STATE BANCORP INC, 10-K, 1996-04-01

STATE BANCORP INC
10-K, 1996-04-01
STATE COMMERCIAL BANKS

Previous: MEDCO RESEARCH INC, 10-K405, 1996-04-01

Next: WORLDCOM INC /MS/, 10-K, 1996-04-01

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
----- THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 1995
-----------------
Commission File No. 0-14874

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

STATE BANCORP, INC.
-------------------
(Exact name of registrant as specified in its charter)

New York 11-2846511
-------- ----------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)

699 Hillside Avenue
New Hyde Park, N.Y. 11040
- ------------------- -----
(Address of principal (Zip Code)
executive offices)

Registrant's telephone number including area code (516) 437-1000

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock ($5.00 par value)
------------------------------
(Title of Class)

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
requirement for the past 90 days.

Yes X No
--- ---

As of March 15, 1996, there were 4,222,128 shares of common stock outstanding
and the aggregate market value of common stock of State Bancorp, Inc. held by
nonaffiliates was approximately $60,165,000 based upon the last trade per share
known to Management.

<PAGE>

STATE BANCORP, INC.
FORM 10-K

INDEX

PART I Page
------ ----

Item 1. Business

General 1.
Statistical Information 4.

Item 2. Properties 4.

Item 3. Legal Proceedings 5.

Item 4. Submission of Matters to a Vote of Stockholders 5.

PART II
-------

Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters 6.

Item 6. Selected Consolidated Financial Data 6.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7.

Item 8. Consolidated Financial Statements and
Supplementary Data 7.

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 8.

PART III
--------
Item 10. Directors and Executive Officers of the
Registrant 8.

Item 11. Executive Compensation 8.

Item 12. Security Ownership of Certain Beneficial
Owners and Management 9.

Item 13. Certain Relationships and Related Transactions 9.

PART IV
-------
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 9.

Signatures 13.

Exhibits

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

Listed hereunder are the documents incorporated by reference and the parts of
the Form 10-K into which such documents are incorporated:

(1) The Annual Report to Stockholders for the year ended December 31,
1995. Referenced in Parts I and II of the December 31, 1995 Annual
Report on Form 10-K, Items 1, 5, 6, 7 and 8.
(2) The 1996 Proxy Statement, dated March 29, 1996. Referenced in Part
III of the December 31, 1995 Annual Report on Form 10-K, Items 10, 11,
12 and 13.

PART I
ITEM 1. BUSINESS

GENERAL

State Bancorp, Inc. (the "Company") was incorporated under the laws of the State
of New York on November 18, 1985. The acquisition by the Company of 100% of the
outstanding shares of State Bank of Long Island (the "Bank"), on a share for
share basis, was consummated as of the close of business on June 24, 1986.

The Company has no other subsidiaries and does not engage in any activities
other than acting as holding company for the common stock of the Bank. The
business of the Company is conducted through the Bank, which continues to
conduct its business in the same manner and from the same offices as it had done
before the effective date of the reorganization. The Bank, therefore, accounts
for all of the consolidated assets and revenues of the Company.

<PAGE>

The Company is subject to supervision and regulation by the Board of Governors
of the Federal Reserve System ("Federal Reserve Board") pursuant to the Bank
Holding Company Act of 1956, as amended. The Bank is subject to periodic
examination and regulation by the State of New York Banking Department and the
Federal Deposit Insurance Corporation.

The Bank was organized in 1966 and is the only independent commercial bank
headquartered in New Hyde Park. It provides general banking services to
residents and businesses located substantially in the eastern end of Queens
County, Nassau County and the western end of Suffolk County. It offers a full
range of deposit products including checking, fixed and variable rate savings,
time, money market and IRA and Keogh accounts. Credit services offered include
commercial mortgages, commercial and installment loans, home equity lines of
credit, residential mortgages and auto loans. In addition, the Bank provides
merchant credit card services, access to annuity products and offers a consumer
debit card with membership in a national ATM network. The Bank currently has
ATMs at five of its eight branch locations. The Bank also offers its retail
customers the ability to verify their account balances, affect transfers between
accounts and access current deposit and loan rates through an automated
telephone voice response system.

There is strong competition in the area serviced by the Bank from branches of
several savings banks and savings and loan associations, as well as branches of
the major New York City banks. Of these, the Bank

- 2 -
<PAGE>

is considerably smaller in size than virtually all of its commercial
competitors, and approximates the size of only one or two of its thrift
competitors. Nonetheless, the Bank has demonstrated the ability to compete
profitably with larger financial institutions.

The Bank's business is not of a seasonal nature nor does it depend on one or a
few large customers for its existence. The Bank does not have any foreign
commitments, with the exception of letters of credit issued on behalf of several
of its depositors. The Bank's nature and conduct of business have remained
unchanged since year end 1994.

In 1979, the Bank established the New Hyde Park Leasing Corporation to lease
various types of commercial equipment. During 1994, the Bank established SB ORE
Corp. to hold foreclosed property acquired in connection with extensions of
credit. Total operating income and income before income taxes of these
subsidiaries are less than ten percent of the respective amounts for the
consolidated entity.

Compliance with provisions regulating environmental controls will have no effect
upon the capital expenditures, earnings or competitive position of the Company.

The Company employed 174 full-time and part-time officers and employees as of
December 31, 1995.

- 3 -
<PAGE>

STATISTICAL INFORMATION

Statistical information is furnished pursuant to the requirements of Guide 3
(Statistical Disclosure by Bank Holding Companies) promulgated under the
Securities Act of 1933.

Incorporated by reference is the Company's 1995 Annual Report to stockholders.
The Company's statistical information may be found on pages 30 - 34.

ITEM 2. PROPERTIES

The main office of the Company is located at the Bank's main branch at 699
Hillside Avenue, New Hyde Park, N.Y. The lease on the land used by the Bank
expires on March 27, 2009 and contains an option to renew for an additional ten-
year period.

The Bank's lending division is located at the Triad office complex, 1981 Marcus
Avenue, Lake Success, N.Y. This lease expires on March 31, 1997 and contains an
option to renew for an additional five-year period. The Bank's Regional
Financial Centers are located at the Jericho Atrium, 500 North Broadway,
Jericho, N.Y. and at 2 Lincoln Avenue, Rockville Centre, N.Y. The Jericho lease
expires on May 31, 1997 and the Rockville Centre lease expires on October 31,
1997.

The Bank operates full service branches at 501 North Broadway, Jericho, N.Y.;
580 East Jericho Turnpike, Huntington, N.Y.; 740 Veterans Memorial Highway,
Hauppauge, N.Y.; 339 Nassau Boulevard, Garden City South, N.Y.

- 4 -
<PAGE>

and 135 South Street, Oyster Bay, N.Y. The Jericho lease expires on October 31,
2011 and contains a twelve-year renewal option. The Huntington lease expires on
December 31, 1999 and has two five-year renewal options. The Bank's operations
center is also located in the Huntington facility. The Hauppauge lease expires
June 30, 2005 and contains two ten-year renewal options. The Garden City South
and Oyster Bay facilities are owned by the Company.

The fixtures and equipment contained in these operating facilities are owned or
leased by the Bank. The Company considers that all of its premises, fixtures
and equipment are adequate for the conduct of its business.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor the Bank is a party to any pending legal proceedings,
other than ordinary, routine litigation incidental to the banking business. In
the opinion of management, liabilities, if any, resulting from these matters
would not have a material adverse effect on the consolidated financial
statements of the Company or the Bank.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

There were no matters submitted to a vote of stockholders during the quarter
ended December 31, 1995.

- 5 -
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

(a) Incorporated herein by reference is the Company's 1995 Annual Report
to Stockholders. The Company's common stock market data for the past
three years may be found on page 35 thereof, below the Selected
Quarterly Financial Data.

(b) At December 31, 1995, the approximate number of equity stockholders
were as follows:

(1) (2)

Title of Class Number of Record Holders
-------------- ------------------------

Common Stock 1,207

(c) Annual cash dividends of 57, 29, and 26 cents per share, restated to
give retroactive effect to stock dividends, were paid in 1995, 1994,
and 1993, respectively. Annual stock dividends of 10% were paid in
1995, 1994 and 1993. It is the Company's expectation that dividends
will continue to be paid in the future.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

(a) Incorporated herein by reference is the Company's 1995 Annual Report
to Stockholders. The Company's five year summary of operations may be
found on page 36.

- 6 -
<PAGE>

(b) Additional years are not considered necessary to keep the
above referenced summary from being misleading.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

(a) Incorporated herein by reference is the Company's 1995 Annual Report
to Stockholders. Management's Discussion and Analysis of Financial
Condition and Results of Operations may be found on pages 24 - 29.

(b) There are no known trends or any known demands, commitments, events or
uncertainties which will result in, or which are reasonably likely to
result in, the Company's liquidity increasing, or decreasing, in any
material way.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated herein by reference is the Company's 1995 Annual Report to
Stockholders. The Company's audited Consolidated Balance Sheets as of the close
of the last two years may be found on page 6. Reference again is made to State
Bancorp, Inc.'s 1995 Annual Report to Stockholders for the Company's audited
Statements of Consolidated Earnings, Cash Flows and Stockholders' Equity for
each of the three years in the period ended December 31, 1995. These items may
be found on pages 8 - 10.

- 7 -
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

NONE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Incorporated herein by reference is the Company's 1996 Proxy
Statement, dated March 29, 1996. The identification of the directors
of the Company may be found on pages 10 - 12.

(b) Incorporated herein by reference is the Company's 1996 Proxy
Statement, dated March 29, 1996. The identification of the executive
officers of the Company may be found under "Principal Officers" on
page 2.

There exists no family relationships between any director or executive
officer.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference is the Company's 1996 Proxy Statement, dated
March 29, 1996. Management remuneration may be found on page 3.

- 8 -
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Incorporated herein by reference is the Company's 1996 Proxy Statement, dated
March 29, 1996. Security ownership of certain beneficial owners and management
may be found on page 14.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated herein by reference is the Company's 1996 Proxy Statement, dated
March 29, 1996. Certain relationships and related transactions may be found on
page 10.

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS

Included in the 1995 Annual Report to Stockholders of State Bancorp, Inc.
and enclosed herewith, are the following financial statements and notes
thereon:

- Consolidated Balance Sheets as of December 31, 1995 and 1994.

- Consolidated Statements of Condition of State Bank of Long Island as of
December 31, 1995 and 1994.

- Statements of Consolidated Earnings for the years ended December 31,
1995, 1994 and 1993.

- 9 -
<PAGE>

- Statements of Consolidated Cash Flows for the years ended December 31,
1995, 1994 and 1993.

- Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- Summary of Significant Accounting and Reporting Policies (1)

- Securities Held to Maturity and Securities Available for Sale (2)

- Loans - Net (3)

- Allowance for Possible Credit Losses (4)

- Bank Premises and Equipment - Net (5)

- Other Assets (6)

- Lines of Credit (7)

- Income Taxes (8)

- Stockholders' Equity (9)

- Employee Benefit Plans (10)

- Commitments and Contingent Liabilities (11)

- State Bancorp, Inc. (Parent Company Only) (12)

- Financial Instruments with Off-Balance Sheet Risk (13)

- Disclosures about Fair Value of Financial Instruments (14)

- Regulatory Matters (15)

INDEPENDENT AUDITORS' REPORT

- 10 -
<PAGE>

Schedules are omitted because they are not applicable or because required
information is shown in the consolidated financial statements or the notes
thereto.

(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.

EXHIBIT ITEM METHOD OF FILING
- ------- ---- ----------------
NO.
- ---

(3) Articles of incorporation Incorporated by reference from
and by-laws exhibit B to the Company's
a) Articles of Registration Statement on Form S-4,
incorporation file No. 33-2958, Filed February 3, 1986.

b) By-laws, as amended Incorporated by reference from
exhibit 3b to the Company's
December 31, 1990 Form 10-K.

(4) Instruments defining the Pages 22-28 of the above referenced
rights of security holders Registration Statement.

(10) Material contracts

a) Deferred compensation Incorporated by reference from
plan exhibit 10b to the Company's
December 31, 1986 Form 10-K.

b) (i) Directors' Incorporated by reference from
incentive retirement exhibit 10c to the Company's
plan December 31, 1986 Form 10-K.

b) (ii) Agreements of Incorporated by reference from
participants exhibit 10b (ii) to the Company's
surrendering their December 31, 1992 Form 10-K.
rights under the
directors' incentive
retirement plan.

b) (iii) Agreements of Filed herein.
participants
modifying agreements
described in item b)
(ii)

- 11 -
<PAGE>

c) 1987 incentive stock Incorporated by reference from
option plan, as exhibit 10c to the Company's
amended December 31, 1991 Form 10-K.

d) 1994 incentive stock Incorporated by reference from
option plan exhibit 10d to the Company's
December 31, 1993 Form 10-K.

e) (i) Executive Incorporated by reference from
severance plan no.1 exhibit 10f to the Company's
December 31, 1987 Form 10-K.

e) (ii) Executive Incorporated by reference from
severance plan no.2 exhibit 10d to the Company's
December 31, 1990 Form 10-K.

e) (iii) Executive Filed herein
severance plan no.3

e) (iv) Executive Filed herein
severance plan no.4

e) (v) Executive Filed herein
severance plan no.5

f) State Bank of Long Incorporated by reference from
Island 401k exhibit 10g to the Company's
retirement plan and December 31, 1987 Form 10-K.
trust

g) State Bancorp, Inc. Incorporated by reference from
employee stock exhibit 10g to the Company's
ownership plan December 31, 1987 Form 10-K.

h) Deferred compensation Filed herein
agreement

(13) Annual report to Filed herein
stockholders

(24) Independent Auditors' Filed herein
Consent

- 12 -
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15d of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned,

STATE BANCORP, INC.

By: s/Thomas F. Goldrick, Jr., Chairman & Pres.
-------------------------------------------
Thomas F. Goldrick, Jr., Chairman & Pres.

Date: March 26, 1996
-------------------------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
on the dates indicated.

