9,969,036
Dilutive Stock Options		21,282		20,657
Average Total Common Shares and Dilutive Options		9,600,594		9,989,693
EARNINGS PER COMMON SHARE Basic	$	1.98	$	1.66
Diluted	$	1.97	$	1.65
DIVIDENDS PER COMMON SHARE	$	0.66	$	0.66

See accompanying notes to consolidated financial statements.

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SUFFOLK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

	For the Nine Months Ended
	September 30, 2008			September 30, 2007
	unaudited			unaudited
NET INCOME	$	18,946		$	16,524
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Provision for Loan Losses		825			152
Depreciation & Amortization		1,843			1,747
Net Security Gains		(3,737	)		—
Stock Based Compensation		138			180
Accretion of Discounts		(269	)		(108	)
Amortization of Premiums		681			623
Increase in Accrued Interest Receivable		(178	)		(459	)
Decrease in Other Assets		1,718			725
Decrease in Accrued Interest Payable		(1	)		(892	)
Increase (Decrease) in Other Liabilities		1,786			(2,062	)
Net Cash Provided by Operating Activities		21,752			16,430
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities Available for Sale		27,921			22,009
Proceeds from Sale of Investment Securities Available for Sale		3,737			—
Maturities of Investment Securities; Available for Sale		47,000			20,000
Purchases of Investment Securities; Available for Sale		(74,550	)		(28,328	)
Maturities of Investment Securities; Held to Maturity		2,322			2,796
Purchases of Investment Securities; Held to Maturity		(4,560	)		(2,210	)
Loan Disbursements & Repayments, Net		(105,499	)		(42,899	)
Purchases of Premises & Equipment, Net		(1,746	)		(1,261	)
Net Cash Used in Investing Activities		(105,375	)		(29,893	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts		171,194			21,323
Dividends Paid to Shareholders		(6,332	)		(6,641	)
Treasury Shares Acquired		(1,253	)		(16,997	)
Dividend Reinvestment in Common Stock		224			—
Net (Payments of) Proceeds from Other Borrowings		(20,700	)		21,655
Net Cash Provided by Financing Activities		143,133			19,340
Net Increase in Cash & Cash Equivalents		59,510			5,877
Cash & Cash Equivalents Beginning of Period		59,333			43,576
Cash & Cash Equivalents End of Period	$	118,843		$	49,453

See accompanying notes to consolidated financial statements.

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SUFFOLK BANCORP AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements of Suffolk Bancorp (Suffolk) and its consolidated subsidiaries have been prepared to reflect all adjustments (consisting solely of normally recurring accruals) necessary for a fair presentation of the financial condition and results of operations for the periods presented. Certain information and footnotes normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted. Notwithstanding, management believes that the disclosures are adequate to prevent the information from misleading the reader, particularly when the accompanying consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes thereto included in the Registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007.

The results of operations for the three and nine month periods ended September 30, 2008 are not necessarily indicative of the results of operations to be expected for the remainder of the year.

(2) Stock-based Compensation

At September 30, 2008, Suffolk had one stock-based employee compensation plan, a Stock Option Plan (“the Plan”), under which 1,200,000 shares of Suffolk’s common stock were originally reserved for issuance to key employees, and of which 1,020,500 remained available at that date. Options are awarded by a committee appointed by the Board of Directors. The Plan provides that the option price shall not be less than the fair value of the common stock on the date the option is granted. All options are exercisable for a period of ten years or less. The Plan provides for but does not require the grant of stock appreciation rights that the holder may exercise instead of the underlying option. When the stock appreciation right is exercised, the underlying option is canceled. The optionee receives shares of common stock with a fair market value equal to the excess of the fair value of the shares subject to the option at the time of exercise (or the portion thereof so exercised) over the aggregate option price of the shares set forth in the option agreement. The exercise of stock appreciation rights is treated as the exercise of the underlying option. Options vest after one year and expire after ten years.

Suffolk accounts for stock based compensation in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 123(R), “Share-Based Payment” (SFAS 123(R)). This statement requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. During the three months ended September 30, 2008, $44,000 of compensation expense, net of a tax benefit of $18,000, was recorded for stock-based compensation. During the nine months ended September 30, 2008, $138,000 of compensation expense, net of a tax benefit of $56,000, was recorded for stock-based compensation. As of September 30, 2008, there was $59,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested options under the Plan. That cost is expected to be recognized over a remaining period of 4 months.

