SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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STATE BANCORP, INC.
Incorporated pursuant to the Laws of New York State
------------------------------------
Internal Revenue Service -- Employer Identification No. 11-2846511
699 Hillside Avenue, New Hyde Park, New York 11040
(516) 437-1000
------------------------------------
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
filing requirements for the past 90 days. Yes [X] No [ ]
The total number of shares of the registrant's Common Stock outstanding on
October 30, 1995, was 4,211,912
<PAGE>
State Bancorp, Inc.
Item 1 - Financial Statements
Consolidated Balance Sheets
Statements of Consolidated Earnings
Statements of Consolidated Cash Flows
Consolidated Statements of Stockholders' Equity
Notes to Unaudited Consolidated Financial Statements
Financial Statement Presentation
Stockholders' Equity
Earnings per Share
Unrealized Net Gain (Loss) on Securities Available for Sale
Allowance for Possible Credit Losses
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Financial Condition
Material Changes in Results of Operations
Liquidity and Interest Rate Sensitivity
Analysis of Nonperforming Assets and the Allowance for Credit
Losses
Part II
Item 6 - Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
<S> <C> <C>
ASSETS: .......................................... 1995 1994
CASH & DUE FROM BANKS ............................ $ 13,047,474 $ 19,866,956
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL ........................... 0 5,100,000
------------- -------------
CASH AND CASH EQUIVALENTS ........................ 13,047,474 24,966,956
SECURITIES:
HELD TO MATURITY (APPROXIMATE MARKET VALUE -
$118,406,870 IN 1995 AND $130,014,812 IN 1994) . 120,023,761 136,356,799
AVAILABLE FOR SALE ............................... 120,493,057 78,801,673
------------- -------------
TOTAL SECURITIES ................................. 240,516,818 215,158,472
LOANS (NET OF ALLOWANCE FOR POSSIBLE CREDIT LOSSES 264,605,895 250,216,424
OF $5,278,655 IN 1995 AND $4,928,521 IN 1994)
BANK PREMISES AND EQUIPMENT - NET ................ 3,008,765 2,719,814
OTHER ASSETS ..................................... 11,812,107 12,299,053
------------- -------------
TOTAL ASSETS ..................................... $ 532,991,059 $ 505,360,719
------------- -------------
LIABILITIES:
DEPOSITS:
DEMAND ......................................... $ 66,559,212 $ 67,336,288
SAVINGS ........................................ 157,315,664 173,935,240
TIME ........................................... 161,131,531 136,053,074
------------- -------------
TOTAL DEPOSITS ................................... 385,006,407 377,324,602
FEDERAL FUNDS PURCHASED .......................... 15,600,000 16,000,000
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE ... 89,358,000 74,916,295
ACCRUED EXPENSES, TAXES AND OTHER LIABILITIES .... 3,684,305 949,352
------------- -------------
TOTAL LIABILITIES ................................ 493,648,712 469,190,249
------------- -------------
STOCKHOLDERS' EQUITY:
COMMON STOCK, $5.00 PAR VALUE,
AUTHORIZED 10,000,000 SHARES; ISSUED
4,198,135 IN 1995 AND 3,752,819 IN 1994 ...... 20,990,675 18,764,095
SURPLUS .......................................... 16,307,618 13,114,916
RETAINED EARNINGS ................................ 1,970,658 5,201,989
UNREALIZED NET GAIN (LOSS) ON SECURITIES AVAILABLE
FOR SALE (NET OF DEFFERED INCOME TAX EXPENSE
OF $52,162 IN 1995 AND DEFFERED INCOME TAX
BENEFIT OF $647,097 IN 1994) ................. 73,396 (910,530)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY ....................... 39,342,347 36,170,470
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....... $ 532,991,059 $ 505,360,719
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
STATE BANCORP AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,1995 AND 1994 (UNAUDITED)
THREE MONTHS NINE MONTHS
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME:
LOANS ........................................................ $ 6,421,959 $ 4,956,138 $ 18,454,673 $ 14,134,419
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL ........................ 103,891 110,314 745,290 462,702
SECURITIES HELD TO MATURITY AND SECURITIES
AVAILABLE FOR SALE:
U.S. TREASURY SECURITIES .................................. 405,516 355,209 1,210,993 1,033,935
STATES AND POLITICAL SUBDIVISIONS ......................... 488,606 393,498 1,642,758 1,239,808