Signature

s/Thomas F. Goldrick, Jr. Chairman of the Board and President 3/26/96
- ------------------------- (Principal Executive Officer) -------
Thomas F. Goldrick, Jr.

s/Daniel T. Rowe Secretary 3/26/96
- ------------------------- (Principal Financial Officer) -------
Daniel T. Rowe

s/Brian K. Finneran Comptroller 3/26/96
- ------------------------- -------
Brian K. Finneran

s/Gary Holman Vice Chairman of the Board 3/26/96
- ------------------------- -------
Gary Holman

s/Robert J. Grady Director 3/26/96
- ------------------------- -------
Robert J. Grady

s/Carl R. Bruno Director 3/26/96
- ------------------------- -------
Carl R. Bruno

s/J. Robert Blumenthal Director 3/26/96
- ------------------------- -------
J. Robert Blumenthal

s/Richard W. Merzbacher Director 3/26/96
- ------------------------- -------
Richard W. Merzbacher

s/Joseph F. Munson Director 3/26/96
- ------------------------- -------
Joseph F. Munson

s/John F. Picciano Director 3/26/96
- ------------------------- -------
John F. Picciano

s/Raymond M. Piacentini Director 3/26/96
- ------------------------- -------
Raymond M. Piacentini

Director -------
- -------------------------
Suzanne Rueck

- 13 -

<PAGE>

EXHIBIT (10)b)(iii) - AGREEMENTS OF PARTICIPANTS MODIFYING
AGREEMENTS DESCRIBED IN EXHIBIT (10)b)(ii)

<PAGE>

AGREEMENT made as of this 23rd day of March, 1993, effective as of the
1st day of April, 1992, by and between STATE BANCORP, INC. ("Bancorp"), a New
York corporation, having offices at 699 Hillside Avenue, New Hyde Park, New York
and ___________________________________________________________ ("Participant").

WITNESSETH:

WHEREAS, Participant has served as a member of the Board of Directors
of Bancorp and of its wholly-owned subsidiary, STATE BANK OF LONG ISLAND ("the
Bank"); and

WHEREAS, Participant is a participant in the Directors Incentive
Retirement Plan ("the Plan") of Bancorp; and

WHEREAS, Participant is entitled to receive, as such participant,
payment of retirement benefits over a period of five (5) years following
retirement as a director of Bancorp; and

WHEREAS, Bancorp has requested that Participant cancel and surrender
his rights in, to and under the Plan; and

WHEREAS, Participant is willing to cancel and surrender his rights in,
to and under the Plan in exchange for Bancorp's obligation to make the payments
provided for in this agreement.

NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable

<PAGE>

consideration, it is mutually covenanted and agreed by and between the parties
as follows:

1. PAYMENTS:

(a) In full and complete satisfaction and discharge of all of the
rights of Participant under the Plan, Bancorp agrees to pay to Participant or to
his designated beneficiary until March 1, 2007, the sum of $12,350.00 annually,
in monthly installments of $1,029.16 on the first day of each month, the first
payment to be made on April 1, 1992.

(b) If Participant shall die prior to March 1, 2007, the Bank shall
make the balance of such payments to the designated beneficiary of Participant
to and including March 1, 2007. If both Participant and his designated
beneficiary shall die prior to March 1, 2007, the Bank shall make payment of the
balance of such amounts to the estate of the designated beneficiary of
Participant.

(c) The beneficiary is a designated beneficiary for the purposes of
this Agreement only as designated by Participant on a form provided by the
Corporation and delivered to the Corporation before the death of Participant.
Participant may change his designation at any time without the consent of any
prior beneficiary. If Participant dies and there is no designated beneficiary
then surviving, the amounts payable under paragraph (a) of this Article shall be
payable to the estate of Participant.

-2-
<PAGE>

(d) The rights of Participant or any beneficiary of Participant shall
be solely those of an unsecured creditor of the Corporation. If the Corporation
shall acquire an insurance policy or any other asset in connection with the
liabilities assumed by it hereunder, then, except as otherwise expressly
provided, such policy or other asset shall not be deemed to be held under any
trust for the benefit of Participant or his beneficiary or to be collateral
security for the performance of the obligation of the Corporation, but shall be,
and remain, a general, unpledged, unrestricted asset of the Corporation.

2. RESTRICTIVE COVENANT: Participant agrees that so long as he is
receiving payments pursuant to the terms of this agreement, he will not accept
employment from, or serve in any capacity with, any other person, firm or
corporation which is at such time engaged in the business of a like or similar
nature to the business then being conducted by Bancorp or the Bank or by any
subsidiary or affiliate of either of them, provided, however, that the rendering
of legal services by Participant, or any law firm of which he is a partner,
counsel or associate, to any such person, firm or corporation shall not be
deemed a breach of this restriction. Breach of this restriction by Participant
shall result in the forfeiture of all rights of Participant to any future
payments due under this agreement.

-3-
<PAGE>

3. CONSULTING SERVICES: Effective as of the date hereof and as long
as Participant continues to receive monthly payments pursuant to this Agreement,
Participant shall consult with Bancorp and any of its subsidiaries in an
advisory capacity at all times when reasonably requested to do so by Bancorp;
provided, however, that the consultations shall be performed in the place or
places and time or times and the manner that Participant may from time to time
designate, and shall not require a major part of the Participant's time.

During the period during which the Participant is to render advisory
services to Bancorp, Bancorp may suspend, in whole or in part, one or more
payments to the Participant, or discontinue them in their entirety, if the
Participant without the Bancorp's prior consent in writing:

a. renders services to, or permits the use of his name by, any
organization engaged in the same or a similar line of activity as
Bancorp, or in competition with it; or

b. fails to hold himself reasonably available for consultation, by
Bancorp management personnel, on corporate matters within his
particular field of knowledge and experience.

The amount of any and all payments thus suspended or discontinued
shall be forfeited. However, the condition of subparagraph b, above, shall not
be deemed violated if the

-4-
<PAGE>

failure of the Participant is due to reason of health (including physical or
mental infirmity), or if compliance with such condition would subject him to
more than nominal expenses or loss of income.

4. RELINQUISHMENT OF RIGHTS: It is the intention of both Bancorp and
Participant that the provisions of this agreement are in place instead of any
rights that Participant may have under the Plan. Participant does hereby
irrevocably waive, relinquish and forego any and all rights and benefits to
which he may be entitled under the Plan, the rights and benefits provided for in
this agreement being in complete substitution therefor.

5. WAIVER, MODIFICATION OR CANCELLATION: Any waiver, alteration, or
modification of any of the provisions of this agreement shall not be valid
unless in writing and signed by the parties.

6. CONSTRUCTION: This agreement shall be governed by the Law of the
State of New York.

7. BINDING EFFECT: This agreement shall be binding upon and inure to
the benefit of Bancorp, its successors and assigns.

8. This agreement supersedes a prior agreement between Bancorp and
Participant dated April 1, 1992.

-5-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this agreement
the day and year first above written.

STATE BANCORP, INC.

BY:
----------------------------------

----------------------------------

-6-

<PAGE>

EXHIBIT (10)e)(iii) - EXECUTIVE SEVERANCE PLAN NO. 3

<PAGE>

STATE BANCORP, INC.
EXECUTIVE SEVERANCE PLAN NO. 3

PREAMBLE AND STATEMENT OF PURPOSE. The purpose of this Plan is to
assure the Corporation that it will have the continued dedication of, and the
availability of objective advice and counsel from, key executives of the
Corporation notwithstanding the possibility, threat or occurrence of a bid to
take over control of or to restructure the Corporation.

In the event the Corporation receives any proposals concerning a
possible restructuring of the Corporation's assets or the acquisition of the
Corporation's equity securities, the Board of Directors of the Corporation (the
"Board") believes it imperative that the Corporation and the Board be able to
rely upon key executives to continue in their positions and be available for
advice, if requested, without concern that those individuals might be distracted
by the personal uncertainties and risks created by such proposal.

Should the Corporation receive any such proposals, in addition to
their regular duties, such key executives may be called upon to assist in the
assessment of proposals, advise management and the Board as to whether such
proposals would be in the best interest of the Corporation and its shareholders,
and to take such other actions as the Board might determine.

ELIGIBLE EXECUTIVES. Participants under this Plan shall consist of
those key executives of the Corporation and its Subsidiaries (as hereinafter
defined) who are full-time employees

<PAGE>

of the rank of Senior Vice-President and above and who are from time to time
designated as key executives to be included within this Plan by the Board. A
Participant who the Board determines has ceased to be a key executive shall
cease to be a Participant in the Plan when notified by the Board of such
determination; EXCEPT THAT no such determination that a Participant has ceased
to be a key executive shall be made, and if made shall have no effect, (i)
within one year after the Change of Control (as hereinafter defined) in
question, (ii) at any time after the Executive's employment with the Corporation
has terminated or (iii) during any period of time when the Corporation has
knowledge that any third person has taken steps reasonably calculated to effect
a Change of Control until, in the opinion of the Board, the third person has
abandoned or terminated its efforts to effect a Change of Control. Any decision
by the Board that the third person has abandoned or terminated its efforts to
effect a Change of Control shall be conclusive and binding on the Participants.

AGREEMENTS. An Executive Severance Agreement (the "Agreement"), in
substantially the form approved by the Board and attached to this Plan as
Exhibit A, shall be executed by the Corporation and each Participant. Each
Agreement entered into pursuant to this Plan shall provide the following:

SEVERANCE PAYMENTS AND ADJUSTMENTS. Unless the Corporation shall have
offered to a Participant an employment contract substantially in the form of
Exhibit B to the Agreement in accordance with the provisions of the Agreement,
in the event of

-2-
<PAGE>

termination of the Participant's employment with the Corporation (including its
Subsidiaries) for any reason (whether voluntary or involuntary, other than as a
consequence of death, disability, or retirement at or after his normal
retirement date under the Corporation's retirement plans) within one year after
a Change of Control; (i) a cash payment will be made to Participant by the
Corporation in an amount equal to one and one-half times the Participant's then
base salary (the "Base Salary"); (ii) continued coverage for the Participant
without charge to Participant under the group life insurance plan of the
Corporation or any Subsidiary as then in effect or equivalent benefits for an
eighteen month period following termination at a contribution level determined
on the basis of one and one-half times the Participant's Base Salary; (iii)
continued coverage for the Participant without charge to Participant for
eighteen months from the date of termination under Hospital/Medical/Surgical
insurance of the Corporation or any Subsidiary; (iv) an automobile allowance of
$6,000.00; (v) Participant's stock option grants shall become immediately
exercisable; and (vi) such other arrangement will be made as the Board deems
appropriate; PROVIDED, HOWEVER, that: (a) in the event of a Change of Control
defined in clause (iii) of the definition of a "Change of Control", the Board
may require, as a condition for receiving the above benefits, that the
Participant remain employed by the Corporation (including its Subsidiaries) for
a period of up to 180 days following the Change of Control; (b) that the
condition set forth in the preceding clause shall be waived if the Corporation

-3-
<PAGE>

(including its Subsidiaries) terminates the Participant's employment of any
reason; and (c) that in no event shall the aggregate present value of the
severance payments and adjustments to the Participant, discounted under Internal
Revenue Code Section 1274(b)(2) using then current federal rates, exceed three
times the "base amount", as determined under Internal Revenue Code Section 280G.

EMPLOYMENT CONTRACT. In the event that prior to the occurrence of a
Change of Control the Board determines that a third person has taken steps to
effect a Change of Control and that such Change of Control could occur within 90
days after such determination, the Board may approve the Corporation's entering
into an employment contract (a "Contract") with a Participant, substantially in
the form of Exhibit B to the Agreement, providing for the Participant's
continued employment by the Corporation for a period of eighteen months (or
until the Participant's normal retirement date under the Corporation's
retirement plans, whichever is shorter) commencing on the first date upon which
a Change of Control occurs, on substantially the same terms as those of his
employment prior to the Change of Control. The Corporation's offer to enter
into a Contract with a Participant will terminate such Participant's rights to
the severance payments and adjustments described in the preceding paragraph, but
will not affect any other provisions described in the following paragraph),
which shall remain in full force and effect after such offer; PROVIDED THAT no
such offer will be effective for any purpose if received by a Participant after
a Change of Control has occurred.

-4-
<PAGE>

OTHER TERMS AND CONDITIONS. The Agreement shall contain such other
terms, provisions and conditions not inconsistent with this Plan as shall be
determined by the Board.

NON-ASSIGNABILITY. Each Participant's rights under this Plan shall be
non-Transferable except by will or the laws of descent of distribution.

CERTAIN DEFINITIONS.

"BASE SALARY" shall mean the Participant's current base salary
(including all incentive compensation) whether said salary is paid by the
Corporation or any Subsidiary.

A "CHANGE OF CONTROL" shall be deemed to have taken place if: (i) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner of shares of the
Corporation having 25% or more of the total number of votes that may be cast for
the election of directors of the Corporation, unless the Board within 20 days
from the date such person becomes such beneficial owner, determines that the
purpose of such ownership is investment only without any intention of
influencing the management, business or affairs of the corporation; or (ii) at
any time on or before December 31, 1999, those persons who were directors of the
Corporation on November 30, 1995 (the "Current Directors") or who were
recommended for election by a majority of the Current Directors shall have
ceased to constitute a majority of the Board of Directors of the Corporation or
any successor to the Corporation; or (iii) any spin-off or similar corporate
division (a "Division") that results in the

-5-
<PAGE>

distribution to shareholders of the Corporation of a business or businesses
whose assets represent 20% or more of the fair market value of the total assets
of the Corporation and its subsidiaries immediately before the Division. Any
determination by the Board made pursuant to clause (i) above that the purpose of
such ownership is investment only without any intention of influencing the
management, business or affairs of the Corporation may be changed by the Board
at any time, in which event a Change of Control shall be deemed to have taken
place at the date of such changed determination. A Change of Control pursuant
to clause (i) above shall not be deemed to have taken place until the expiration
of the 20 day period referred to in such clause (i), or, if earlier, a
determination by the Board, or a public declaration by such person, that the
purpose of such ownership is other than investment only without any intention of
influencing the management business or affairs of the Corporation. Any
reasonable determination by the Board made in connection with the matters
covered by the foregoing definition shall be conclusive and binding on the
Participants.

"SUBSIDIARY" shall mean any domestic or foreign corporation of which
the Corporation owns, directly or indirectly, 50% or more of the outstanding
securities generally entitled to vote for the election of directors.

UNFUNDED PLAN. The Plan shall be unfunded. Neither the Corporation
nor the Board shall be required to segregate any assets with respect to benefits
under the Plan. Neither the Corporation

-6-
<PAGE>

nor the Board shall be deemed to be a trustee of any amounts to be paid under
the Plan. Any liability of the Corporation to any Participant with respect to
any benefit shall be based solely upon any contractual obligations created by
the Plan and the Agreement; no such obligation shall be deemed to be secured by
any pledge or any encumbrance on any property of the Corporation.

TERMINATION AND AMENDMENT OF THIS PLAN. Unless this Plan shall be
earlier terminated or extended in accordance with the next succeeding sentence,
this Plan shall terminate on December 31, 1999. The Board shall have power at
any time, in its discretion, to amend, abandon or terminate this Plan, in whole
or in part; EXCEPT THAT no amendment, abandonment or terminations shall impair
or abridge the obligations of the Corporation under any Agreements entered into
pursuant to this Plan.