The following table presents the options granted, exercised, or expired during the nine months ended September 30, 2008:

	Shares		Wtd. Avg. Exercise
Balance at December 31, 2007	141,500		$	27.61
Options granted	17,000			31.18
Options exercised	—			—
Options expired or terminated	(16,000	)		32.83
Balance at September 30, 2008	142,500		$	27.45

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The following table presents certain information about the valuation of options granted during the nine months ended September 30, 2008 and the year ended December 31, 2007:

At, or during,	9 Months Ended 9/30/2008			Year Ended 12/31/2007
Exercisable options (vested)		127,500			117,500
Weighted average fair value of options (Black-Scholes model) at date of grant:	$	10.38		$	10.07
Black-Scholes Assumptions:
Risk-free interest rate		3.59	%		4.89	%
Expected dividend yield		2.82	%		2.43	%
Expected life in years		10			10
Expected volatility		35.40	%		25.20	%

The following table details contractual weighted-average lives of outstanding options at various prices:

	By range of exercise prices
from	$	13.13	$	31.18	$	34.39
to		15.50		32.90		34.95
Outstanding stock options		42,000		67,000		33,500
Weighted-average remaining life		1.85		7.28		6.58
Weighted-average exercise price	$	14.60	$	31.86	$	34.74
Exercisable stock options		42,000		52,000		33,500
Weighted-average remaining life		1.85		6.69		6.58
Weighted-average exercise price	$	14.60	$	32.05	$	34.74
			Weighted-average
At all prices	Options		price		life (yrs)
Total outstanding		142,500	$	27.45		5.51
Total exerciseable		127,500	$	27.01		5.06

(3) Income Taxes

Under the liability method, deferred tax assets and liabilities are determined by the difference between the financial statement, and the tax bases of assets and liabilities. Deferred tax assets are subject to management’s judgment of available evidence that future realization is more likely than not. If management determines that Suffolk may be unable to realize all or part of the net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the amount management expects can be realized. On July 13, 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions that meet a “more-likely-than-not” recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. Suffolk has adopted the provisions of FIN 48 as of January 1, 2007. Suffolk determined, under the guidance of FIN 48 and the information available at the time, that is was not likely that the dividend received from its Real Estate Investment Trust subsidiary, would be included in full in taxable income as calculated for purposes of New York State corporate income tax. Accordingly, the cumulative effect of applying the provisions of FIN 48 were recorded as a credit adjustment to retained earnings in the amount of $2,013,000, as a result of the review, recognition, and measurement of uncertain tax positions. As of September 30, 2008, Suffolk had a liability for unrecognized tax benefits in the amount of $110,000. There have been no material changes in unrecognized tax benefits since January 1, 2008. Suffolk recognizes interest and penalties accrued relating to unrecognized tax benefits in income tax expense.

(4) Investments

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). This statement defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. The definition of fair value retains the exchange price notion, however this statement clarifies that the

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exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the principal market for the asset or liability. This statement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, therefore a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. This statement clarifies that market participant assumptions include assumptions about risk, the risk inherent in a particular valuation technique used to measure fair value and/or the risk inherent in the inputs to the valuation technique, as well as the effect of credit risk on the fair value of liabilities. This statement also expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods, focusing on the inputs used to measure fair value. The three levels of the fair value inputs under SFAS No. 157 are described below:

Basis of Fair Value Measurement:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Suffolk has adopted the provisions of SFAS 157 as of January 1, 2008. The following table summarizes fair value measurements as of September 30, 2008: (in thousands)

	Fair Value Measurements Using
Description	9/30/2008		Active Markets for Identical Assets Quoted Prices in (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	387,404	$	85,611	$	301,793		—
Impaired Loans		649		—		—		649
Total	$	388,053	$	85,611	$	301,793	$	649

The types of instruments valued based on quoted market prices in active markets include most U.S. Government debt and agency debt securities. Such instruments are generally classified within level 1 or level 2 of the fair value hierarchy. As required by SFAS No. 157, Suffolk does not adjust the quoted price for such instruments.

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include state and municipal obligations, mortgage backed securities and collateralized mortgage obligations. Such instruments are generally classified within level 2 of the fair value hierarchy.

On October 10, 2008, FASB issued Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Assets When the Market for That Assets is Not Active”. This FASB Staff Position (FSP) applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with SFAS No. 157. FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations and internal assumption that can be used in determining the fair value of financial assets when the market for that financial asset is not active. This FSP is effective upon issuance, including prior periods for which financial statements have not been issued.

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or market value, and classified at level 3 in the fair value hierarchy. Market value is measured based on the value of the collateral securing these loans or techniques that are not supported by market activity for loans that are not collateral dependent and require management’s judgment. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable. The value of real estate collateral is determined based on appraisals by qualified licensed appraisers hired by Suffolk. The value of business equipment may be based on an appraisal by qualified licensed appraisers hired by Suffolk if significant, or may be valued based on the equipment’s net book value on the business’ financial statements. Inventory and accounts receivable collateral may be valued based on independent field examiner review or aging reports, if significant.

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Field examiner reviews may be conducted based on the loan exposure and reliance on this type of collateral. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

(5) Retirement Plan

In September 2006, FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to recognize the funded status of a benefit plan in its statement of financial position; recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FASB No. 87 or No. 106; measure defined benefit plan assets and obligation as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions); and disclose in the notes to financial statements additional information about certain effects of net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset and obligation. Upon initial application of this statement and subsequently, an employer should continue to apply the provisions in Statements 87, 88, and 106 in measuring plan assets and benefit obligations as of the date of its statement of financial position and in determining the amount of net periodic benefit cost. An employer with publicly traded equity securities was required to recognize initially the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. Suffolk has adopted the provisions of SFAS. No. 158, which have been recorded in the accompanying consolidated statement of condition and disclosures.