MORTGAGE-BACKED SECURITIES ................................ 1,871,302 1,797,269 5,420,118 5,336,718
U.S. GOVERNMENT AGENCY SECURITIES ......................... 510,166 93,333 1,052,156 93,333
OTHER ..................................................... 24,908 0 56,497 0
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME ........................................ 9,826,348 7,705,761 28,582,485 22,300,915
------------ ------------ ------------ ------------
INTEREST EXPENSE:
------------
TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE ............. 1,507,437 810,227 4,378,221 2,180,253
OTHER DEPOSITS AND TEMPORARY BORROWINGS ...................... 3,096,288 2,108,324 9,077,005 6,142,721
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE ....................................... 4,603,725 2,918,551 13,455,226 8,322,974
------------ ------------ ------------ ------------
NET INTEREST INCOME .......................................... 5,222,623 4,787,210 15,127,259 13,977,941
PROVISION FOR POSSIBLE CREDIT LOSSES ......................... 375,000 450,000 1,125,000 1,950,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE CREDIT LOSSES .................................. 4,847,623 4,337,210 14,002,259 12,027,941
------------ ------------ ------------ ------------
NONINTEREST INCOME:
SERVICE CHARGES ON DEPOSIT ACCOUNTS .......................... 306,850 271,484 848,254 719,542
NET SECURITY LOSSES .......................................... (3,866) (13,762) (50,316) (25,946)
OTHER OPERATING INCOME ....................................... 61,449 51,946 257,492 210,178
------------ ------------ ------------ ------------
TOTAL NONINTEREST INCOME ..................................... 364,433 309,668 1,055,430 903,774
------------ ------------ ------------ ------------
INCOME BEFORE OPERATING EXPENSES ............................. 5,212,056 4,646,878 15,057,689 12,931,715
------------ ------------ ------------ ------------
OPERATING EXPENSES:
SALARIES AND OTHER EMPLOYEE BENEFITS ..................... 1,867,553 1,705,166 5,647,190 5,046,836
OCCUPANCY .................................................... 325,688 318,565 993,689 919,068
EQUIPMENT .................................................... 121,863 122,605 380,257 369,395
DEPOSIT ASSESSMENT FEES .................................... 45,328 234,296 457,306 709,073
AMORTIZATION OF INTANGIBLES ................................ 160,300 142,079 481,787 459,572
OTHER OPERATING EXPENSES ................................... 666,589 684,440 2,085,804 1,901,776
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES ..................................... 3,187,321 3,207,151 10,046,033 9,405,720
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ................................... 2,024,735 1,439,727 5,011,656 3,525,995
PROVISION FOR INCOME TAXES ................................... 693,098 457,161 1,582,524 1,037,663
------------ ------------ ------------ ------------
NET INCOME ................................................... $ 1,331,637 $ 982,566 $ 3,429,132 $ 2,488,332
------------ ------------ ------------ ------------
EARNINGS PER COMMON SHARE .................................... $ 0.32 $ 0.24 $ 0.82 $ 0.61
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ................................... 4,194,005 4,123,068 4,158,772 4,103,366
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
STATE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,1995 AND 1994 (UNAUDITED)
OPERATING ACTIVITIES: 1995 1994
<S> <C> <C>
NET INCOME ................................................... $ 3,429,132 $ 2,488,332
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN ) OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE CREDIT LOSSES ....................... 1,125,000 1,950,000
DEPRECIATION AND AMORTIZATION OF BANK PREMISES AND EQUIPMENT 277,115 262,219
AMORTIZATION OF INTANGIBLES ................................ 481,787 459,572
AMORTIZATION OF NET PREMIUM ON SECURITIES .................. 883,863 1,008,309
NET SECURITY LOSSES ........................................ 50,316 25,946
INCREASE IN OTHER ASSETS, NET .............................. (694,100) (1,426,910)
INCREASE IN ACCRUED EXPENSES, TAXES
AND OTHER LIABILITIES ................................... 2,734,953 1,735,890
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................... 8,288,066 6,503,358
------------ ------------
INVESTING ACTIVITIES:
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY ...... 48,315,122 65,357,203