EFFECTIVE DATE. This Plan shall become effective on November 28,
1995.

-7-
<PAGE>

EXHIBIT A

EXECUTIVE SEVERANCE AGREEMENT

AGREEMENT between STATE BANCORP, INC., a New York corporation (the
"Corporation"), and (the "Executive"),

W I T N E S S E T H :

WHEREAS, the Board of Directors of the Corporation has approved the
Corporation entering into severance agreements with key executives of the
Corporation and its Subsidiaries (as defined in the Plan) pursuant to the
Corporation's Executive Severance Plan No. 3 (the "Plan"); and

WHEREAS, the Executive is a key executive of the Corporation or one of
its Subsidiaries and has been selected by the Board as a key executive to be a
Participant under the Plan; and

WHEREAS, should the Corporation receive any proposal from a third
person concerning a possible business combination with, a possible restructuring
of the assets of or, the acquisition of equity securities of, the Corporation,
the Board believes it imperative that the Corporation and the Board be able to
rely upon the Executive to continue in his position, and that the Corporation be
able to receive and rely upon his advice, if it requests it, as to the best
interests of the Corporation and its shareholders without concern that he might
be distracted by the personal uncertainties and risks created by such a
proposal; and

<PAGE>

WHEREAS, should the Corporation receive any such proposals, in
addition to the Executive's regular duties, he may be called upon to assist in
the assessment of such proposals, advise management and the Board as to whether
such proposals would be in the best interests of the Corporation and its
shareholders, and to take such other actions as the Board might determine to be
appropriate;

NOW, THEREFORE, to assure the Corporation that it will have the
continued dedication of the Executive and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Corporation, and to induce the Executive to remain in the
employ of the Corporation, and for other good and valuable consideration, the
Corporation and the Executive agree as follows:

1. SERVICES DURING CERTAIN EVENTS. In the event a third person
begins a tender or exchange offer, circulates a proxy to shareholders, or takes
other steps to effect a Change of Control (as hereinafter defined), the
Executive agrees that he will not voluntarily leave the employ of the
Corporation, and will render the services contemplated in the recitals to this
Agreement and the Plan, until the third person has abandoned or terminated his
efforts to effect a Change of Control or until a Change of Control has occurred.

2. TERMINATION AFTER CHANGE OF CONTROL. Subject to the provisions of
Section 3 of this Agreement, in the event the Executive's employment with the
Corporation (references in this

-2-

<PAGE>

Agreement to the Corporation also include, where appropriate, reference to any
of the Corporation's Subsidiaries as well as any corporation the business or
businesses of which were conducted by the Corporation or any of its Subsidiaries
before a Change of Control defined in clause (iii) of paragraph F below)
terminates for any reason (either voluntary or involuntary, other than as a
consequence of his death or disability, or of his retirement at or after his
normal retirement date under the Corporation's retirement plans) within one year
after a Change of Control:

A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the Executive as
compensation for services rendered to the Corporation a lump sum cash amount
(subject to any applicable payroll or other taxes required to be withheld) equal
to one and one-half times the Executive's then Base Salary as defined in the
Plan. In the event there are fewer than eighteen whole or partial months
remaining from the date of the Executive's termination to his normal retirement
date, the amount calculated in this paragraph will be reduced by multiplying it
by a fraction the numerator of which is the number of whole or partial months so
remaining to his normal retirement date and the denominator of which is
eighteen.

B. GROUP LIFE INSURANCE. The Corporation will provide the Executive with
coverage under the Corporation's group life insurance plan as then in effect, or
equivalent benefits, at no cost to the Executive, for eighteen months following
the date his employment terminates (or until his normal retirement date,

-3-
<PAGE>

whichever is shorter) at a level determined on the basis of one and one-half
times the Executive's Base Salary.

C. HOSPITAL/MEDICAL/SURGICAL INSURANCE. The Executive's
participation in the Hospital/Medical/Surgical insurance plan of the
Corporation, shall be continued on the same basis as prior to the Change of
Control or equivalent benefits shall be provided by the Corporation at no direct
cost to him, for a period of eighteen months years from the date his employment
terminates (or until his normal retirement date, whichever, is shorter).

D. OTHER PLANS AND AUTOMOBILE ALLOWANCE. The Executive's
participation in any applicable Savings, Retirement, Incentive and/or Profit
Sharing Plan of the Corporation shall continue only through the last day of his
employment. Any terminating distributions and/or vested rights under such Plans
shall be governed by the terms of those respective Plans. Notwithstanding
anything to the contrary contained herein, Executive's stock option grants shall
become immediately exercisable. The Executive shall, in addition, receive an
automobile allowance at the rate of $6,000.00 payable in equal monthly
installments in advance.

E. CERTAIN REDUCTION OF PAYMENTS BY THE CORPORATION. Anything in
this Agreement to the contrary notwithstanding, in the event the certified
public accountants of the Corporation immediately prior to the Change of Control
shall determine that any payment or distribution by the Corporation to or for
the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment")

-4-
<PAGE>

would be nondeductible by the Corporation for Federal income purposes because of
Section 280G of the Internal Revenue Code of 1954, as amended or any successor
thereto (the "Code"), then the aggregate present value of amounts payable or
distributable to or for the benefit of Executive pursuant to this Agreement
(such payments of distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. For purposes of this paragraph, the "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of Agreement Payments without causing any Payment to be nondeductible by
the Corporation because of said Section 280G of the Code.

If said certified public accountants of the Corporation immediately
prior to the Change of Control determine that any Payment would be nondeductible
by the Corporation because of Section 280G of the Code, the Corporation shall
promptly give the Executive notice to that effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and the Executive may then elect,
in his sole discretion, which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall advise the
Corporation in writing of his election within ten days of his receipt of notice.
If no such election is made by the Executive within such ten-day period, the
Corporation may elect which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after

-5-
<PAGE>

such election the aggregate present value of the Agreement Payments equals the
Reduced Amount) and shall notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be determined in accordance with
Section 280G(d)(4) of the Code. All determinations made by said certified
public accountants of the Corporation under this paragraph shall be binding upon
the Corporation and Executive and should be made within 60 days of a termination
of employment of Executive. As promptly as practicable following such
determination and the elections hereunder, the Corporation shall pay to or
distribute to or for the benefit of Executive such amounts as are then due to
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of Executive in the future such amounts as become due to Executive under
this Agreement.

As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by said certified public
accountants of the Corporation hereunder, it is possible that Agreement Payments
have been made by the Corporation which should not have been made
("Overpayment"), in each case, consistent with the calculation of the Reduced
Amount hereunder. In the event that said certified public accountants, based
upon the assertion of a deficiency by the Internal Revenue Service against the
Corporation or Executive which said certified public accountants believe has a
high probability of success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to Executive which

-6-
<PAGE>

Executive shall repay to the Corporation together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by Executive to the
Corporation if and to the extent such payment would not reduce the amount which
is subject to taxation under Section 4999 of the Code. In the event that said
certified public accountants,based upon controlling precedent, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Corporation to or for the benefit of the Executive together with interest at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

F. DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
beneficial owner of shares of the Corporation having 25% or more of the total
number of votes that may be cast for the election of directors of the
Corporation, unless the Board, within 20 days from the date such person becomes
such beneficial owner, determines that the purpose of such ownership is
investment only without any intention of influencing the management, business or
affairs of the Corporation; (ii) at any time on or before December 31, 1999
those persons who were directors of the Corporation on November 30, 1995 (the
"Current Directors") or who were recommended for election by a majority of the
Current Directors shall cease to constitute a majority of the Board of Directors
of the Corporation or any

-7-
<PAGE>

successor to the Corporation; or (iii) any spin-off, split-up or similar
corporation division (a "Division") that results in the distribution to
shareholders of the Corporation of a business or businesses whose assets
represent 20% or more of the fair market value of the total assets of the
Corporation and its subsidiaries immediately before the Division. Any
determination by the Board made pursuant to clause (i) above that the purpose of
such ownership is investment only without any intention of influencing the
management, business or affairs of the Corporation may be changed by the Board
at any time, in which event a Change of Control shall be deemed to have taken
place at the date of such changed determination. A Change of Control pursuant
to clause (i) above shall not be deemed to have taken place until the expiration
of the 20 day period referred to in such clause (i), or, if earlier, a
determination by the Board, or a public declaration by such person, that the
purpose of such ownership is other than investment only without any intention of
influencing the management, business or affairs of the Corporation. Any
reasonable determination by the Board made in connection with the matters
covered by the foregoing definition shall be conclusive and binding on the
Executive.

G. Anything else contained herein to the contrary notwithstanding, if
a Change of Control defined in clause (iii) of the first sentence of Section
2.F. above occurs, the Board may, on or before the date of such Change of
Control, require as an additional condition for receiving the benefits listed in
Sections

-8-
<PAGE>

2.A. through 2.D. above, that the Executive continue in the employ of the
Corporation for up to 180 days following the Change of Control, PROVIDED,
HOWEVER, that such condition shall be waived if the Executive's employment is
terminated by the Corporation for any reason.

3. EMPLOYMENT CONTRACT EFFECTIVE UPON CHANGE OF CONTROL. In the
event that prior to the occurrence of a Change of Control, the Board shall
determine, in the exercise of its reasonable business judgment, that a third
person has taken steps to effect a Change of Control and that such Change of
Control could occur within 90 days after such determination, the Board may
approve the Corporation's entering into an employment contract (a "Contract")
with the Executive, substantially in the form of Exhibit B hereto, providing for
the continued employment of the Executive for a period of eighteen months (or
until the Executive's' normal retirement date, whichever is shorter) commencing
on the first date upon which a Change of Control shall occur. The Contract
shall provide, among other things, that the base salary payable to the Executive
shall be at least equal to $25,000 in excess of the Executive's Base Salary (as
defined in the Plan) paid or payable for the calendar year during which the
Contract is entered into (or during which the Change of Control occurs,
whichever is higher), and that the Executive's position, authority and
responsibilities shall not be less than those held, exercised and assigned
immediately prior to the date of the Contract (or the date upon which the Change
of Control occurs, whichever are greater). Any

-9-
<PAGE>

offer of the Corporation to enter into a Contract with the Executive shall be
made in accordance with the provisions of Section 4.G of this Agreement and
shall remain open for a period of 30 days. Upon the Executive's acceptance of
an offer made by the Corporation in accordance with the provisions of this
Section 3, or upon his failure to accept such offer within 30 days after his
receipt thereof, the obligations of the Corporation under Section 2 of this
Agreement shall terminate, and the Corporation shall have no liability under
such Section 2 thereafter; PROVIDED that the terms and provisions of this
Agreement other than Section 2 shall remain in full force and effect after the
making of such offer; AND PROVIDED FURTHER THAT if such offer is received by the
Executive after a Change of Control has occurred, such offer shall not be
effective for any purpose and all the terms and provisions of this Agreement
(including Section 2) shall remain in full force and effect notwithstanding the
making of such offer.

4. GENERAL.

A. INDEMNIFICATION. If litigation shall be brought to enforce or
interpret any provision contained herein, the Corporation, to the extent
permitted by applicable law and the Corporation's Certificate of Incorporation
and by-laws, hereby indemnifies the Executive for his reasonable attorneys' fees
and disbursements incurred in such litigation, and hereby agrees to pay
prejudgment interest on any money judgment obtained by the Executive calculated
at the State Bank of Long Island prime interest rate in effect from time to time
from the date that payment(s) to him should have been made under this Agreement.

-10-
<PAGE>

B. PAYMENT OBLIGATIONS ABSOLUTE. The Corporation's obligation to pay
the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Corporation may have against him or
anyone else. All amounts payable by the Corporation hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the
Corporation shall be final and the Corporation will not seek to recover all or
any part of such payment from the Executive or from whomsoever may be entitled
thereto, for any reason whatsoever. In no event shall the Executive be
obligated to seek other employment in mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and the obtaining of
any such other employment shall in no event effect any reduction of the
Corporation's obligations to make the payments and arrangements required to be
made under this Agreement.

C. CONTINUING OBLIGATIONS. The Executive shall retain in confidence
any confidential information known to him concerning the Corporation and its
business so long as such information is not publicly disclosed.

D. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Corporation and any successor
to the Corporation, but neither this Agreement nor any rights arising hereunder
may be assigned or pledged by the Executive.

-11-
<PAGE>

E. SEVERABILITY. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
effective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

F. CONTROLLING LAW. This Agreement shall in all respects be governed
by, and construed in accordance with, the internal laws of the State of New York
without reference to the principles of conflict of laws.

G. NOTICES. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party, or shall be
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and other communications shall be
effective when actually received by the addressee.

H. AMENDMENT. This Agreement may be modified only by an agreement in
writing executed by both of the parties hereto.

-12-
<PAGE>

I. TERMINATION. This Agreement shall terminate upon the earlier of (a)
the termination of the Plan or (b) on the date the Board determines, in
accordance with the Plan, that the Executive is no longer a key executive to be
included within the Plan and so notifies the Executive; PROVIDED, HOWEVER, that
if a Change of Control shall have occurred prior to the termination of the Plan,
such termination shall not abridge or impair the obligations of the Corporation
under this Agreement and this Agreement shall remain in effect for a period of
eighteen months from the date of such Change of Control or until the Executive's
normal retirement date, whichever is shorter and, PROVIDED, FURTHER, that a
determination pursuant to Clause I.b. shall not be made, and if made shall have
no effect, (i) within one year after the Change of Control in question, (ii) at
any time after the Executive's employment with the Corporation has terminated or
(iii) during any period of time when the Corporation has knowledge that any
third person has taken steps reasonably calculated to effect a Change of Control
until, in the opinion of the Board, the third person has abandoned or terminated
his efforts to effect a Change of Control. Any decision by the Board that the
third person has abandoned or terminated his efforts to effect a Change of
Control shall be conclusive and binding on the Executive.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the 28th
day of November, 1995.

----------------------------------
Executive

STATE BANCORP, INC.

BY:

-------------------------------
President

-13-
<PAGE>

EXHIBIT B

EMPLOYMENT CONTRACT

AGREEMENT dated ____________ , 199_, between, ____________
____________________ a New York corporation (the "Corporation"), and
________________________ (the "Executive").

The Corporation recognizes that the Executive has made substantial
contributions to the growth and success of the Corporation, and desires to
assure the Corporation of the Executive's continued service.

The Executive is willing to continue to perform services for the
Corporation during the Employment Period hereinafter referred to.

Accordingly, the Corporation and the Executive hereby agree as
follows:

1. EMPLOYMENT. The Corporation agrees to continue to employ the
Executive, and the Executive agrees to remain in the Corporation's employ, on
and subject to the terms and conditions hereinafter set forth.