In accordance with the requirements of SFAS No. 132(R), Suffolk presents information concerning net periodic defined benefit pension expense for the quarter and year to date periods ended September 30, 2008 and 2007, including the following components:

	3 months 9/30/2008			3 months 9/30/2007			9 months 9/30/2008			9 months 9/30/2007
Service cost	$	338,452		$	345,431		$	1,015,355		$	1,036,292
Interest cost		408,165			370,522			1,224,496			1,111,565
Expected return on plan assets		(520,474	)		(470,830	)		(1,561,423	)		(1,412,490	)
Amortization of prior service cost		(995	)		(995	)		(2,984	)		(2,984	)
Amortization of unrecognized net actuarial loss		—			33,732			—			101,195
Net periodic benefit expense	$	225,148		$	277,859		$	675,444		$	833,577

A contribution of approximately $986,000 was made to the pension plan in June of 2008. There were no additional contributions required to be made to the plan in the three months ended September 30, 2008.

(6) Recent Accounting Pronouncements

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB SFAS No. 115” (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. The statement defines items eligible for the measurement option. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Suffolk has adopted the provision of SFAS No. 159, which did not have a material impact on the company’s financial condition, results of operations and disclosures.

In December 2007, FASB revised SFAS No. 141, “Business Combinations” (SFAS No.141(R)). This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This statement recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. This statement also defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquiree achieves control. Additionally this statement determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective for fiscal years beginning after December 15, 2008. Suffolk is currently evaluating the impact of SFAS No. 141(R) on its financial condition, results of operations and disclosures.

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In December 2007, FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS No.160). This statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement amends ARB No. 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years beginning after January 1, 2009. Suffolk is currently evaluating the impact of SFAS No. 160 on its financial condition, results of operations and disclosures.

In March 2008, FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (SFAS No. 161). This statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement is effective for fiscal years and interim periods beginning after November 15, 2008. Suffolk is currently evaluating the impact of SFAS No. 161 on its financial condition, results of operations and disclosures.

In May 2008, FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS No.162). This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the U.S. GAAP hierarchy). SFAS No. 162 divides the body of U.S. GAAP into four categories by level of authority. This statement is effective sixty days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. Suffolk is currently evaluating the impact of SFAS No. 162 on its financial condition, results of operations and disclosures.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

For the Quarters and Nine-Month Periods ended September 30, 2008 and 2007

Recent Developments

Turmoil in credit markets increased as the problems posed by sub-prime mortgages granted during the previous several years became increasingly evident. An inability to value securities backed by these mortgages forced a number of financial institutions to take losses, reducing the amount of capital available to support their lending. The uncertainty created by the difficulties in valuing these securities spread more broadly into such markets as that for credit default swaps, and individuals and financial institutions became reluctant to lend to one another. This triggered a concurrent drop in equity markets, and federal officials took a number of unprecedented steps to stabilize credit markets, the precise outcome of which remains unclear. Residential real estate continued to decline in value, and the number of foreclosures increased, further diminishing investors’ confidence and resulting in significant declines in the value of banking stocks.

Against this background, rates of interest for shorter terms dropped during the year more than those for longer terms, resulting in a steeper “yield curve.” This was primarily the result of reductions by the Federal Reserve Board in its targets for federal funds and discount rates. At times, actual rates for overnight lending greatly exceed the target rates. However, rates were volatile throughout the period.

At Suffolk, interest income was flat despite an increase in total net loans, although that was offset by lesser interest expense, resulting in higher net interest income. The net interest margin decreased to 4.62 percent in the third quarter of 2008, down from 5.09 percent, in the third quarter of 2007. The net interest margin on a year to date basis decreased to 4.70 percent in 2008, down from 5.08 percent for the comparable period last year.

Return on average equity decreased to 19.89 percent for the third quarter in 2008, down from 24.36 percent during the third quarter of 2007, and earnings-per-share decreased from $.61 in the third quarter of 2007 to $.59 in the third quarter of 2008. For the first nine months of 2008, return on average equity increased to 22.36 percent, up from 21.43 percent during the comparable period of 2007, and earnings per share increased to $1.98 for the first nine months of 2008 up from $1.66 for the same period last year. The increase in return on average equity and earnings per share on a year to date basis is the result of a

Page 12

net gain on sale of securities during the first quarter of 2008, the proceeds of which were realized from the sale of shares issued by Visa, Inc. in connection with its initial public offering. Suffolk’s subsidiary, Suffolk County National Bank, was a member of the former Visa, Inc. payments organization and was issued shares when Visa, Inc. was organized. Approximately 39 percent of those shares were redeemed in connection with the initial public offering. The remaining shares are restricted because of unsettled litigation pending against Visa, Inc. Visa, Inc., at its discretion, may redeem additional restricted shares in order to resolve pending litigation. The restriction expires upon resolution of the pending litigation. Accordingly, Suffolk has recorded these shares at zero in the accompanying statement of condition. Upon expiration of the restriction, Suffolk expects to record the fair value of the remaining shares.