PURCHASES OF SECURITIES HELD TO MATURITY ..................... (32,430,168) (71,556,978)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE ......... 37,314,678 27,502,353
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE .... 20,081,359 28,304,408
PURCHASES OF SECURITIES AVAILABLE FOR SALE ................... (97,890,331) (51,943,317)
INCREASE IN LOANS - NET ...................................... (15,514,471) (4,541,953)
PURCHASES OF BANK PREMISES AND EQUIPMENT ..................... (566,066) (219,304)
PROCEEDS FROM SALE OF BANK PREMISES AND EQUIPMENT ............ 0 1,625
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES .......................... (40,689,877) (7,095,963)
------------ ------------
FINANCING ACTIVITIES:
DECREASE IN DEMAND AND SAVINGS DEPOSITS ...................... (17,396,652) (12,859,629)
INCREASE (DECREASE) IN TIME DEPOSITS ......................... 25,078,457 (6,061,389)
DECREASE IN FEDERAL FUNDS PURCHASED .......................... (400,000) (425,000)
INCREASE (DECREASE) IN SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE ............................................. 14,441,705 (9,182,726)
PROCEEDS FROM SHARES ISSUED UNDER DIVIDEND REINVESTMENT PLAN . 516,142 355,789
PAYMENT OF CASH DIVIDENDS .................................... (1,932,701) (1,182,519)
PROCEEDS FROM THE EXERCISE OF STOCK OPTIONS .................. 175,378 0
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ............ 20,482,329 (29,355,474)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ...................... (11,919,482) (29,948,079)
CASH AND CASH EQUIVALENTS - JANUARY 1 .......................... 24,966,956 42,451,340
------------ ------------
CASH AND CASH EQUIVALENTS - SEPTEMBER 30 ....................... $ 13,047,474 $ 12,503,261
------------ ------------
SUPPLEMENTAL DATA:
INTEREST PAID ............................................. $ 13,241,804 $ 8,236,372
INCOME TAXES PAID ......................................... $ 1,467,090 $ 1,606,890
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
UNREALIZED
NET GAIN (LOSS)
ON SECURITIES
COMMON RETAINED AVAILABLE
STOCK SURPLUS EARNINGS FOR SALE TOTAL
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 ..................... $ 18,764,095 $ 13,114,916 $ 5,201,989 ($ 910,530) $ 36,170,470
NET INCOME ..................................... 3,429,132 3,429,132
CASH DIVIDENDS DECLARED ($0.46 PER SHARE) ...... (1,932,701) (1,932,701)
10% STOCK DIVIDEND ISSUED
(378,222 SHARES AT MARKET VALUE) .......... 1,891,105 2,836,657 (4,727,762) 0
SHARES ISSUED UNDER DIVIDEND REINVESTMENT
PLAN (45,047 SHARES AT 95% OF MARKET VALUE) 225,235 290,907 516,142
STOCK OPTIONS EXERCISED ........................ 110,240 65,138 175,378
NET CHANGE IN UNREALIZED NET LOSS ON
SECURITIES AVAILABLE FOR SALE ............. 983,926 983,926
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1995 ................... $ 20,990,675 $ 16,307,618 $ 1,970,658 $ 73,396 $ 39,342,347
------------ ------------ ------------ ------------ ------------
BALANCE, JANUARY 1, 1994 ..................... $ 16,870,255 $ 11,066,551 $ 5,913,437 $ 865,005 $ 34,715,248
NET INCOME ..................................... 2,488,332 2,488,332
CASH DIVIDENDS DECLARED($0.29 PER SHARE) ....... (1,182,519) (1,182,519)
10% STOCK DIVIDEND ISSUED
(337,863 SHARES AT MARKET VALUE) ........... 1,689,315 1,858,247 (3,547,562) 0
SHARES ISSUED UNDER DIVIDEND REINVESTMENT
PLAN (37,187 SHARES AT 95% OF MARKET VALUE) 185,935 169,854 355,789
NET CHANGE IN UNREALIZED NET GAIN ON
SECURITIES AVAILABLE FOR SALE ............... (1,229,068) (1,229,068)
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1994 ................... $ 18,745,505 $ 13,094,652 $ 3,671,688 ($ 364,063) $ 35,147,782
------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
Notes to Unaudited Consolidated Financial Statements
Financial Statement Presentation In the opinion of the management of State
Bancorp, Inc. (the "Company"), the preceding unaudited consolidated financial
statements contain all adjustments, consisting of normal accruals, necessary for
a fair presentation of its consolidated financial condition as of September 30,
1995 and December 31, 1994 and its consolidated results of operations for the
three and nine months ended September 30, 1995 and 1994 and changes in cash
flows and stockholders' equity for the nine months ended September 30, 1995 and
1994. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K.