2. EMPLOYMENT PERIOD. The period of employment (the "Employment
Period") of the Executive by the Corporation as provided in Section 1 shall be
for a period commencing on the first date upon which a Change of Control (as
hereinafter defined) occurs after the date of this Agreement (the "Effective
Date") and ending on the earlier of (i) the date which is eighteen months after
the Effective Date and (ii) the Executive's normal retirement date

<PAGE>

under the Corporation's retirement plans (the earlier of the dates referred to
in the preceding clauses (i) and (ii) is hereinafter referred to as the
"Expiration Date"). For the purposes of this Agreement, a "Change of Control"
shall be deemed to have taken place if: (i) a third person, including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes
the beneficial owner of shares of the Corporation having 25% or more of the
total number of votes that may be cast for the election of directors of the
Corporation, unless the Board of Directors of the Corporation (the "Board"),
within 20 days from the date such person becomes such beneficial owner
determines that the purpose of such ownership is investment only without any
intention of influencing the management, business or affairs of the Corporation;
(ii) at any time on or before ____________, 199_ those persons who were
directors of the Corporation on November 30, 1995 (the "Current Directors") or
who were recommended for election by a majority of the Currrent Directors shall
cease to constitute a majority of the Board of Directors of the Corporation or
any successor to the Corporation; or (iii) any spin-off, split-off, split-up or
similar corporation division (a "Division") that results in the distribution to
shareholders of the Corporation of a business or businesses whose assets
represent 20% or more of the fair market value of the total assets of the
Corporation and its subsidiaries immediately before the Division. Any
determination by the Board made pursuant to clause (i) above that the purpose of
such ownership is investment only without any intention of

-2-
<PAGE>

influencing the management, business or affairs of the Corporation may be
changed by the Board at any time, in which event a Change of Control shall be
deemed to have taken place at the date of such changed determination. A Change
of Control pursuant to clause (i) above shall not be deemed to have taken place
until the expiration of the 20 day period referred to in such clause (i), or, if
earlier, a determination by the Board, or a public declaration by such person,
that the purpose of such ownership is other than investment only without any
intention of influencing the management, business or affairs of the Corporation.
Any reasonable determination by the Board made in connection with the matters
covered by the foregoing definition shall be conclusive and binding on the
Executive.

3. POSITION AND DUTIES.

(a) During the Employment Period the Executive's position (including
titles), authority and responsibilities shall not be less than those held,
exercised and assigned immediately prior to the date of this Agreement (or
immediately prior to the Effective Date, whichever are greater). During the
Employment Period, the Executive will devote his entire time during reasonable
business hours to the business and affairs of the Corporation and will use his
best efforts to perform faithfully and efficiently the responsibilities assigned
to him hereunder, and will not, without the consent of the Board, engage
directly or indirectly in any other business for compensation or profit. The
Corporation will, at its cost and expense, provide the Executive with offices in

-3-
<PAGE>

Nassau County or Suffolk County, New York, and other accommodations, and
secretarial and other support services, including, if applicable, the use of an
automobile at least equal to those provided by the Corporation at any time
during the 90 day period immediately preceding the date of this Agreement or, if
more favorable to the Executive, at any time thereafter with respect to
employment by the Corporation with comparable responsibilities.

(b) The expiration of the Employment Period shall not be deemed to
preclude the Executive from being further employed by the Corporation, and if
such employment continues, the employment shall be compensated therefor upon
such terms as shall be agreed upon by the Corporation and the Executive.

4. COMPENSATION.

(a) ANNUAL SALARY. The Executive shall receive an annual base salary
(the "Annual Salary") at least equal to $25,000.00 in excess of the annual base
salary (inclusive of incentive compensation) paid or payable to the Executive by
the Corporation during the calendar year in which the date of this Agreement
occurs (or during the calendar year in which the Effective Date occurs,
whichever is higher). The Annual Salary shall be payable in accordance with the
usual payroll practices of the Corporation as in effect during the 90-day period
immediately preceding the date of this Agreement or if more favorable to the
Executive, as in effect at any time thereafter with respect to employees of the
Corporation with comparable responsibilities. Any subsequent increase in the
Annual Salary shall not serve to limit or reduce

-4-
<PAGE>

any other obligation of the Corporation hereunder and after any such increase
the Annual Salary shall not be reduced.

(b) INCENTIVE, SAVINGS, RETIREMENT AND OTHER BENEFIT PLANS. During
the Employment Period the Executive shall be entitled to participate in all
incentive, savings, retirement and other benefit plans and programs of the
Corporation, including stock option plans, on a basis providing him with
compensation and benefits which, in the aggregate, are at least equal to those
provided by the Corporation for its executive employees under such plans and
programs as in effect at any time during the 90 day period immediately preceding
the date of this Agreement or, if more favorable to the Executive, as in effect
at any time thereafter with respect to employees of the Corporation with
comparable responsibilities. Notwithstanding anything to the contrary contained
herein, Executive's stock option grants shall become immediately exercisable.

(c) EXPENSES. During the Employment Period the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and procedures of the Corporation
as in effect during the 90 day period immediately preceding the date of this
Agreement or, if more favorable to the Executive, as in effect at any time
thereafter with respect to employees with comparable responsibilities.

(d) VACATION AND FRINGE BENEFITS. The Executive shall be entitled to
paid vacation and fringe benefits in accordance with

-5-
<PAGE>

the policies of the Corporation as in effect during the 90 day period
immediately preceding the date of this Agreement or, if more favorable to the
Executive, as in effect at any time thereafter with respect to employees with
comparable responsibilities.

5. TERMINATION.

(a) DEATH. This Agreement shall terminate automatically upon the
Executive's death.

(b) DISABILITY. The Corporation may terminate this Agreement after
having established the Executive's Disability by giving the Executive written
notice of its intention to terminate his employment, and his employment with the
Corporation shall terminate effective on the 90th day after receipt of such
notice if within 90 days after such receipt the Executive shall fail to return
to full time performance of his duties. Any such termination shall be effected
only with the approval of the Board. For purposes of this Agreement
"Disability" means disability which after the expiration of more than 26 weeks
after the commencement is determined to be total and permanent by a physician
selected by the Corporation or its insurers and acceptable to the Executive or
his legal representatives.

(c) CAUSE. The Corporation may terminate the Executive's employment
for Cause. Any such termination shall be effected only with the approval of the
Board. For purposes of this Agreement, "Cause" means (i) fraud,
misappropriation or intentional material damage to the property or business of
the Corporation or (ii) commission of a felony as determined by a court of
competent jurisdiction, whose determination is final and non-appealable.

-6-
<PAGE>

(d) GOOD REASON. The Executive may terminate his employment for Good
Reason. For purposes of this Agreement, "Good Reason" means:

(i) without the express written consent of the Executive, (a) any
reduction of the Executive's position (including titles), authority or
responsibilities with the Corporation under Section 3 of this Agreement or (B)
any other breach of Section 3 of this Agreement, other than an insubstantial or
inadvertent breach remedied by the Corporation promptly after receipt of notice
thereof given by the Executive;

(ii) any failure by the Corporation to comply with any of the
provisions of Section 4 of this Agreement, other than an insubstantial and
inadvertent failure remedied by the Corporation promptly after receipt of notice
thereof given by the Executive;

(iii) without the express consent of the Executive, the Corporation's
requiring the Executive to be based at any office or location other than that at
which the Executive is based at the date of this Agreement, except for travel
which is reasonably required in the performance of the Executive's
responsibilities and which is substantially similar (as to frequency and
duration) to the travel required of the Executive during the one-year period
immediately prior to the Effective Date; or

(iv) any termination by the Corporation of the Executive's employment
otherwise than as permitted by this Agreement, it being understood that any such
purported termination shall not be effective for any purpose of this Agreement.

-7-
<PAGE>

(e) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause or by the Executive for Good Reason shall be communicated by a Notice of
Termination to the other party hereto given in accordance with Section 8(h) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision of this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date of this Agreement (the "Date of Termination").

6. OBLIGATION OF THE CORPORATION UPON TERMINATION.

(a) DEATH. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations incurred by the Corporation hereunder prior to the date
of his death.

(b) DISABILITY. If the Executive's employment hereunder is
terminated by reason of the Executive's Disability, the Executive shall be
entitled to receive, after the effective date of termination of his employment
pursuant to Section 5(b) of this Agreement, Disability and other benefits in
accordance with the terms of the plans in which he is a participant pursuant to
Section 4(b) of this Agreement.

-8-
<PAGE>

(c) CAUSE. If the Executive's employment hereunder is terminated for
Cause, the Corporation shall pay the Executive his full Annual Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Corporation shall have no further obligations to the Executive
under this Agreement.

(d) OTHER. If the Corporation shall terminate the Executive's
employment hereunder other than for Cause or Disability (which termination may
be effected only with the approval of the Board) or the Executive shall
terminate his employment hereunder for Good Reason:

A. LUMP SUM CASH PAYMENT. On or before the Date of Termination, the
Corporation will pay to the Executive as compensation for services rendered to
the Corporation a lump sum cash amount (subject to any applicable payroll or
other taxes required to be withheld) equal to one and one-half times the
Executive's then Annual Salary. In the event that at the Date of Termination
there are fewer than eighteen whole or partial months remaining until the
Expiration Date, the amount calculated in this Paragraph A will be reduced by
multiplying it by a fraction the numerator of which is the number of whole or
partial months so remaining until the Expiration Date and the denominator of
which is eighteen.

B. INSURANCE BENEFITS.

(i) The Corporation shall provide the Executive with coverage under
the Corporation's group life insurance plan as then

-9-
<PAGE>

in effect, or equivalent benefits, at no cost to the Executive, for one and
one-half years following the Termination Date (or until the Expiration Date
whichever is shorter) at a level determined on the basis of one and one-half
times the Executive's Annual Salary.

(ii) The Executive's participation in the Corporation's
Hospital/Medical/Surgical insurance plan shall be continued on the same basis as
prior to the Termination Date or equivalent benefits shall be provided, by the
Corporation, at no direct cost to the Executive, for a period of eighteen months
from the Date of Termination (or until the Expiration Date, whichever is
shorter).

C. OTHER PLANS AND AUTOMOBILE ALLOWANCE. The Executive's
participation in any applicable Savings, Retirement, Incentive and/or Profit
Sharing Plan of the Corporation shall continue only through the Date of
Termination. Any terminating distributions and/or vested rights under such
Plans shall be governed by the terms of those respective Plans. The Executive
shall, in addition, receive an automobile allowance of $6,000.00.

7. CERTAIN REDUCTION OF PAYMENTS BY THE CORPORATION. Anything in
this Agreement to the contrary notwithstanding, in the event the certified
public accountants of the Corporation immediately prior to the Change of Control
shall determine that any payment or distribution by the Corporation to or for
the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Corporation for Federal income purposes
because of Section 280G of the Internal Revenue Code of

-10-
<PAGE>

1954, as amended or any successor thereto, (the "Code"), then the aggregate
present value of amounts payable or distributable to or for the benefit of
Executive pursuant to this Agreement (such payments of distributions pursuant to
this Agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this
paragraph, the "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be nondeductible by the Corporation because of said
Section 280G of the Code.

If said certified public accountants of the Corporation immediately
prior to the Change of Control determine that any Payment would be nondeductible
by the Corporation because of Section 280G of the Code, the Corporation shall
promptly give the Executive notice to the effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and the Executive may then elect,
in his sole discretion, which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall advise the
Corporation in writing of his election within ten days of his receipt of notice.
If no such election is made by the Executive within such ten-day period, the
Corporation may elect which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall notify the
Executive promptly

-11-
<PAGE>

of such election. For purposes of this paragraph, present value shall be
determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by said certified public accountants of the Corporation
under this paragraph shall be binding upon the Corporation and Executive and
should be made within 60 days of a termination of employment of Executive. As
promptly as practicable following such determination and the elections
hereunder, the Corporation shall pay to or distribute to or for the benefit of
Executive such amounts as are then due to Executive under this Agreement and
shall promptly pay to or distribute for the benefit of Executive in the future
such amounts as become due to Executive under this Agreement.

-12-
<PAGE>

the Code; provided, however, that no amount shall be payable by Executive to the
Corporation if and to the extent such payment would not reduce the amount which
is subject to taxation under Section 4999 of the Code. In the event that said
certified public accountants,based upon controlling precedent, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Corporation to or for the benefit of the Executive together with interest at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

8. CONTINUING DUTY TO CORPORATION. Following the resignation or
termination of the Executive's employment for any reason, the Executive shall
retain in confidence any confidential information known by the Executive
concerning the Corporation and its business so long as such information is not
publicly disclosed.

9. MISCELLANEOUS.

(a) For purposes of this Agreement, all references to the Corporation
shall also, where appropriate, be references to (i) any subsidiary of the
Corporation and/or (ii) any successor to the Corporation. For purposes of this
Agreement, a "subsidiary of the Corporation" shall mean any domestic or foreign
corporation of which the Corporation owns, directly or indirectly, 50% or more
of the outstanding securities generally entitled to vote for the election of
directors.

(b) If litigation shall be brought to enforce or interpret any
provision contained herein, the Corporation, to the extent permitted by
applicable law and the Corporation's

-13-
<PAGE>

Certificate of Organization and by-laws, hereby indemnifies the Executive for
his reasonable attorney's fees and disbursements incurred in such litigation,
and hereby agrees to pay prejudgment interest on any money judgment obtained by
the Executive calculated at the Citibank prime interest rate in effect from time
to time from the date that payment(s) to him should have been made under this
Agreement.

(c) The Corporation's obligation to pay the Executive the
compensation and to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Corporation any have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation
will not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reason whatsoever. In no event
shall the executive be obligated to seek other employment in mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and the obtaining of such other employment shall in no event effect any
reduction of the Corporation's obligations to make the payments and arrangements
required to be made under this Agreement.

(d) This Agreement shall supersede all prior employment agreements
between the Corporation and the Executive effective as

-14-
<PAGE>

of the date of commencement of the Employment Period. Upon the commencement of
the Employment Period any prior employment agreement shall be deemed cancelled
and terminated and the Executive shall have no further rights thereunder, except
that all amounts due and unpaid under such prior employment agreement as of the
date of the commencement of the Employment Period shall be paid to the Executive
when the same would, but for such cancellation and termination, have been paid.

(e) This Agreement shall be binding upon and inure to the benefit of
the Executive and his estate, and the Corporation and any successor of the
Corporation, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Executive.

(f) Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

(g) This Agreement shall in all respects be governed by, and
construed in accordance with, the internal laws of the State of New York without
reference to principles of conflict of laws.

(h) This Agreement may be modified only by an agreement in writing
executed by both the parties hereto.

-15-
<PAGE>

(i) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.

------------------------------
Executive

STATE BANCORP, INC.