On October 14, 2008, subsequent to the preparation of Suffolk’s release of third quarter earnings, Visa, Inc. announced that it had reached an agreement in principle with Discover Financial Services (“Discover”) to settle litigation pending since 2004, and that the specific terms of the settlement were still being negotiated and would be made available when a final agreement had been reached. On October 27, 2008, Visa, Inc. announced that it had agreed to settle litigation with Discover, for $1.8875 billion, which included $1.7425 billion from the escrow created under Visa, Inc.’s retrospective responsibility plan, $80 million from Visa, Inc. to obtain releases from MasterCard, and an additional $65 million which would be refunded by Morgan Stanley under a separate agreement related to the settlement; and that this settlement would be subject to approval by Visa, Inc.’s former U.S. member financial institutions. On October 31, 2008, officials of Visa, Inc. conducted a conference call providing additional information concerning the settlement, thus allowing Suffolk to compute conclusively the net amount of its liability under the settlement. Based on a total excess of settlements over the amount of litigation escrow provided by Visa, Inc. of $807,500,000, Suffolk’s portion amounted to $455,995, resulting in an after-tax charge of $294,116, or $0.03 per share, recorded for the third quarter. It is expected that sufficient shares of Visa, Inc. will be redeemed during the fourth quarter of 2008 to cover this charge, thus reversing its effect.

Key to maintaining performance was close management of the balance sheet. Steps included:

• Repositioning of the investment portfolio to provide downside protection from falling rates, and continued purchases of municipal securities, currently providing liquidity as well as higher returns net of taxes, and some protection from falling interest rates.

• Pursuing ongoing program of capital management, maintaining total risk-based capital (“TRBC”) at a small margin above 10.00 percent which qualifies as “well-capitalized” with regulatory agencies and affords certain advantages to the banking subsidiary. Maximum prudent leverage is thus applied to the shareholders’ investment by means of selected repurchases of shares when capital exceeds the target, and through the retention of earnings when assets are growing. Growth in the core business during the quarter was sufficient to provide leverage to all retained earnings, and no shares were repurchased.

• Maintaining emphasis on both commercial and personal demand deposits, and non-maturity time deposits while responding as necessary to demand in Suffolk’s market for certificates of deposit of all sizes. In light of increased demand for loans from customers unable to obtain financing from other banks whose capital losses reduced their lending capacity, Suffolk redoubled its emphasis on the profitability of the whole relationship of it customers with the Bank, seeking when possible to both make loans to and obtain funding from qualified customers.

• Managing net loan charge-offs aggressively. During the third quarter of 2008, net charge-offs amounted to 8 basis points of average net loans, on an annualized basis.

• Consistent underwriting for lending to preserve both credit quality and yields in face of competition. Emphasis on preservation of margins over less profitable growth, and on the relationship rather than the transaction.

Net Income

Net income was $5,673,000 for the quarter, down 6.1 percent from $6,043,000 posted during the same period last year. Earnings per share for the quarter were $0.59 versus $0.61, a decrease of 3.3 percent. Net income was $18,946,000 for the nine months ended September 30, 2008, up from $16,524,000 posted during the same period last year. Earnings per share were $1.98 for the nine month period ended September 30, 2008, up from $1.66 posted last year. Included in net income is $2,429,000 attributed to the Visa, Inc. transaction, net of income taxes.

Page 13

Interest Income

Interest income was $22,454,000 for the third quarter of 2008, down 0.1 percent from $22,474,000 posted for the same quarter in 2007. Average net loans during the third quarter of 2008 totaled $1,039,045,000 compared to $912,248,000 for the same period of 2007. During the third quarter of 2008, the yield on a fully taxable-equivalent basis was 6.14 percent on average earning assets of $1,516,069,000 down from 7.03 percent on average earning assets of $1,319,548,000 during the third quarter of 2007. Interest income remained flat from quarter to quarter. Interest income was $66,407,000 for the first nine months of 2008, down 0.7 percent from $66,870,000 recorded in the first nine months of 2007. During the first nine months of 2008, the yield on a fully taxable-equivalent basis was 6.29 percent on average earning assets of $1,457,667,000, down from 6.98 percent on average earning assets of $1,316,723,000 during the first nine months of 2007.

Interest Expense

Interest expense for the third quarter of 2008 was $5,769,000, down 10.2 percent from $6,427,000 for the same period of 2007. During the third quarter of 2008, the cost of funds was 2.24 percent on average interest-bearing liabilities of $1,030,877,000, down from 2.99 percent on average interest-bearing liabilities of $858,812,000 during the third quarter of 2007. Interest expense decreased due to decreased rates paid for time certificates and borrowings, offset by increased balances and rates paid for Savings, N.O.W. and Money Market deposits. Interest expense was $17,421,000 for the nine months ended September 30, 2008, down 7.1 percent from $18,756,000 recorded last year to date. During the first nine months of 2008, the cost of funds was 2.34 percent on average interest-bearing liabilities of $990,647,000, down from 2.90 percent on average-interest bearing liabilities of $861,735,000 during the first nine months of 2007.