Stockholders' Equity
Common shares issued have been adjusted to reflect a 10% stock dividend
issued on July 5, 1995.
Earnings per Share
Earnings per share are computed based on the weighted average number of
common shares outstanding after giving retroactive effect to stock dividends.
The impact of the assumed exercise of stock options is immaterial or
antidilutive in all periods presented
Securities
Management designates each security, at the time of purchase, as either
available for sale or held to maturity depending upon investment objectives,
liquidity needs and intent. Securities held to maturity are stated at amortized
cost. The company has the intent and ablity to hold such securities to maturity.
Securities available for sale are stated at estimated market value and
unrealized gains and losses are excluded from earnings and reported as a
separate component of stockholders' equity until realized.
Allowance for Possible Credit Losses
Activity in the allowance for possible credit losses for the nine months
ended September 30, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance, January 1 $4,928,521 $4,725,033
Provision charged to income 1,125,000 1,950,000
Charge-offs, net of recoveries
of $59,870 and $87,929 (774,866) (1,070,295)
----------- -----------
Balance, September 30 $5,278,655 $5,604,738
=========== ===========
</TABLE>
Effective January 1, 1995, the Company adopted Statements of Financial
Accounting Standards No. 114 ("SFAS No. 114"), "Accounting by Creditors for
Impairment of a Loan," and No. 118 ("SFAS No. 118"), "Accounting by Creditors
for Impairment Recognition and Disclosures." A loan is considered impaired under
SFAS No. 114 when, based on current information and events, it is probable that
the lender will not be able to collect all the principal and interest due under
the contractual terms of the loan. Impaired loans subject to individual analysis
consist of all nonaccrual commercial mortgages and nonaccrual commercial and
industrial loans over $250,000. Due to the nature of the Company's loans, the
adoption of SFAS No. 114 and SFAS No. 118 did not have a material effect on the
Company's results of consolidated operations or financial condition during the
first nine months of 1995. As of September 30, total impaired loans amounted to
$6,640,309. As a result of the Company's evaluation of impaired loans, an
allowance for credit losses of $1,136,930 was established for $5,950,309 of the
total impaired loans with the balance of impaired loans requiring no
<PAGE>
specific allowance according to SFAS No. 114. For the three and nine months
ended September 30, 1995, the total average impaired loan balance was $6,215,214
and $6,089,621, respectively.
Interest received on nonaccrual loans is either applied against principal
or reported as income, according to management's judgement as to the
collectibility of the principal. Interest for impaired restructured loans is
accrued in accordance with their revised terms. Total interest income recognized
for impaired nonaccrual and restructured loans during the three and nine months
ended September 30, 1995 was $34,054 and $63,837, respectively.
<PAGE>
Item 2. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
1. Material Changes in Financial Condition -- Total assets of the Company
grew by $27.6 million (5.5%) to $533.0 million at September 30, 1995, when
compared to December 31, 1994. This growth was primarily attributable to a $25.4
million increase in the investment portfolio, mainly taxable Government Agency
obligations. Also adding to the asset expansion was a $14.1 million or 5.5%
increase in the Company's loans outstanding, mainly middle market commercial and
industrial credits.