BY:
---------------------------
President

-16-

<PAGE>

EXHIBIT (10)e)(iv) - EXECUTIVE SEVERANCE PLAN NO. 4

<PAGE>

STATE BANCORP, INC.
EXECUTIVE SEVERANCE PLAN NO. 4

ELIGIBLE EXECUTIVES. Participants under this Plan shall consist of
those key executives of the Corporation and its Subsidiaries (as hereinafter
defined) who are full-time employees

<PAGE>

of the rank of Vice-President and above and who are from time to time designated
as key executives to be included within this Plan by the Board. A Participant
who the Board determines has ceased to be a key executive shall cease to be a
Participant in the Plan when notified by the Board of such determination; EXCEPT
THAT no such determination that a Participant has ceased to be a key executive
shall be made, and if made shall have no effect, (i) within one year after the
Change of Control (as hereinafter defined) in question, (ii) at any time after
the Executive's employment with the Corporation has terminated or (iii) during
any period of time when the Corporation has knowledge that any third person has
taken steps reasonably calculated to effect a Change of Control until, in the
opinion of the Board, the third person has abandoned or terminated its efforts
to effect a Change of Control. Any decision by the Board that the third person
has abandoned or terminated its efforts to effect a Change of Control shall be
conclusive and binding on the Participants.

-2-
<PAGE>

termination of the Participant's employment with the Corporation (including its
Subsidiaries) for any reason (whether voluntary or involuntary, other than as a
consequence of death, disability, or retirement at or after his normal
retirement date under the Corporation's retirement plans) within one year after
a Change of Control; (i) a cash payment will be made to Participant by the
Corporation in an amount equal to one times the Participant's then base salary
(the "Base Salary"); (ii) continued coverage for the Participant without charge
to Participant under the group life insurance plan of the Corporation or any
Subsidiary as then in effect or equivalent benefits for an twelve month period
following termination at a contribution level determined on the basis of one
times the Participant's Base Salary; (iii) continued coverage for the
Participant without charge to Participant for twelve months from the date of
termination under Hospital/Medical/Surgical insurance of the Corporation or any
Subsidiary; (iv) an automobile allowance of $6,000.00; (v) Participant's stock
option grants shall become immediately exercisable; and (vi) such other
arrangement will be made as the Board deems appropriate; PROVIDED, HOWEVER,
that: (a) in the event of a Change of Control defined in clause (iii) of the
definition of a "Change of Control", the Board may require, as a condition for
receiving the above benefits, that the Participant remain employed by the
Corporation (including its Subsidiaries) for a period of up to 180 days
following the Change of Control; (b) that the condition set forth in the
preceding clause shall be waived if the Corporation

-3-
<PAGE>

EMPLOYMENT CONTRACT. In the event that prior to the occurrence of a
Change of Control the Board determines that a third person has taken steps to
effect a Change of Control and that such Change of Control could occur within 90
days after such determination, the Board may approve the Corporation's entering
into an employment contract (a "Contract") with a Participant, substantially in
the form of Exhibit B to the Agreement, providing for the Participant's
continued employment by the Corporation for a period of twelve months (or until
the Participant's normal retirement date under the Corporation's retirement
plans, whichever is shorter) commencing on the first date upon which a Change of
Control occurs, on substantially the same terms as those of his employment prior
to the Change of Control. The Corporation's offer to enter into a Contract with
a Participant will terminate such Participant's rights to the severance payments
and adjustments described in the preceding paragraph, but will not affect any
other provisions described in the following paragraph), which shall remain in
full force and effect after such offer; PROVIDED that no such offer will be
effective for any purpose if received by a Participant after a Change of Control
has occurred.

-4-
<PAGE>

OTHER TERMS AND CONDITIONS. The Agreement shall contain such other
terms, provisions and conditions not inconsistent with this Plan as shall be
determined by the Board.

NON-ASSIGNABILITY. Each Participant's rights under this Plan shall be
non-Transferable except by will or the laws of descent of distribution.

CERTAIN DEFINITIONS.

"BASE SALARY" shall mean the Participant's current base salary
(including all incentive compensation) whether said salary is paid by the
Corporation or any Subsidiary.
A "CHANGE OF CONTROL" shall be deemed to have taken place if: (i) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner of shares of the
Corporation having 25% or more of the total number of votes that may be cast for
the election of directors of the Corporation, unless the Board within 20 days
from the date such person becomes such beneficial owner, determines that the
purpose of such ownership is investment only without any intention of
influencing the management, business or affairs of the corporation; or (ii) at
any time on or before December 31, 1999, those persons who were directors of the
Corporation on November 30, 1995 (the "Current Directors") or who were
recommended for election by a majority of the Current Directors shall have
ceased to constitute a majority of the Board of Directors of the Corporation or
any successor to the Corporation; or (iii) any spin-off or similar corporate
division (a "Division") that results in the

-5-
<PAGE>

UNFUNDED PLAN. The Plan shall be unfunded. Neither the Corporation
nor the Board shall be required to segregate any assets with respect to benefits
under the Plan. Neither the Corporation

-6-
<PAGE>

nor the Board shall be deemed to be a trustee of any amounts to be paid under
the Plan. Any liability of the Corporation to any Participant with respect to
any benefit shall be based solely upon any contractual obligations created by
the Plan and the Agreement; no such obligation shall be deemed to be secured
by any pledge or any encumbrance on any property of the Corporation.

EFFECTIVE DATE. This Plan shall become effective on November 28,
1995.

-7-
<PAGE>

EXHIBIT A

EXECUTIVE SEVERANCE AGREEMENT

AGREEMENT between STATE BANCORP, INC., a New York corporation (the
"Corporation"), and
(the "Executive"),

W I T N E S S E T H :

WHEREAS, the Executive is a key executive of the Corporation or one of
its Subsidiaries and has been selected by the Board as a key executive to be a
Participant under the Plan; and

<PAGE>

2. TERMINATION AFTER CHANGE OF CONTROL. Subject to the provisions of
Section 3 of this Agreement, in the event the Executive's employment with the
Corporation (references in this

-2-
<PAGE>

A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the Executive as
compensation for services rendered to the Corporation a lump sum cash amount
(subject to any applicable payroll or other taxes required to be withheld) equal
to one times the Executive's then Base Salary as defined in the Plan. In the
event there are fewer than twelve whole or partial months remaining from the
date of the Executive's termination to his normal retirement date, the amount
calculated in this paragraph will be reduced by multiplying it by a fraction the
numerator of which is the number of whole or partial months so remaining to his
normal retirement date and the denominator of which is twelve.

B. GROUP LIFE INSURANCE. The Corporation will provide the Executive
with coverage under the Corporation's group life insurance plan as then in
effect, or equivalent benefits, at no cost to the Executive, for twelve months
following the date his employment terminates (or until his normal retirement
date,

-3-
<PAGE>

whichever is shorter) at a level determined on the basis of one times the
Executive's Base Salary.

C. HOSPITAL/MEDICAL/SURGICAL INSURANCE. The Executive's
participation in the Hospital/Medical/Surgical insurance plan of the
Corporation, shall be continued on the same basis as prior to the Change of
Control or equivalent benefits shall be provided by the Corporation at no direct
cost to him, for a period of twelve months years from the date his employment
terminates (or until his normal retirement date, whichever, is shorter).

-4-
<PAGE>

-5-
<PAGE>

-6-
<PAGE>

-7-
<PAGE>

-8-
<PAGE>

3. EMPLOYMENT CONTRACT EFFECTIVE UPON CHANGE OF CONTROL. In the
event that prior to the occurrence of a Change of Control, the Board shall
determine, in the exercise of its reasonable business judgment, that a third
person has taken steps to effect a Change of Control and that such Change of
Control could occur within 90 days after such determination, the Board may
approve the Corporation's entering into an employment contract (a "Contract")
with the Executive, substantially in the form of Exhibit B hereto, providing for
the continued employment of the Executive for a period of twelve months (or
until the Executive's' normal retirement date, whichever is shorter) commencing
on the first date upon which a Change of Control shall occur. The Contract
shall provide, among other things, that the base salary payable to the Executive
shall be at least equal to $10,000 in excess of the Executive's Base Salary (as
defined in the Plan) paid or payable for the calendar year during which the
Contract is entered into (or during which the Change of Control occurs,
whichever is higher), and that the Executive's position, authority and
responsibilities shall not be less than those held, exercised and assigned
immediately prior to the date of the Contract (or the date upon which the Change
of Control occurs, whichever are greater). Any

-9-
<PAGE>

offer of the Corporation to enter into a Contract with the Executive shall be
made in accordance with the provisions of Section 4.G of this Agreement and
shall remain open for a period of 30 days. Upon the Executive's acceptance of
an offer made by the Corporation in accordance with the provisions of this
Section 3, or upon his failure to accept such offer within 30 days after his
receipt thereof, the obligations of the Corporation under Section 2 of this
Agreement shall terminate, and the Corporation shall have no liability under
such Section 2 thereafter; PROVIDED THAT the terms and provisions of this
Agreement other than Section 2 shall remain in full force and effect after the
making of such offer; AND PROVIDED FURTHER THAT if such offer is received by the
Executive after a Change of Control has occurred, such offer shall not be
effective for any purpose and all the terms and provisions of this Agreement
(including Section 2) shall remain in full force and effect notwithstanding the
making of such offer.

4. GENERAL.

-10-
<PAGE>

-11-
<PAGE>

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

H. AMENDMENT. This Agreement may be modified only by an agreement in
writing executed by both of the parties hereto.

-12-
<PAGE>

I. TERMINATION. This Agreement shall terminate upon the earlier of
(a) the termination of the Plan or (b) on the date the Board determines, in
accordance with the Plan, that the Executive is no longer a key executive to be
included within the Plan and so notifies the Executive; PROVIDED, HOWEVER, that
if a Change of Control shall have occurred prior to the termination of the Plan,
such termination shall not abridge or impair the obligations of the Corporation
under this Agreement and this Agreement shall remain in effect for a period of
eighteen months from the date of such Change of Control or until the Executive's
normal retirement date, whichever is shorter and, PROVIDED, FURTHER, that a
determination pursuant to Clause I.b. shall not be made, and if made shall have
no effect, (i) within one year after the Change of Control in question, (ii) at
any time after the Executive's employment with the Corporation has terminated or
(iii) during any period of time when the Corporation has knowledge that any
third person has taken steps reasonably calculated to effect a Change of Control
until, in the opinion of the Board, the third person has abandoned or terminated
his efforts to effect a Change of Control. Any decision by the Board that the
third person has abandoned or terminated his efforts to effect a Change of
Control shall be conclusive and binding on the Executive.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
28th day of November, 1995.

------------------------------
Executive

STATE BANCORP, INC.

BY:
---------------------------
President

-13-
<PAGE>

EXHIBIT B

EMPLOYMENT CONTRACT

AGREEMENT dated _____________, 199_, between, _____________
____________________ a New York corporation (the "Corporation"), and
________________________ (the "Executive").

The Executive is willing to continue to perform services for the
Corporation during the Employment Period hereinafter referred to.

Accordingly, the Corporation and the Executive hereby agree as
follows:

2. EMPLOYMENT PERIOD. The period of employment (the "Employment
Period") of the Executive by the Corporation as provided in Section 1 shall be
for a period commencing on the first date upon which a Change of Control (as
hereinafter defined) occurs after the date of this Agreement (the "Effective
Date") and ending on the earlier of (i) the date which is twelve months after
the Effective Date and (ii) the Executive's normal retirement date

<PAGE>

-2-
<PAGE>

3. POSITION AND DUTIES.

-3-
<PAGE>

4. COMPENSATION.

(a) ANNUAL SALARY. The Executive shall receive an annual base salary
(the "Annual Salary") at least equal to $10,000.00 in excess of the annual base
salary (inclusive of incentive compensation) paid or payable to the Executive by
the Corporation during the calendar year in which the date of this Agreement
occurs (or during the calendar year in which the Effective Date occurs,
whichever is higher). The Annual Salary shall be payable in accordance with the
usual payroll practices of the Corporation as in effect during the 90-day period
immediately preceding the date of this Agreement or if more favorable to the
Executive, as in effect at any time thereafter with respect to employees of the
Corporation with comparable responsibilities. Any subsequent increase in the
Annual Salary shall not serve to limit or reduce

-4-
<PAGE>

any other obligation of the Corporation hereunder and after any such increase
the Annual Salary shall not be reduced.

(d) VACATION AND FRINGE BENEFITS. The Executive shall be entitled to
paid vacation and fringe benefits in accordance with

-5-
<PAGE>

5. TERMINATION.

(a) DEATH. This Agreement shall terminate automatically upon the
Executive's death.

-6-
<PAGE>

(d) GOOD REASON. The Executive may terminate his employment for Good
Reason. For purposes of this Agreement, "Good Reason" means:

-7-
<PAGE>

6. OBLIGATION OF THE CORPORATION UPON TERMINATION.

-8-
<PAGE>

A. LUMP SUM CASH PAYMENT. On or before the Date of Termination, the
Corporation will pay to the Executive as compensation for services rendered to
the Corporation a lump sum cash amount (subject to any applicable payroll or
other taxes required to be withheld) equal to one times the Executive's then
Annual Salary. In the event that at the Date of Termination there are fewer
than twelve whole or partial months remaining until the Expiration Date, the
amount calculated in this Paragraph A will be reduced by multiplying it by a
fraction the numerator of which is the number of whole or partial months so
remaining until the Expiration Date and the denominator of which is eighteen.

B. INSURANCE BENEFITS.

(i) The Corporation shall provide the Executive with coverage under
the Corporation's group life insurance plan as then

-9-
<PAGE>

in effect, or equivalent benefits, at no cost to the Executive, for one year
following the Termination Date (or until the Expiration Date whichever is
shorter) at a level determined on the basis of one times the Executive's Annual
Salary.

(ii) The Executive's participation in the Corporation's
Hospital/Medical/Surgical insurance plan shall be continued on the same basis as
prior to the Termination Date or equivalent benefits shall be provided, by the
Corporation, at no direct cost to the Executive, for a period of twelve months
from the Date of Termination (or until the Expiration Date, whichever is
shorter).

-10-
<PAGE>

If said certified public accountants of the Corporation immediately
prior to the Change of Control determine that any Payment would be nondeductible
by the Corporation because of Section 280G of the Code, the Corporation shall
promptly give the Executive notice to the effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and the Executive may then elect,
in his sole discretion, which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall advise the
Corporation in writing of his election within ten days of his receipt of notice.
If no such election is made by the Executive within such ten-day period, the
Corporation may elect which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall notify the
Executive promptly

-11-
<PAGE>

-12-
<PAGE>

9. MISCELLANEOUS.

(b) If litigation shall be brought to enforce or interpret any
provision contained herein, the Corporation, to the extent permitted by
applicable law and the Corporation's

-13-
<PAGE>

(d) This Agreement shall supersede all prior employment agreements
between the Corporation and the Executive effective as

-14-
<PAGE>

(g) This Agreement shall in all respects be governed by, and
construed in accordance with, the internal laws of the State of New York without
reference to principles of conflict of laws.