A portion of the Bank’s demand deposits are reclassified as savings accounts on a daily basis. The purpose of the reclassification is to reduce the non-interest-bearing reserve balances that the Bank is required to maintain with the Federal Reserve Bank, and thereby increase funds available for investment. Although these balances are classified as savings accounts for regulatory purposes, they are included in demand deposits in the accompanying consolidated statements of condition.

Page 14

Net Interest Income

Net interest income, before the provision for loan losses, is the largest component of Suffolk’s earnings. It was $16,685,000 for the third quarter of 2008, up 4.0 percent from $16,047,000 during the same period of 2007. The net interest margin for the quarter, on a fully taxable-equivalent basis, was 4.62 percent compared to 5.09 percent for the same period of 2007.

The following table details the components of Suffolk’s net interest income for the quarter on a taxable-equivalent basis: (in thousands)

Quarters ending September 30,	2008							2007
	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
INTEREST-EARNING ASSETS
U.S. Treasury securities	$	9,888	$	102		4.13	%	$	9,486	$	101		4.26	%
Collateralized mortgage obligations		147,695		2,017		5.46			138,597		1,874		5.41
Mortgage backed securities		695		12		6.91			950		17		7.16
Obligations of states and political subdivisions		165,592		2,422		5.85			142,788		2,136		5.98
U.S. govt. agency obligations		91,082		855		3.75			106,120		1,083		4.08
Corporate bonds and other securities		8,584		119		5.55			5,389		96		7.13
Federal funds sold and securities purchased under agreements to resell		53,488		262		1.96			3,970		53		5.34
Loans, including non-accrual loans
Commercial, financial & agricultural loans		226,143		3,616		6.40			192,738		4,079		8.47
Commercial real estate mortgages		329,305		5,958		7.24			301,994		5,729		7.59
Real estate construction loans		114,068		2,220		7.78			88,648		2,277		10.27
Residential mortgages (1st and 2nd liens)		201,003		3,118		6.20			161,683		2,575		6.37
Home equity loans		69,535		911		5.24			65,949		1,399		8.49
Consumer loans		94,960		1,671		7.04			98,812		1,786		7.23
Other loans (overdrafts)		4,031		—		—			2,424		—		—
Total interest-earning assets	$	1,516,069	$	23,283		6.14	%	$	1,319,548	$	23,205		7.03	%
Cash and due from banks	$	46,794						$	47,611
Other non-interest-earning assets		43,526							41,017
Total assets	$	1,606,389						$	1,408,176
INTEREST-BEARING LIABILITIES
Saving, N.O.W. and money market deposits	$	525,541	$	2,085		1.59	%	$	414,431	$	1,221		1.18	%
Time deposits		316,713		2,337		2.95			317,379		3,484		4.39
Total saving and time deposits		842,254		4,422		2.10			731,810		4,705		2.57
Federal funds purchased and securities sold under agreement to repurchase		45,734		295		2.58			54,109		739		5.46
Other borrowings		142,889		1,052		2.94			72,893		983		5.39
Total interest-bearing liabilities	$	1,030,877	$	5,769		2.24	%	$	858,812	$	6,427		2.99	%
Rate spread						3.90	%						4.04	%
Non-interest-bearing deposits	$	447,089						$	426,369
Other non-interest-bearing liabilities		14,314							23,767
Total liabilities	$	1,492,280						$	1,308,948
Stockholders’ equity		114,109							99,228
Total liabilities and stockholders’ equity	$	1,606,389						$	1,408,176
Net-interest income (taxable-equivalent basis) and effective interest rate differential			$	17,514		4.62	%			$	16,778		5.09	%
Less: taxable-equivalent basis adjustment				(829	)						(731	)
Net-interest income			$	16,685						$	16,047

Page 15

For the nine months ended September 30, 2008, net interest income was $48,986,000, up 1.8 percent from $48,114,000 during the same period of 2007. The net interest margin for the first nine months of 2008, on a fully taxable-equivalent basis, was 4.70 percent compared to 5.08 percent for the same period of 2007.

The following table details the components of Suffolk’s net interest income for the first nine months of the year on a taxable-equivalent basis: (in thousands)