The asset increase was largely funded through higher levels of time
deposits (up $25.1 million), principally large denomination certificates of
deposit, and securities sold under agreements to repurchase (up $14.4 million).
Total deposits advanced by $7.7 million or 2.0%, despite a $16.6 million or 9.6%
decrease in savings deposit balances. Despite the success of the Company's
Prosperity Savings product, introduced in January 1995, retail and public
savings balances have continued to decline as a result of lower interest rates
and the flat yield curve that has prevailed for most of this year.
Third quarter 1995 average assets were $519.6 million, an increase of 12.8%
from the comparable 1994 period. Loan growth of $34.4 million or 14.9% accounted
for the largest category of asset expansion. Funding the growth in average
assets were increases in demand deposits, short-term certificates of deposits
and borrowed funds. Passbook and statement savings balances, on average,
continued to decline during the third quarter of 1995 as customers transferred
balances into higher yielding certificates of deposit, as well as mutual funds
and annuity products.
At September 30, 1995, the Company maintained capital adequacy ratios above
those necessary for it to be classified as a "well capitalized" institution
pursuant to the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). The table on the following page (#2-1)
summarizes the Company's capital ratios as of September 30, 1995 and compares
them to current regulatory guidelines and December 31 and September 30, 1994
actual results.
<TABLE>
<CAPTION>
Table 2-1
Tier I capital/ Total Capital/
Tier I Risk-Weighted Risk-Weighted
Leverage Assets Assets
----------- --------------- --------------
<S> <C> <C> <C>
Regulatory Minimum 3.00%-5.00% 4.00% 8.00%
Ratios as of:
September 30, 1995 7.23% 12.09% 13.74%
December 31, 1994 6.75% 11.83% 13.51%
September 30, 1994 7.19% 12.16% 13.96%
Regulatory Criteria for
a "Well Capitalized"
Institution 5.00% 6.00% 10.00%
</TABLE>
The Company's liquidity policy emphasizes adequate, but not excessive,
liquidity and the protection of net interest income from the effect of adverse
movements in interest rates and the shape of the interest rate yield curve.
Throughout the first nine months of this year, the Company's liquidity position
remained stable and well within acceptable industry standards. At September 30,
1995, the Company had access to $17 million in informal lines of credit extended
by correspondent banks to be utilized, if needed, for short-term funding
purposes. In addition, the Company had approximately $55 million in investment
securities available to be pledged to secure repurchase agreements or Federal
Reserve Discount Window borrowings. The Company also has access to approximately
$50 million in Federal Home Loan Bank lines of credit available to be drawn down
for overnight, term and repurchase transactions. Further detail on the Company's
liquidity and interest- sensitivity position may be found on Table 2-2 that
follows this analysis.
<PAGE>
2. Material Changes in Results of Operations -- Net income for the nine
months ended September 30, 1995 was $3,429,000, a 35.5% improvement over the
comparable 1994 period. The growth in earnings during 1995 was the result of
improvements in net interest income and noninterest income coupled with an $835
thousand reduction in the provision for credit losses due to continued
improvement in the quality of the Company's loan portfolio. Higher earning asset
levels, primarily commercial loans, coupled with a 3 basis point improvement in
the net interest spread (to 4.16%), accounted for the 8.2% increase in gross
margin to $15.1 million. The wider spread resulted from the impact of the higher
prime rate prevailing during 1995's third quarter along with a shift in the
asset mix to a greater reliance on higher yielding loans and investment
securities. Noninterest income, excluding net securities losses, when compared
to the comparable 1994 period, rose by 18.9% due to higher deposit service
charges and greater letter of credit issuance fees and annuity commission
income.