(h) This Agreement may be modified only by an agreement in writing
executed by both the parties hereto.

-15-
<PAGE>

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.

----------------------------------
Executive

STATE BANCORP, INC.

BY:
-------------------------------
, President

-16-

<PAGE>

EXHIBIT (10)e)(v) - EXECUTIVE SEVERANCE PLAN NO. 5

<PAGE>

STATE BANCORP, INC.
EXECUTIVE SEVERANCE PLAN NO. 5

ELIGIBLE EXECUTIVES. Participants under this Plan shall consist of
those key executives of the Corporation and its Subsidiaries (as hereinafter
defined) who are full-time employees

<PAGE>

-2-
<PAGE>

termination of the Participant's employment with the Corporation (including its
Subsidiaries) for any reason (whether voluntary or involuntary, other than as a
consequence of death, disability, or retirement at or after his normal
retirement date under the Corporation's retirement plans) within one year after
a Change of Control; (i) a cash payment will be made to Participant by the
Corporation in an amount equal to one times the Participant's then base salary
(the "Base Salary"); (ii) continued coverage for the Participant without charge
to Participant under the group life insurance plan of the Corporation or any
Subsidiary as then in effect or equivalent benefits for an twelve month period
following termination at a contribution level determined on the basis of one
times the Participant's Base Salary; (iii) continued coverage for the
Participant without charge to Participant for twelve months from the date of
termination under Hospital/Medical/Surgical insurance of the Corporation or any
Subsidiary; (iv) an automobile allowance of $6,000.00; (v) Participant's stock
option grants shall become immediately exercisable; and (vi) such other
arrangement will be made as the Board deems appropriate; PROVIDED, HOWEVER,
that: (a) in the event of a Change of Control defined in clause (iii) of the
definition of a "Change of Control", the Board may require, as a condition for
receiving the above benefits, that the Participant remain employed by the
Corporation (including its Subsidiaries) for a period of up to 180 days
following the Change of Control; (b) that the condition set forth in the
preceding clause shall be waived if the Corporation

-3-
<PAGE>

EMPLOYMENT CONTRACT. In the event that prior to the occurrence of a
Change of Control the Board determines that a third person has taken steps to
effect a Change of Control and that such Change of Control could occur within 90
days after such determination, the Board may approve the Corporation's entering
into an employment contract (a "Contract") with a Participant, substantially in
the form of Exhibit B to the Agreement, providing for the Participant's
continued employment by the Corporation for a period of twelve months (or until
the Participant's normal retirement date under the Corporation's retirement
plans, whichever is shorter) commencing on the first date upon which a Change of
Control occurs, on substantially the same terms as those of his employment prior
to the Change of Control. The Corporation's offer to enter into a Contract with
a Participant will terminate such Participant's rights to the severance payments
and adjustments described in the preceding paragraph, but will not affect any
other provisions described in the following paragraph), which shall remain in
full force and effect after such offer; PROVIDED THAT no such offer will be
effective for any purpose if received by a Participant after a Change of Control
has occurred.

-4-
<PAGE>

OTHER TERMS AND CONDITIONS. The Agreement shall contain such other
terms, provisions and conditions not inconsistent with this Plan as shall be
determined by the Board.

NON-ASSIGNABILITY. Each Participant's rights under this Plan shall be
non-Transferable except by will or the laws of descent of distribution.

CERTAIN DEFINITIONS.

"BASE SALARY" shall mean the Participant's current base salary
(including all incentive compensation) whether said salary is paid by the
Corporation or any Subsidiary.

A "CHANGE OF CONTROL" shall be deemed to have taken place if: (i) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner of shares of the
Corporation having 25% or more of the total number of votes that may be cast for
the election of directors of the Corporation, unless the Board within 20 days
from the date such person becomes such beneficial owner, determines that the
purpose of such ownership is investment only without any intention of
influencing the management, business or affairs of the corporation; or (ii) at
any time on or before November 30, 1998, those persons who were directors of the
Corporation on November 30, 1995 (the "Current Directors") or who were
recommended for election by a majority of the Current Directors shall have
ceased to constitute a majority of the Board of Directors of the Corporation or
any successor to the Corporation; or (iii) any spin-off or similar corporate
division (a "Division") that results in the

-5-
<PAGE>

UNFUNDED PLAN. The Plan shall be unfunded. Neither the Corporation
nor the Board shall be required to segregate any assets with respect to benefits
under the Plan. Neither the Corporation

-6-
<PAGE>

nor the Board shall be deemed to be a trustee of any amounts to be paid under
the Plan. Any liability of the Corporation to any Participant with respect to
an benefit shall be based solely upon any contractual obligations created by the
Plan and the Agreement; no such obligation shall be deemed to be secured by any
pledge or any encumbrance on any property of the Corporation.

EFFECTIVE DATE. This Plan shall become effective on November 28,
1995.

-7-
<PAGE>

EXHIBIT A

EXECUTIVE SEVERANCE AGREEMENT

AGREEMENT between STATE BANCORP, INC., a New York corporation (the
"Corporation"), and
(the "Executive"),

W I T N E S S E T H :

WHEREAS, the Executive is a key executive of the Corporation or one of
its Subsidiaries and has been selected by the Board as a key executive to be a
Participant under the Plan; and

<PAGE>

2. TERMINATION AFTER CHANGE OF CONTROL. Subject to the provisions of
Section 3 of this Agreement, in the event the Executive's employment with the
Corporation (references in this

-2-
<PAGE>

A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the Executive as
compensation for services rendered to the Corporation a lump sum cash amount
(subject to any applicable payroll or other taxes required to be withheld) equal
to one times the Executive's then Base Salary as defined in the Plan. In the
event there are fewer than twelve whole or partial months remaining from the
date of the Executive's termination to his normal retirement date, the amount
calculated in this paragraph will be reduced by multiplying it by a fraction the
numerator of which is the number of whole or partial months so remaining to his
normal retirement date and the denominator of which is twelve.

B. GROUP LIFE INSURANCE. The Corporation will provide the Executive
with coverage under the Corporation's group life insurance plan as then in
effect, or equivalent benefits, at no cost to the Executive, for twelve months
following the date his employment terminates (or until his normal retirement
date,

-3-
<PAGE>

whichever is shorter) at a level determined on the basis of one times the
Executive's Base Salary.

C. HOSPITAL/MEDICAL/SURGICAL INSURANCE. The Executive's
participation in the Hospital/Medical/Surgical insurance plan of the
Corporation, shall be continued on the same basis as prior to the Change of
Control or equivalent benefits shall be provided by the Corporation at no direct
cost to him, for a period of twelve months years from the date his employment
terminates (or until his normal retirement date, whichever, is shorter).

-4-
<PAGE>

-5-
<PAGE>

-6-
<PAGE>

F. DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
beneficial owner of shares of the Corporation having 25% or more of the total
number of votes that may be cast for the election of directors of the
Corporation, unless the Board, within 20 days from the date such person becomes
such beneficial owner, determines that the purpose of such ownership is
investment only without any intention of influencing the management, business or
affairs of the Corporation; (ii) at any time on or before November 30, 1998
those persons who were directors of the Corporation on November 28, 1995 (the
"Current Directors") or who were recommended for election by a majority of the
Current Directors shall cease to constitute a majority of the Board of Directors
of the Corporation or any

-7-
<PAGE>

-8-
<PAGE>

3. EMPLOYMENT CONTRACT EFFECTIVE UPON CHANGE OF CONTROL. In the
event that prior to the occurrence of a Change of Control, the Board shall
determine, in the exercise of its reasonable business judgment, that a third
person has taken steps to effect a Change of Control and that such Change of
Control could occur within 90 days after such determination, the Board may
approve the Corporation's entering into an employment contract (a "Contract")
with the Executive, substantially in the form of Exhibit B hereto, providing for
the continued employment of the Executive for a period of twelve months (or
until the Executive's' normal retirement date, whichever is shorter) commencing
on the first date upon which a Change of Control shall occur. The Contract
shall provide, among other things, that the base salary payable to the Executive
shall be at least equal to $10,000 in excess of the Executive's Base Salary (as
defined in the Plan) paid or payable for the calendar year during which the
Contract is entered into (or during which the Change of Control occurs,
whichever is higher), and that the Executive's position, authority and
responsibilities shall not be less than those held, exercised and assigned
immediately prior to the date of the Contract (or the date upon which the Change
of Control occurs, whichever are greater). Any

-9-
<PAGE>

4. GENERAL.

-10-
<PAGE>

-11-
<PAGE>

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

H. AMENDMENT. This Agreement may be modified only by an agreement in
writing executed by both of the parties hereto.

-12-
<PAGE>

I. TERMINATION. This Agreement shall terminate upon the earlier of
(a) the termination of the Plan or (b) on the date the Board determines, in
accordance with the Plan, that the Executive is no longer a key executive to be
included within the Plan and so notifies the Executive; PROVIDED, HOWEVER, that
if a Change of Control shall have occurred prior to the termination of the Plan,
such termination shall not abridge or impair the obligations of the Corporation
under this Agreement and this Agreement shall remain in effect for a period of
eighteen months from the date of such Change of Control or until the Executive's
normal retirement date, whichever is shorter and, PROVIDED, FURTHER, that a
determination pursuant to Clause I.b. shall not be made, and if made shall have
no effect, (i) within one year after the Change of Control in question, (ii) at
any time after the Executive's employment with the Corporation has terminated or
(iii) during any period of time when the Corporation has knowledge that any
third person has taken steps reasonably calculated to effect a Change of Control
until, in the opinion of the Board, the third person has abandoned or terminated
his efforts to effect a Change of Control. Any decision by the Board that the
third person has abandoned or terminated his efforts to effect a Change of
Control shall be conclusive and binding on the Executive.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
28th day of November, 1995.

------------------------------
Executive

STATE BANCORP, INC.

BY:
---------------------------
President

-13-
<PAGE>

EXHIBIT B

EMPLOYMENT CONTRACT

AGREEMENT dated _____________, 199_, between, _____________
____________________ a New York corporation (the "Corporation"), and
________________________ (the "Executive").

The Executive is willing to continue to perform services for the
Corporation during the Employment Period hereinafter referred to.

Accordingly, the Corporation and the Executive hereby agree as
follows:

2. EMPLOYMENT PERIOD. The period of employment (the "Employment
Period") of the Executive by the Corporation as provided in Section 1 shall be
for a period commencing on the first date upon which a Change of Control (as
hereinafter defined) occurs after the date of this Agreement (the "Effective
Date") and ending on the earlier of (i) the date which is twelve months after
the Effective Date and (ii) the Executive's normal retirement date

<PAGE>

under the Corporation's retirement plans (the earlier of the dates referred to
in the preceding clauses (i) and (ii) is hereinafter referred to as the
"Expiration Date"). For the purposes of this Agreement, a "Change of Control"
shall be deemed to have taken place if: (i) a third person, including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes
the beneficial owner of shares of the Corporation having 25% or more of the
total number of votes that may be cast for the election of directors of the
Corporation, unless the Board of Directors of the Corporation (the "Board"),
within 20 days from the date such person becomes such beneficial owner
determines that the purpose of such ownership is investment only without any
intention of influencing the management, business or affairs of the Corporation;
(ii) at any time on or before November 30, 1998 those persons who were directors
of the Corporation on November 28, 1995 (the "Current Directors") or who were
recommended for election by a majority of the Currrent Directors shall cease to
constitute a majority of the Board of Directors of the Corporation or any
successor to the Corporation; or (iii) any spin-off, split-off, split-up or
similar corporation division (a "Division") that results in the distribution to
shareholders of the Corporation of a business or businesses whose assets
represent 20% or more of the fair market value of the total assets of the
Corporation and its subsidiaries immediately before the Division. Any
determination by the Board made pursuant to clause (i) above that the purpose of
such ownership is investment only without any intention of

-2-
<PAGE>

3. POSITION AND DUTIES.

-3-
<PAGE>

4. COMPENSATION.

-4-
<PAGE>

any other obligation of the Corporation hereunder and after any such increase
the Annual Salary shall not be reduced.

(d) VACATION AND FRINGE BENEFITS. The Executive shall be entitled to
paid vacation and fringe benefits in accordance with

-5-
<PAGE>

5. TERMINATION.

(a) DEATH. This Agreement shall terminate automatically upon the
Executive's death.

-6-
<PAGE>

(d) GOOD REASON. The Executive may terminate his employment for Good
Reason. For purposes of this Agreement, "Good Reason" means:

-7-
<PAGE>

6. OBLIGATION OF THE CORPORATION UPON TERMINATION.

-8-
<PAGE>

A. LUMP SUM CASH PAYMENT. On or before the Date of Termination, the
Corporation will pay to the Executive as compensation for services rendered to
the Corporation a lump sum cash amount (subject to any applicable payroll or
other taxes required to be withheld) equal to one times the Executive's then
Annual Salary. In the event that at the Date of Termination there are fewer
than twelve whole or partial months remaining until the Expiration Date, the
amount calculated in this Paragraph A will be reduced by multiplying it by a
fraction the numerator of which is the number of whole or partial months so
remaining until the Expiration Date and the denominator of which is eighteen.

B. INSURANCE BENEFITS.

(i) The Corporation shall provide the Executive with coverage under
the Corporation's group life insurance plan as then

-9-
<PAGE>

(ii) The Executive's participation in the Corporation's
Hospital/Medical/Surgical insurance plan shall be continued on the same basis as
prior to the Termination Date or equivalent benefits shall be provided, by the
Corporation, at no direct cost to the Executive, for a period of twelve months
from the Date of Termination (or until the Expiration Date, whichever is
shorter).

-10-
<PAGE>

If said certified public accountants of the Corporation immediately
prior to the Change of Control determine that any Payment would be nondeductible
by the Corporation because of Section 280G of the Code, the Corporation shall
promptly give the Executive notice to the effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and the Executive may then elect,
in his sole discretion, which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall advise the
Corporation in writing of his election within ten days of his receipt of notice.
If no such election is made by the Executive within such ten-day period, the
Corporation may elect which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall notify the
Executive promptly

-11-
<PAGE>

-12-
<PAGE>

9. MISCELLANEOUS.

(b) If litigation shall be brought to enforce or interpret any
provision contained herein, the Corporation, to the extent permitted by
applicable law and the Corporation's

-13-
<PAGE>

(d) This Agreement shall supersede all prior employment agreements
between the Corporation and the Executive effective as

-14-
<PAGE>

(g) This Agreement shall in all respects be governed by, and
construed in accordance with, the internal laws of the State of New York without
reference to principles of conflict of laws.