Year to date ending September 30,	2008							2007
	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
INTEREST-EARNING ASSETS
U.S. Treasury securities	$	9,966	$	304		4.07	%	$	9,464	$	303		4.27	%
Collateralized mortgage obligations		147,927		5,956		5.37			146,302		5,826		5.31
Mortgage backed securities		741		38		6.84			977		52		7.10
Obligations of states and political subdivisions		162,356		7,049		5.79			134,998		6,004		5.93
U.S. govt. agency obligations		101,187		2,948		3.88			117,412		3,518		4.00
Corporate bonds and other securities		9,463		500		7.04			5,634		304		7.19
Federal funds sold and securities purchased under agreements to resell		18,160		265		1.95			3,396		136		5.34
Loans, including non-accrual loans
Commercial, financial & agricultural loans		224,363		11,207		6.66			194,076		12,301		8.45
Commercial real estate mortgages		324,428		17,441		7.17			293,940		16,588		7.52
Real estate construction loans		100,651		6,111		8.10			85,473		6,724		10.49
Residential mortgages (1st and 2nd liens)		191,469		8,975		6.25			154,157		7,447		6.44
Home equity loans		67,544		2,937		5.80			69,169		4,436		8.55
Consumer loans		96,581		5,088		7.02			98,927		5,286		7.12
Other loans (overdrafts)		2,831		—		—			2,798		—		—
Total interest-earning assets	$	1,457,667	$	68,819		6.29	%	$	1,316,723	$	68,925		6.98	%
Cash and due from banks	$	47,350						$	47,560
Other non-interest-earning assets		46,558							50,796
Total assets	$	1,551,575						$	1,415,079
INTEREST-BEARING LIABILITIES
Saving, N.O.W. and money market deposits	$	459,191	$	4,841		1.41	%	$	422,871	$	3,632		1.15	%
Time deposits		316,216		7,804		3.29			308,333		9,848		4.26
Total saving and time deposits		775,407		12,645		2.17			731,204		13,480		2.46
Federal funds purchased and securities sold under agreement to repurchase		53,182		1,181		2.96			53,830		2,180		5.40
Other borrowings		162,058		3,595		2.96			76,701		3,096		5.38
Total interest-bearing liabilities	$	990,647	$	17,421		2.34	%	$	861,735	$	18,756		2.90	%
Rate spread						3.95	%						4.08	%
Non-interest-bearing deposits	$	429,050						$	423,473
Other non-interest-bearing liabilities		18,924							27,072
Total liabilities	$	1,438,621						$	1,312,280
Stockholders’ equity		112,954							102,799
Total liabilities and stockholders’ equity	$	1,551,575						$	1,415,079
Net-interest income (taxable-equivalent basis) and effective interest rate differential			$	51,398		4.70	%			$	50,169		5.08	%
Less: taxable-equivalent basis adjustment				(2,412	)						(2,055	)
Net-interest income			$	48,986						$	48,114

Page 16

The table below presents a summary of changes in interest income, interest expense, and the resulting net interest income on a taxable equivalent basis for the quarterly periods presented. Because of numerous, simultaneous changes in volume and rate during the period, it is not possible to allocate precisely the changes between volumes and rates. In this table changes not due solely to volume or to rate have been allocated to these categories based on percentage changes in average volume and average rate as they compare to each other: (in thousands)

	In Third Quarter 2008 over Third Quarter 2007, Changes Due to
	Volume			Rate			Net Change
Interest-earning assets
U.S. Treasury securities	$	4		$	(3	)	$	1
Collateralized mortgage obligations		124			19			143
Mortgage-backed securities		(4	)		(1	)		(5	)
Obligations of states & political subdivisions		335			(49	)		286
U.S. government agency obligations		(146	)		(82	)		(228	)
Corporate bonds & other securities		48			(25	)		23
Federal funds sold & securities purchased under agreements to resell		263			(54	)		209
Loans, including non-accrual loans		2,308			(2,659	)		(351	)
Total interest-earning assets	$	2,932		$	(2,854	)	$	78
Interest-bearing liabilities
Saving, N.O.W., & money market deposits	$	377		$	487		$	864
Time deposits		(7	)		(1,140	)		(1,147	)
Federal funds purchased & securities sold under agreements to repurchase		(101	)		(343	)		(444	)
Other borrowings		653			(584	)		69
Total interest-bearing liabilities	$	922		$	(1,580	)	$	(658	)
Net change in net interest income (taxable-equivalent basis)	$	2,010		$	(1,274	)	$	736

The table below presents a summary of changes in interest income, interest expense, and the resulting net interest income on a taxable equivalent basis for the nine month periods presented: (in thousands)

	In First Nine Months of 2008 over First Nine Months of 2007, Changes Due to
	Volume			Rate			Net Change
Interest-earning assets
U.S. Treasury securities	$	16		$	(15	)	$	1
Collateralized mortgage obligations		65			65			130
Mortgage-backed securities		(12	)		(2	)		(14	)
Obligations of states & political subdivisions		1,191			(146	)		1,045
U.S. government agency obligations		(475	)		(95	)		(570	)
Corporate bonds & other securities		202			(6	)		196
Federal funds sold & securities purchased under agreements to resell		263			(134	)		129
Loans, including non-accrual loans		6,025			(7,048	)		(1,023	)
Total interest-earning assets	$	7,275		$	(7,381	)	$	(106	)
Interest-bearing liabilities
Saving, N.O.W., & money market deposits	$	331		$	878		$	1,209
Time deposits		246			(2,290	)		(2,044	)
Federal funds purchased & securities sold under agreements to repurchase		(26	)		(973	)		(999	)
Other borrowings		2,341			(1,842	)		499
Total interest-bearing liabilities	$	2,892		$	(4,227	)	$	(1,335	)
Net change in net interest income (taxable-equivalent basis)	$	4,383		$	(3,154	)	$	1,229

Page 17

Other Income

Other income increased to $2,801,000 for the quarter compared to $2,756,000 the previous year, up 1.6 percent. Service charges on deposits were up 4.7 percent. Service charges, including commissions and fees other than for deposits, increased by 15.3 percent. Trust revenue was up 0.8 percent. Other operating income decreased by 52.2 percent.