Total operating expenses increased by 6.8% during the first nine months of
1995 versus 1994. Higher levels of salaries and employee benefits (up 11.9%),
occupancy expenses (up 8.1%) and foreclosed property costs accounted for the
increase in operating expenses. Partially offsetting these increases was a
decline in FDIC deposit assessment costs due to a reduction in the assessment
rate during the third quarter of 1995. The Company's operating efficiency ratio
(total operating expenses as a percentage of fully taxable equivalent net
revenue, excluding securities transactions) was 58.4% during the first nine
months of 1995 versus 60.2% in the comparable year age period. The Company
continues to strive for an efficiency ratio of no more than 55% and, with
several initiatives currently underway, anticipates achieving that goal during
1996.
Nonperforming assets totaled $10.5 million at September 30, 1995, a
decrease of $1.4 million versus December 31, 1994. This reduction resulted
principally from a $1.9 million decline in restructured, accruing loans.
Nonaccrual loans, up $0.9 million since December 31, 1994, continue to receive
significant management attention and are being aggressively pursued via
collection and workout efforts. Continued improvement in the level of
nonperforming assets is anticipated by management during the fourth quarter of
1995 and into 1996. The provision for credit losses, as previously mentioned,
declined by $825 thousand during the first nine months of 1995 due to the
favorable trend in asset quality experienced thus far this year. The allowance
for possible credit losses amounted to $5.3 million or 1.96% of total loans
outstanding at September 30, 1995 versus 1.93% and 2.39% at December 31, 1994
and September 30, 1994, respectively.
<PAGE>
<TABLE>
<CAPTION>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1995
TABLE 2-2 LIQUIDITY AND INTEREST RATE SENSITIVITY
($ INTHOUSANDS SENSITIVITY TIME HORIZON
0 - 6 6 - 12 Over Noninterest
INTEREST - SENSITIVE ASSETS : 1) Months Months 1 Year Sensitive Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Loans 2) ........................................... $183,091 $ 14,474 $ 64,714 $ 7,606 $269,885
Securities Held to Maturity 3) ..................... 18,879 28,995 72,150 120,024
Securities Available for Sale 3) .................. 45,863 20,699 52,375 1,430 120,367
Unrealized Net Gain on Securities
Available for Sale ............................... 126 126
-------- -------- -------- -------- --------
Total Interest-Sensitive Assets .............. 247,959 64,168 189,239 9,036 510,402
Cash and Due from Banks ............................ 13,047 13,047
All Other Assets 6) ............................... 4,257 1,821 3,464 9,542
-------- -------- -------- -------- --------
Total Assets ................................. $265,263 $ 65,989 $189,239 $ 12,500 $532,991
-------- -------- -------- -------- --------
INTEREST - BEARING LIABILITIES : 1)
Savings Accounts 4) ............................... $ 17,815 $ 17,815 $ 71,264 $ 0 $106,894
Money Fund and Now Accounts 5) .................... 39,544 3,626 7,251 0 50,421
Time Deposits ...................................... 97,202 19,972 43,958 0 161,132
-------- -------- -------- -------- --------
Total Interest-Bearing Liabilities ........... 154,561 41,413 122,473 0 318,447
Securities Sold Under Agreements to Repurchase and
Federal Funds Purchased . 104,958 104,958
All Other Liabilities, Equity and Demand Deposits 6) 1,335 944 58 107,249 109,586
-------- -------- -------- -------- --------
Total Liabilities and Equity ................. $260,854 $ 42,357 $122,531 $107,249 $532,991
-------- -------- -------- -------- --------
Cumulative Interest-Sensitivity Gap .......... $ 4,409 $ 28,040 $ 94,748 $ 0 $ 0
-------- -------- -------- -------- --------
Cumulative Interest-Sensitivity Ratio ........ 101.7 % 109.2 % 122.3 % 100.0 % 100.0 %
Cumulative Interest-Sensitivity Gap
As a % of Interest-Sensitive Assets ....... 1.7 % 8.5 % 18.2 % -- % -- %
<FN>
1) Allocations to specific interest sensitivity periods are based on the
earlier of the repricing or maturity date.
2) Nonaccrual loans are shown in the noninterest sensitive category.
3) Estimated principal reductions have been assumed for mortgage-backed
securities based upon their current constant prepayment rates.
4) Savings deposits are assumed to decline ratably over a three-year
period.
5) Now accounts are assumed to decline ratably over a two-year period.