(h) This Agreement may be modified only by an agreement in writing
executed by both the parties hereto.

-15-
<PAGE>

IF TO THE EXECUTIVE:

IF TO THE CORPORATION: State Bancorp, Inc.
699 Hillside Avenue
New Hyde Park, NY 11040

IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.

------------------------------
Executive

STATE BANCORP, INC.

BY:
---------------------------
President

-16-

<PAGE>

EXHIBIT (10) h) - DEFERRED COMPENSATION AGREEMENT

<PAGE>

DEFERRED COMPENSATION AGREEMENT

AGREEMENT made as of the 1st day of January, l994, by and between
STATE BANK OF LONG ISLAND (hereinafter referred to as "the Bank") and
(hereinafter referred to as "the Employee"),

W I T N E S S E T H :

1. The Employee will serve for the term of employment by the Bank,
and will devote the time, attention, skill and effort reasonably required to
perform competently the duties of any position to which he is elected or
appointed.

2. The Bank will pay the Employee compensation in such amount as the
Board of Directors of the Bank ("the Board") may from time to time determine.

3. The Bank will also pay the Employee deferred compensation as
described in Paragraph 5.

4. (a) The Bank will credit to a book reserve (hereinafter referred
to as the "Deferred Compensation Account") established for this purpose, on or
before the last day of each calendar year in which the Employee: (i) has been
employed by the Bank; and (ii) has been a participant in the State Bancorp, Inc.
Employee Stock Ownership Plan ("the Plan"), an amount equal to the difference,
if any, between: (iii) the amount which would have been contributed to the Plan
in the absence of any limitations imposed by the Internal Revenue Code, as now
in effect or as it may be amended from time to time; and (iv) the actual amount
contributed.

<PAGE>

(b) Funds credited to the Deferred Compensation Account shall be kept
in cash, co-mingled with the assets of the Bank or invested and reinvested in
mutual funds, stocks, bonds, securities, or any other assets as may be selected
by the Board in its discretion. Funds credited to the Deferred Compensation
Account shall be credited with interest at a rate which is not less than the
Bank's Prime Rate at such time. "Prime Rate" as used in this Agreement, means
the rate of interest announced by the Bank as its prime rate as in effect on the
first day of each calendar month, which rate shall remain in effect for the
subsequent calendar month.

(c) Title to and beneficial ownership of any assets, whether cash or
investments, which the Bank may earmark to pay the contingent deferred
compensation hereunder, shall at all times remain in the Bank, and the Employee
and his designated beneficiary shall not have any property interest whatsoever
in any specific assets of the Bank.

5. The benefits to be paid as deferred compensation are as follows:

(a) If the Employee ceases to be Employee of the Bank on or after
having attained age 60, the Bank shall pay him in thirty-six (36) equal monthly
installments an amount equal to the fair market value of the assets in the
Deferred Compensation Account as of such date. Notwithstanding the foregoing,
the total amount payable to the Employee shall be increased semi-annually to
reflect the net income on the funds which remain invested in the

-2-
<PAGE>

Deferred Compensation Account. If the Employee dies on or after his 60th
birthday and before the thirty-six (36) monthly payments are made, the unpaid
balance will continue to be paid in installments for the unexpired portion of
such three (3) year period to his designated beneficiary in the same manner as
set forth above.

(b) If the Employee ceases to be an employee of the Bank for any
reason other than death or disability, but before having attained age 60, then
the amount in the Deferred Compensation Account shall continue to be invested or
held in cash as the Board, in its discretion, may determine and no payments
shall be made until the Employee shall have reached age 60, at which time
payments shall be made in the same manner and to the same extent as set forth in
paragraph 5(a). Notwithstanding the foregoing, if prior to reaching age 60 the
Employee dies or becomes disabled, then payments shall be made in the same
manner and to the same extent as set forth in paragraph 5(c).

(c) If the Employee dies or is disabled before attaining age 60 and
while an employee of the Bank, then the Bank shall make thirty-six (36) monthly
payments to the Employee (if he is disabled) or to his designated beneficiary
(if he is deceased), in the same manner and to the same extent as provided in
paragraph 5(a).

(d) If both the Employee and his designated beneficiary die before
thirty-six (36) monthly payments are made by the Bank, then the remaining value
of the Deferred Compensation Account shall

-3-
<PAGE>

be determined as of the date the designated beneficiary died and shall be paid
as promptly as possible in one lump sum to the estate of the designated
beneficiary.

(e) The beneficiary is a designated beneficiary for the purposes of
this Agreement only as designated by the Employee. The beneficiary is
________________, ____ of the Employee. The Employee may change his designation
at any time without the consent of any prior beneficiary. If the Employee dies
and there is no designated beneficiary then surviving, the amounts payable under
paragraph 5(c) shall be payable to the Employee's estate.

(f) For the purposes of paragraph 5(c), the Employee will be
considered disabled if, on the basis of evidence satisfactory to the Board, the
Board finds a mental or physical impairment rendering him unable to serve as an
employee of the Bank and the impairment will continue for more than one year.

(g) The installment payments to be made under paragraphs 5(a) and
5(c) shall commence on January 1 of the calendar year next succeeding the year
which the Employee ceases to be an employee of the Bank. The installments
payable to the Employee under paragraph 5(b) shall commence on January 1 of the
calendar year next succeeding the calendar year in which he attains age 60.

(h) Notwithstanding anything herein to the contrary, the Board shall
have the right in its sole discretion to vary the manner and time of making the
installment distributions provided in this paragraph and may make such
distributions in lump sums or over

-4-
<PAGE>

a shorter period of time as it may find appropriate, provided, however,
installment distributions shall not be made in lesser amounts or over a longer
period of time than provided in this paragraph.

6. Nothing in this Agreement and no action taken pursuant to the
provisions of this Agreement shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Bank and the Employee, his
designated beneficiary or any other person. Any funds which may be invested
under the provisions of this Agreement shall continue for all purposes to be a
part of the general funds of the Bank and no person other than the Bank shall by
virtue of the provisions of this Agreement have any interest in such funds. To
the extent that any person acquires a right to receive payments from the Bank
under this Agreement, such right shall be no greater than the right of any
unsecured general creditor of the Bank.

7. The right of the Employee or any other person to the payment of
deferred compensation or other benefits under this Agreement shall not be
assigned, transferred, pledged or encumbered except by will or by the laws of
descent and distribution.

8. If the Board finds that any person to whom a payment is payable
under this Agreement is unable to care for his affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or other legal
representative) may be

-5-
<PAGE>

paid to the spouse, a child, a parent, or a brother or sister, or to any person
deemed by the Board to have incurred expense for such person otherwise entitled
to payment, in such manner and proportions as the Board may determine. Any such
payment shall be a complete discharge of the liabilities of the Bank under this
Agreement.

9. Nothing herein shall be construed as conferring upon the Employee
the right to continue in the employ of the Bank as an officer or in any other
capacity.

10. Any deferred compensation payable under this Agreement shall not
be deemed salary or other compensation to the Employee for the purpose of
computing benefits to which he may be entitled under any pension plan or other
arrangement of the Bank for the benefit of its employees.

11. The Board shall have full power and authority to interpret,
construe and administer this Agreement and the Board's interpretations and
construction thereof, the actions thereunder, including any valuation of
Deferred Compensation Account, or the amount or recipient of the payment to be
made therefrom, shall be binding and conclusive on all persons for all purposes.
No member of the Board shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of this
Agreement unless attributable to his own wilful misconduct or lack of good
faith.

-6-
<PAGE>

l2. This Agreement shall be binding upon and inure to the benefit of
the Bank, its successors and assigns and the Employee, his heirs, executors,
administrators and legal representatives.

l3. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York.

14. This Agreement may not be amended or modified, except by an
agreement in writing signed by the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

STATE BANK OF LONG ISLAND

BY:
--------------------------------

-----------------------------------

-7-

<PAGE>

EXHIBIT (13) - ANNUAL REPORT TO STOCKHOLDERS

<PAGE>

CONTENTS

Financial Highlights . . . . . . . . . . . . 1
Message from the Chairman. . . . . . . . . . 2
Serving the Long Island Community. . . . . . 4
Financial Statements . . . . . . . . . . . . 6
Auditors' Report . . . . . . . . . . . . . . 23
Management's Discussion of
Financial Condition and
Results of Operations . . . . . . . . . . 24
Statistical Information. . . . . . . . . . . 30
Market Data. . . . . . . . . . . . . . . . . 36
Five Year Summary of Operations. . . . . . . 37
Board of Directors . . . . . . . . . . . . . 38
Officers and Administration. . . . . . . . . 39
Advisory Board . . . . . . . . . . . . . . . 40

<PAGE>

Financial Highlights ($ in Thousands)
%
1995 Change 1994
---- ------ ----

Total Assets $650,950 28.8% $505,361
Stockholders' Equity 40,588 12.2% 36,170
Net Income 5,039 25.4% 4,019

Return on Average Assets 0.94% 0.83%
Return on Average Stockholders'
Equity 13.11% 11.45%

NET INCOME 29 YEAR HISTORY 1967-1995
THOUSANDS OF DOLLARS

YEAR DOLLARS
- ---- -------
1967 $0
1968 8
1969 117
1970 101
1971 148
1972 198
1973 230
1974 340
1975 438
1976 439
1977 494
1978 584
1979 730
1980 865
1981 996
1982 1,224
1983 1,352
1984 1,420
1985 1,736
1986 2,073
1987 2,212
1988 2,416
1989 2,603
1990 2,759
1991 3,146
1992 3,463
1993 3,708
1994 4,019
1995 5,039

TOTAL ASSETS
AVG. ANNUAL GROWTH RATE - 20.6%
5 YEAR ANALYSIS
MILLIONS OF DOLLARS

YEAR DOLLARS
- ---- -------
1991 289.1
1992 424.5
1993 490.7
1994 505.4
1995 651.0

STOCKHOLDERS' EQUITY
AVG. ANNUAL GROWTH RATE - 9.2%
5 YEAR ANALYSIS
MILLIONS OF DOLLARS

YEAR DOLLARS
- ---- -------
1991 28.5
1992 31.0
1993 34.7
1994 36.2
1995 40.6

NET INCOME
AVG. ANNUAL GROWTH RATE - 13.0%
5 YEAR ANALYSIS
MILLIONS OF DOLLARS

YEAR DOLLARS
- ---- -------
1991 3,146
1992 3,463
1993 3,708
1994 4,019
1995 5,039

<PAGE>

As we begin the year 1996, it is with a considerable measure of pride and
satisfaction that we are able to look back upon the year just ended and report
to our many friends the completion of yet another year of record earnings and
asset growth. This is now our nineteenth year of such earnings growth, a record
we believe can be matched by only a scarce handful of financial institutions
across the country. In addition to another record year in reported earnings,
our Company has also achieved record levels of stockholders' equity, assets,
loans and deposits during the year 1995. These are all significant milestones
which the entire State Bank family can look upon with a great sense of
accomplishment.

The year 1995 brought with it a continuing modest improvement in the Long Island
economy. Nonetheless, the overall condition of our area's economy, of which we
are so very much a part, continues to lag behind many other regions of the
country in terms of solid, sustainable growth. Employment and commercial and
residential real estate trends, in particular, continued to be persistently weak
during much of 1995, and this has been clearly reflected throughout the Long
Island business community. Consequently, our region must continue to look
toward the more widespread economic expansion currently being experienced in
other areas of the country. Nevertheless, from the standpoint of growth and
development, it was once again a most successful year for our Company.

Although there were no new acquisitions during the year, we were most gratified
with the continuing growth experienced by our existing eight branch locations.
Our newest locations, as we would expect, have benefitted to the greatest degree
from the Company-wide growth in deposits during 1995. By way of illustration,
we are delighted to report that the deposit base in our Hauppauge office has
increased more than sixfold since the acquisition in September of 1993, from a
level at acquisition of $6 million to its current deposit level in excess of $35
million. Similarly, our Huntington office has experienced growth of nearly 100%
since the acquisition in November 1992, from a level of $27 million to its
current level of deposits in excess of $50 million. Indeed, the deposit growth
experience in each of our well located branch offices is indicative of the
strong presence we have established in all of our retail markets. While our
most significant deposit growth during 1995 was experienced in our two Suffolk
County offices, we continue to be the largest independent commercial bank
headquartered in Nassau County, and have experienced significant growth in that
county as well.

The officers and staff of the Bank continued during 1995 to spend a considerable
amount of time, and to commit a significant amount of Company resources, towards
strengthening our operations and enhancing our efficiencies. We have been
rewarded with favorable results in this regard largely through the greater
utilization of existing technologies as well as the development and application
of newer technologies currently available. Inasmuch as our Company operates in
one of the most competitive banking markets in the country, it is critical that
we remain in the forefront technologically with respect to the introduction of
new products and the enhancement of existing services. Specifically, we can now
offer our retail customers state-of-the-art access to their accounts at any hour
of any day, through both our network of recently installed ATM equipment or
through our twenty-four hour telephone banking system, Touch24. Both of these
account access vehicles have been received enthusiastically by our customer
base. During early 1996, it is anticipated that our Touch24 system will be
available to our commercial and municipal customers as well. In addition, our
many business clients seeking a more sophisticated means of electronic banking
will be able to utilize a real-time computer based cash management system in
1996. We also continue to explore the Company's utilization of the Internet, as
well as platform automation and check imaging services. Clearly, all of the
aforementioned technological advancements will enable our Company to compete
effectively and aggressively in the years ahead.

Turning again to our financial results for 1995, we were most gratified that net
income exceeded $5 million for the first time in our history, and represented a
very substantial increase of 25% over 1994 levels. As noted earlier, this is
our nineteenth consecutive year of record earnings. We know of no other
financial institution in our region that can report such a trend of
uninterrupted earnings growth, and of this we are quite proud. Total assets, as
well, attained record levels, recording an increase of nearly 29% at December
31, 1995. Loans and deposits, the heart of our business and key components of
our asset and liability structure, increased at year end by 13% and 32%
respectively, over December 31, 1994 levels. Perhaps most importantly, total
capital and Tier I capital continued to be significantly in excess of Federal
regulatory criteria for well-capitalized institutions, and our Stockholders'
Equity increased by 12% to a year-end total in excess of $40 million for the
first time in our history. Finally, the key profitability measures of our
Company, Return on Average Assets and Return on Average Stockholders' Equity,
both reflected significant gains to 0.94% and 13.11%, respectively. Again, we
are very pleased with the positive trends indicated in all financial aspects of
the Company.