Other income for the nine months ended September 30, 2008 was $11,843,000, up 54.1 percent from $7,685,000 for the comparable year to date period. Service charges on deposit were up 4.8 percent. Service charges, including commissions and fees other than for deposits, increased 6.9 percent. Trust revenue was up 9.0 percent. Other operating income decreased by 3.3 percent. Proceeds received in connection with shares redeemed as part of the Visa, Inc. Inc. initial public offering resulted in a net securities gain of $3,737,000 during the first quarter.

Other Expense

Other expense for the third quarter of 2008 was $11,345,000, up 14.5 percent from $9,907,000 for the comparable period in 2007. Employee compensation increased by 7.6 percent, net occupancy expense increased 21.5 percent, equipment expense increased by 3.7 percent, and other operating expense increased by 32.3 percent. Increased expenses are attributed to new branch locations, and $456,000 recorded in connection with the settlement of Visa, Inc.’s litigation with Discover.

Other expense for the first nine months of 2008 was $32,134,000, up 5.2 percent from $30,549,000 compared to the first nine months of 2007. Employee compensation increased by 4.3 percent, net occupancy expense increased 13.0 percent, equipment expense decreased by 4.8 percent, and other operating expense increased by 6.5 percent.

Capital Resources

Stockholders’ equity totaled $117,380,000 on September 30, 2008, an increase of 7.7 percent from $108,981,000 on December 31, 2007. This was the result of net income, offset by the depreciation in the market value of securities available for sale, cash dividends and the repurchase of shares. The ratio of equity to assets was 7.2 percent at September 30, 2008 and 7.4 percent at December 31, 2007.

The following table details amounts and ratios of Suffolk’s regulatory capital: (in thousands of dollars except ratios)

	Actual				For capital adequacy				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2008
Total Capital (to risk-weighted assets)	$	126,949	10.34	%	$	98,179	8.00	%	$	122,724	10.00	%
Tier 1 Capital (to risk-weighted assets)		118,979	9.69	%		49,090	4.00	%		73,634	6.00	%
Tier 1 Capital (to average assets)		118,979	7.41	%		64,218	4.00	%		80,273	5.00	%
As of December 31, 2007
Total Capital (to risk-weighted assets)	$	114,858	10.21	%	$	89,991	8.00	%	$	112,488	10.00	%
Tier 1 Capital (to risk-weighted assets)		107,186	9.53	%		44,995	4.00	%		67,493	6.00	%
Tier 1 Capital (to average assets)		107,186	7.60	%		56,449	4.00	%		70,562	5.00	%

Credit Risk

Suffolk makes loans based on the best evaluation possible of the creditworthiness of the borrower. Even with careful underwriting, some loans may not be repaid as originally agreed. To provide for this possibility, Suffolk maintains an allowance for loan losses, based on an analysis of the performance of the loans in its portfolio. The analysis includes subjective factors based on management’s judgment as well as quantitative evaluation. Prudent, conservative estimates should produce an allowance that will provide for a range of losses. According to U.S. GAAP, a financial institution should record its best estimate. Appropriate factors contributing to the estimate may include changes in the composition of the institution’s assets, or potential economic slowdowns or downturns. Also important is the geographical or political environment in which the institution operates. Suffolk’s management considers all of these factors when determining the provision for loan losses.

Page 18

The provision for the allowance for loan losses was $300,000 for the third quarter of 2008, and $22,000 for the comparable period in 2007. Net charge-offs were $215,000 for the third quarter of 2008 compared to net recoveries of $41,000 for the third quarter of 2007. The provision for the allowance for loan losses was $825,000 for the first nine months of 2008, and $152,000 for the comparable period in 2007. Net charge-offs were $467,000 for the first nine months of 2008 compared to $123,000 of net recoveries for the comparable period of 2007.

The following table presents information about the allowance for loan losses: (in thousands of dollars except for ratios)

	For the last 12 months			For the three months ended
				Sept. 30 2008			June 30 2008			Mar. 31 2008			Dec. 31 2007
Allowance for loan losses
Beginning balance	$	7,459		$	7,885		$	7,852		$	7,672		$	7,459
Total charge-offs		(790	)		(369	)		(296	)		(95	)		(30	)
Total recoveries		335			154			74			65			42
Reclass to Allowance for Contingent Liabilities		(84	)		—			(45	)		(15	)		(24	)
Provision for loan losses		1,050			300			300			225			225
Ending balance	$	7,970		$	7,970		$	7,885		$	7,852		$	7,672
Coverage ratios
Loans, net of discounts: average	$	994,454		$	1,047,062		$	1,022,218		$	977,243		$	931,292
at end of period		1,014,210			1,061,658			1,027,031			1,009,350			958,800
Non-performing assets		1,880			1,775			2,355			1,743			1,648
Non-performing assets/total loans (net of discount)		0.19	%		0.17	%		0.23	%		0.17	%		0.17	%
Net charge-offs/average net loans (annualized)		0.04	%		0.08	%		0.09	%		0.01	%		(0.01	)%
Allowance/non-accrual, restructured, & OREO		424.96	%		449.01	%		334.82	%		450.49	%		465.53	%
Allowance for loan losses/net loans		0.77	%		0.75	%		0.77	%		0.78	%		0.80	%