6) Other Assets and Liabilities are shown according to payment schedule or
reasonable estimate.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 2 - MANAGEMENT'S DISCUSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
TABLE 2 - 3
STATE BANCORP, INC.
ANALYSIS OF NONPERFORMING ASSETS AND THE ALLOWANCE FOR CREDIT LOSSES
SEPTEMBER 30, 1995 VERSUS DECEMBER 31, 1994 AND SEPTEMBER 30, 1994
(DOLLARS IN THOUSANDS)
PERIOD ENDED:
<S> <C> <C> <C>
NONPERFORMING ASSETS BY TYPE ................................................... 9/30/95 12/31/94 9/30/94
-------- -------- --------
NONACCRUAL LOANS:
SECURED BY REAL ESTATE .................................................. $ 4,512 $ 3,182 $ 4,479
COMMERCIAL & INDUSTRIAL .................................................... 2,959 3,359 3,866
ALL OTHER .................................................................. 136 166 133
-------- -------- --------
SUBTOTAL NONACCRUAL LOANS ............................................... 7,607 6,707 8,478
RESTRUCTURED, ACCRUING LOANS .................................................. 2,818 4,709 4,913
OTHER REAL ESTATE ............................................................. 57 454 52
-------- -------- --------
TOTAL NONPERFORMING ASSETS ............................................... $ 10,482 $ 11,870 $ 13,443
-------- -------- --------
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING ......................................................... $ 1,946 $ 1,162 $ 1,790
TOTAL LOANS OUTSTANDING ...................................................... $269,885 $255,230 $234,588
TOTAL STOCKHOLDERS' EQUITY ................................................... $ 39,342 $ 36,170 $ 35,148
<CAPTION>
QUARTER ENDED:
<S> <C> <C> <C>
ANALYSIS OF THE ALLOWANCE FOR
CREDIT LOSSES 9/30/95 12/31/94 9/30/94
-------- -------- --------
BEGINNING BALANCE ............................................................ $ 4,970 $ 5,604 $ 5,239
ADD: PROVISION ............................................................... 375 375 450
LESS: NET CHARGE-OFFS ........................................................ 66 1,050 85
-------- -------- --------
-------- -------- --------
ENDING BALANCE ........................................................... $ 5,279 $ 4,929 $ 5,604
-------- -------- --------
KEY RATIOS AT PERIOD-END:
ALLOWANCE AS A % OF TOTAL LOANS ............................................. 1.96% 1.93% 2.39%
NONACCRUAL LOANS AS A % OF TOTAL LOANS ...................................... 2.82% 2.63% 3.61%
NONPERFORMING ASSETS AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE .............................................. 3.88% 4.64% 5.73%
NONPERFORMING ASSETS AS A % OF
STOCKHOLDERS' EQUITY AND THE ALLOWANCE
FOR CREDIT LOSSES ......................................................... 23.49% 28.88% 32.99%
ALLOWANCE FOR CREDIT LOSSES AS A %
OF NONACCRUAL LOANS ....................................................... 69.40% 73.49% 66.10%
ALLOWANCE FOR CREDIT LOSSES AS A %
OF NONPERFORMING ASSETS ................................................... 50.36% 41.52% 41.69%
</TABLE>
<PAGE>
PART II
Item 6 - Exhibits and Reports on Form 8-K
On August 22, 1995, the Company filed a report on Form 8-K indicating that
it had declared a $0.10 cash dividend on its common stock, payable October
16, 1995 to holders of record as of September 15, 1995. This represents a
change in the Company's cash dividend policy from an annual to a quarterly
basis. Future cash dividends will be reviewed by the Company's Board of
Directors on a quarterly basis beginning in the fourth quarter of 1995. The
Company's stock dividend policy will continue to be reviewed on an annual
basis.
<PAGE>
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.
State Bancorp, Inc.
11/10/95 Daniel T. Rowe, Secretary
-----------------------------
(Principal Financial Officer)
11/10/95 Brian K. Finneran, Comptroller
------------------------------
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<PERIOD-START> JUL-01-1995
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0
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