Suffolk has financial and performance letters of credit. Financial letters of credit require Suffolk to make payment if the customer’s financial condition deteriorates, as defined in the agreements. Performance letters of credit require Suffolk to make payments if the customer fails to perform certain non-financial contractual obligations. The maximum potential undiscounted amount of future payments of these letters of credit as of September 30, 2008 is $24,043,000 and they expire as follows: (in thousands)

2008	$	5,131
2009		18,338
2010		400
2011		102
Thereafter		72
	$	24,043

Amounts due under these letters of credit would be reduced by any proceeds that Suffolk would be able to obtain in liquidating the collateral for the loans, which varies depending on the customer. The allowance for contingent liabilities includes a provision of $36,000 for losses based on the letters of credit outstanding as of September 30, 2008.

Critical Accounting Policies, Judgments and Estimates

Suffolk’s accounting and reporting policies conform to U.S. GAAP and general practices within the financial services industry. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

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Allowance for Loan Losses

Suffolk considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The balance in the allowance for loan losses is determined based on management’s review and evaluation of the loan portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions, and other pertinent factors, including management’s assumptions as to future delinquencies, recoveries and losses. All of these factors may change significantly. To the extent actual performance differs from management’s estimates, additional provisions for loan losses may be required that would reduce earnings in future periods.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Suffolk originates and invests in interest-earning assets and solicits interest-bearing deposit accounts. Suffolk’s operations are subject to market risk resulting from fluctuations in interest rates to the extent that there is a difference between the amounts of interest-earning assets and interest-bearing liabilities that are prepaid, withdrawn, mature, or re-priced in any given period of time. Suffolk’s earnings or the net value of its portfolio (the present value of expected cash flows from liabilities) will change when interest rates change. The principal objective of Suffolk’s asset/liability management program is to maximize net interest income while keeping risks acceptable. These risks include both the effect of changes in interest rates, and risks to liquidity. The program also provides guidance to management in funding Suffolk’s investment in loans and securities. Suffolk’s exposure to interest-rate risk has not changed substantially since December 31, 2007.

Business Risks and Uncertainties

This report contains some statements that look to the future. These may include remarks about Suffolk Bancorp, the banking industry, and the economy in general. 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. 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, new and unanticipated legislation, regulation, or accounting standards may require Suffolk to change its practices in ways that materially change the results of operation. Each of the factors may change in ways that management does not now foresee. 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.

Item 4.

Controls and Procedures

Suffolk’s Chief Executive Officer and Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934 for Suffolk. Based upon their evaluation of these controls and procedures as of September 30, 2008, the Certifying Officers have concluded that Suffolk’s disclosure controls and procedures are effective.

In addition, there has been no significant change in Suffolk’s internal controls over financial reporting that occurred during Suffolk’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Suffolk’s internal controls over financial reporting.

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PART II

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information about repurchases of common stock:

	For the last 12 months		For the three months ended
			Sept. 30 2008		June 30 2008		Mar. 31 2008		Dec. 31 2007
Average price per share of quarterly repurchases	$	20.21	$	—	$	—	$	29.84	$	30.81
Aggregate cost of quarterly repurchases	$	4,483,602	$	—	$	—	$	1,253,160	$	3,230,442
Repurchases of common stock
Treasury stock, beginning balance		3,848,799		3,995,661		3,995,661		3,953,661		3,848,799
Repurchases		146,862		—		—		42,000		104,862
Treasury stock, ending balance		3,995,661		3,995,661		3,995,661		3,995,661		3,953,661

Item 6.

Exhibits and Reports on Form 8-K

CERTIFICATION OF PERIODIC REPORT - Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT - Exhibit 32.1

The following reports were filed on Form 8-K during the three month period ended September 30, 2008.

Current Report on Form 8-K – the Company’s press release titled, “SUFFOLK BANCORP ANNOUNCES EARNINGS FOR THE SECOND QUARTER OF 2008,” dated July 15, 2008.

Current Report on Form 8-K – the Company’s press release titled, “SUFFOLK BANCORP ANNOUNCES EDGAR F. GOODALE AS ACTING CHAIRMAN AND J. GORDON HUSZAGH AS ACTING PRESIDENT AND CEO,” dated August 7, 2008.

Current Report on Form 8-K – the Company’s press release titled, “SUFFOLK BANCORP ANNOUNCES REGULAR QUARTERLY DIVIDEND,” dated August 26, 2008.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUFFOLK BANCORP
Date: November 6, 2008	/s/ J. Gordon Huszagh
	J. Gordon Huszagh
	Acting President, Chief Executive Officer, Executive Vice President & Chief Financial Officer

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