For a more detailed analysis of the consolidated financial statement, please
refer to Management's Discussion and Analysis of Financial Condition and Results
of Operations on Page 24 of this Report.

Beyond the financial results of last year, there were several noteworthy events
regarding our State Bank family as well.

<PAGE>

We note particularly the retirement from the Board of Directors of Mr. William
B. Benack in April 1995. Mr. Benack's retirement followed nearly fifteen years
of service to our Company, during which time he made a significant contribution
to the successes of the Company, both as a member of several Board Committees
and as Chairman of our Funds Management Committee. His valued insights have
been much appreciated over the years.

The Bank's official staff continued to expand, with several new additions at
various administrative levels. We were particularly pleased to welcome Mr.
Kenneth M. Scheriff as a Senior Vice President within our Commercial Lending
Division, as well as Messrs. James T. Burns, Patrick M. Demery, Kevin T.
Hennessy, Kevin R. McHale, and Thomas Scott Swain, all Vice Presidents within
our Queens, Nassau and Suffolk Lending Groups. The addition of these seasoned
lenders, bringing to the Company an average of over twenty years of lending
experience in our Long Island communities, will contribute greatly to the
continued growth and expansion of our organization. We were also pleased to
welcome during 1995 Ms. Elizabeth A. Mead, who joined us as an Assistant Manager
within our Branch Administration Group, and will assist in the administration of
our branch network. Additionally, we acknowledge the promotions during 1995 of
Ms. Susanne Pheffer and Ms. Jean-ann Yngstrom to the position of 1st Vice
President. Ms. Pheffer has been with the Bank for thirteen years now, and
directs the activities of our Management Information Systems Group. Ms.
Yngstrom joined State Bank twelve years ago and serves as a senior level
executive within our Commercial Lending Division. Also promoted during the year
was Mr. William M. Holland to the position of Assistant Vice President and Ms.
Katherine A. O'Brien to the position of Manager, both within our Financial
Group. Finally, we are delighted to acknowledge the promotions of Ms. Maria
Billiris and Ms. Cynthia M. Monahan to the position of Assistant Manager in our
Lending Group and Operations Group, respectively.

Once again, during 1995 the untiring efforts of our many Advisory Board members
have contributed greatly to the successes enjoyed by our Company. A constant
source of new business referrals, the role of the Advisory Board has continued
to take on an even greater importance to our Company as we grow and expand. On
a more somber note, we were saddened recently with the passing of long-time
Advisory Board member Mrs. Gladys Danilek in December, 1995. A memorial to Mrs.
Danilek appears on the inside back cover of this Report.

Continuing to be of significant interest to our many stockholders is the
Company's Dividend Reinvestment Plan. This Plan was created in 1993 to afford
our stockholders the opportunity to reinvest their cash dividends into Company
stock. Additional purchases of stock can be made each quarter both through the
reinvestment of the cash dividend as well as the contribution of additional cash
for investment. This Plan has been exceptionally well received during the past
few years, with many of our stockholders electing to take advantage of the
program.

Finally, we continued as a Company to refine and enhance during 1995 many of our
strategies and action plans contained in our long range strategic plan, Mission
2000. Much time and effort was contributed by every department within the
Company to implementing many of these strategies during the course of the year.
I am delighted to report that we continue to be very much on track towards the
realization of the Company goals we have identified for ourselves, as being
critical to the success of our Company into the next century.

Again, the year 1995 was truly a full and rewarding one for all of us here at
State Bancorp and State Bank of Long Island. It is with great anticipation that
we now look forward to the continued growth and prosperity of our fine
organization. We remain most confident that the years ahead will bring us even
greater successes as we strive to reinforce our position as Long Island's
preeminent independent commercial bank.

Thomas F. Goldrick, Jr.
CHAIRMAN OF THE BOARD,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER

<PAGE>

SERVING THE LONG ISLAND COMMUNITY

A State Bank of Long Island, we believe that one of our most important assets
is our customers. They represent a unique combination of commercial, middle
market and small business firms, municipalities and consumers, a true
microcosm of the Long Island marketplace.

COMMERCIAL
State Bank has successfully developed a niche in the commercial/industrial
middle market which is often ignored by larger financial institutions.
Companies with sales of $200 million or less are typically grouped by major
banks into branch banking systems where the level of resources devoted to them
is minimal.

From our beginning, thirty years ago, State Bank has thrived in this market
segment. Our dedicated staff of seasoned professionals has the ability to
respond quickly to customer needs and to provide true relationship banking.
With each customer, our objective is to establish a long-term relationship
and to help every business achieve its goals.

At State Bank of Long Island, we offer our commercial customers a full line
of financial products from lines of credit, term loans, equipment financing
and commercial mortgages to checking and savings accounts. We will be adding
business telephone banking and an on-line cash management service in l996. At
State Bank, our level of service and products provide a better banking value
to commercial customers.

SMALL BUSINESS
Small businesses form the backbone of Long Island's economy. According to the
U.S. Small Business Administration, 81% or 67,000 of Long Island's businesses
employ 10 or less persons. COLLECTIVELY, THESE INNOVATIVE ENTREPRENEURS ARE THE
MAJOR EMPLOYERS OF LONG ISLAND!

In general, small businesses tend to be undercapitalized and often fail to
qualify for financing from commercial banks. In addition, many lack the
expertise to successfully market their products or services on a regional or
nationwide scale. If there is one accomplishment in which State Bank takes
great pride, it would be our tireless commitment to the small business
market. We provide small businesses with a full range of loans from
long-term financing for real estate and equipment to short-term financing to
support inventory and receivables. In every instance, we strive to match our
customers need to the best lending technique and structure available. In
fact, in 1995, State Bank received an award from the Small Business
Administration for being one of the most active lenders in the Long Island
marketplace.

Perhaps our most important contribution to the small business market over the
years has been our willingness to listen and provide advice. Our officers
are banking professionals who will work with customers of any size to develop
a viable business plan.

<PAGE>

MUNICIPAL SECTOR
Relative to its size, State Bank is a major force in the local municipal sector,
providing financial services to the counties, towns, villages, schools and
special districts throughout Long Island. By recent count, Long Island includes
not only the counties of Nassau and Suffolk, but 110 cities, towns and villages,
127 school districts, 423 special town districts and 383 special purpose units
for a total of 1,045 taxing units. Each of these municipal units provides some
of the basic services that are necessary to support the quality of life in our
communities, including fire and police protection, education, water supplies and
garbage collection. Each of these units in turn, requires special financing
because of their unique structure and fiduciary responsibility to taxpayers.

At State Bank of Long Island, we are especially versed in the special
requirements of municipalities. For example, as a safeguard, we continuously
collateralize all municipal deposits with a third party pledge of U.S.
Treasury and/or New York State municipal notes. In addition to providing our
municipal customers with basic checking and savings services, we also
actively and aggressively bid on their Certificates of Deposit and short-term
debt. This competitive bidding allows municipal units to invest their
excess funds and borrow when needed at the best possible rates - which
directly benefits each and every resident of Long Island.

PERSONAL BANKING
When consumers are asked why they do business with a particular financial
institution, they usually give one of two responses. Either the financial
institution is conveniently located near to where they live or work, or they
feel it provides a superior level of service.

At State Bank of Long Island, we are pleased to report that most of our
customers bank with us for BOTH of those reasons. In a recent customer
survey, an overwhelming majority of respondents indicated they were very
satisfied with the quality of service provided by our personnel and that our
branch locations and business hours were most helpful in meeting their needs.

Through our eight offices, located across Nassau and Suffolk counties, we
offer a full complement of personal banking services including checking,
savings, installment and mortgage loans. For our youngest customers, we
offer a "Junior Savings Program" with no minimum balance and no fees. For
college students, we offer a "Value Plus Package" which includes checking, an
ATM access card, savings and overdraft protection to qualified applicants.
For larger investors, we offer "Prosperity Savings" and a number of
alternative investment options. For senior citizens, we offer our "Senior
Value Package."

At State Bank of Long Island, we continue to maintain a strong commitment to
the thousands of personal banking customers who elect to use our products and
services. We appreciate their confidence in us and are resolved to continue
to earn their trust at every opportunity, while continually providing the
highest quality financial products and services available anywhere.

<PAGE>

STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994

NOTES 1995 1994
----- ---- ----
<S> <C> <C> <C>

ASSETS:
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . 11,14 $ 45,853,678 $ 19,866,956
Securities purchased under agreements to resell. . . . . . . . . . . . 1,14 76,000,000 5,100,000
----------- -----------
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 121,853,678 24,966,956
Securities held to maturity
(approximate market value of $28,224,224 in 1995 and
$130,014,812 in 1994) . . . . . . . . . . . . . . . . . . . . . . . 1,2,14 28,222,798 136,356,799
Securities available for sale - at market value. . . . . . . . . . . . 1,2,14 204,391,430 78,801,673
Loans (net of allowance for possible credit losses of
$5,004,216 in 1995 and $4,928,521 in 1994) . . . . . . . . . . . . . 1,3,4,13,14 282,574,525 250,216,424
Bank premises and equipment - net. . . . . . . . . . . . . . . . . . . 1,5 2,959,399 2,719,814
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,6,8,14 10,948,638 12,299,053
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $650,950,468 $505,360,719
----------- -----------
----------- -----------
LIABILITIES:
Deposits: 1,14
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,821,175 $ 67,336,288
Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,970,879 173,935,240
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,947,900 136,053,074
----------- -----------

Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497,739,954 377,324,602
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . 7,14 17,000,000 16,000,000
Securities sold under agreements to repurchase . . . . . . . . . . . . 14 83,217,774 74,916,295
Other short-term borrowings. . . . . . . . . . . . . . . . . . . . . . 14 10,000,000
Accrued expenses, taxes and other liabilities. . . . . . . . . . . . . 14 2,405,188 949,352
----------- -----------

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 610,362,916 469,190,249
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . 10,11,13,14

STOCKHOLDERS' EQUITY: 9
Common stock, $5.00 par value,
authorized 10,000,000 shares; issued 4,211,912 shares in 1995
and 3,752,819 shares in 1994 . . . . . . . . . . . . . . . . . . . . 21,059,560 18,764,095
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,402,404 13,114,916
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,159,000 5,201,989
Unrealized net loss on securities available for sale . . . . . . . . .
(Net of deferred income tax benefit of $23,456 in 1995 and
$647,097 in 1994). . . . . . . . . . . . . . . . . . . . . . . . . . (33,412) (910,530)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 40,587,552 36,170,470
----------- -----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . $650,950,468 $505,360,719
----------- -----------
----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

STATE BANK OF LONG ISLAND AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1995 and 1994

NOTES 1995 1994
----- ---- ----
<S> <C> <C> <C>
ASSETS:
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . 11,14 $ 45,853,678 $ 19,866,956
Securities purchased under agreements to resell. . . . . . . . . . . . 1,14 76,000,000 5,100,000
----------- -----------

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 121,853,678 24,966,956
Securities held to maturity
(approximate market value of $28,224,224 in 1995 and
$130,014,812 in 1994). . . . . . . . . . . . . . . . . . . . . . . . 1,2,14 28,222,798 136,356,799
Securities available for sale - at market value. . . . . . . . . . . . 1,2,14 204,391,430 78,801,673
Loans (net of allowance for possible credit losses of
$5,004,216 in 1995 and $4,928,521 in 1994) . . . . . . . . . . . . . 1,3,4,13,14 282,574,525 250,216,424
Bank premises and equipment - net. . . . . . . . . . . . . . . . . . . 1,5 2,959,399 2,719,814
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,6,8,14 10,948,638 12,299,053
----------- -----------

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $650,950,468 $505,360,719
----------- -----------
----------- -----------

LIABILITIES:
Deposits: 1,14
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,821,175 $ 67,336,288
Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,970,879 173,935,240
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,947,900 136,053,074
----------- -----------

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 610,362,916 469,190,249
----------- -----------

COMMITMENTS AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . 10,11,13,14

STOCKHOLDER'S EQUITY: 9
Common stock, $5.00 par value,
authorized 750,000 shares; issued 629,974 shares
in both years. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,149,870 3,149,870
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,879,224 1,879,224
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . 35,591,870 32,051,906
Unrealized net loss on securities available for sale
(Net of deferred income tax benefit of $23,456 in 1995 and
$647,097 in 1994). . . . . . . . . . . . . . . . . . . . . . . . . . (33,412) (910,530)
----------- -----------
Total stockholder's equity . . . . . . . . . . . . . . . . . . . . . . 40,587,552 36,170,470
----------- -----------

TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . . . . . . . . . . . $650,950,468 $505,360,719
----------- -----------
----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

STATE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

NOTES 1995 1994 1993
----- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME: 1
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $25,022,021 $19,754,955 $17,361,376
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . 1,466,075 907,144 888,950
Securities held to maturity and securities available for sale :
United States Treasury securities. . . . . . . . . . . . . . . . 1,616,262 1,440,419 2,509,743
States and political subdivisions. . . . . . . . . . . . . . . . 2,132,573 1,699,473 1,394,987
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . 7,521,153 7,196,680 6,984,042
Government Agency securities . . . . . . . . . . . . . . . . . . 1,584,265 268,333
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,007 663
---------- ---------- ----------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . 39,426,356 31,267,004 29,139,761
---------- ---------- ----------

INTEREST EXPENSE:
Time certificates of deposit of $100,000 or more . . . . . . . . . 6,167,786 3,108,368 1,979,695
Other deposits and temporary borrowings. . . . . . . . . . . . . . 12,501,783 8,869,348 9,417,746
---------- ---------- ----------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 18,669,569 11,977,716 11,397,441
---------- ---------- ----------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . 20,756,787 19,289,288 17,742,320
Provision for possible credit losses . . . . . . . . . . . . . . . 1,4 1,200,000 1,950,000 3,000,000
---------- ---------- ----------
Net interest income after provision for possible
credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . 19,556,787 17,339,288 14,742,320
---------- ---------- ----------

OTHER INCOME:
Service charges on deposit accounts. . . . . . . . . . . . . . . . 1,113,625 972,809 642,895
Net security (losses) gains. . . . . . . . . . . . . . . . . . . . (55,162) (30,272) 2,336,518
Other operating income . . . . . . . . . . . . . . . . . . . . . . 365,684 322,693 314,352
---------- ---------- ----------
Total other income . . . . . . . . . . . . . . . . . . . . . . . . 1,424,147 1,265,230 3,293,765
---------- ---------- ----------

Income before operating expenses . . . . . . . . . . . . . . . . . 20,980,934 18,604,518 18,036,085
---------- ---------- ----------

OPERATING EXPENSES:
Salaries and other employee benefits . . . . . . . . . . . . . . . 10 7,765,544 6,852,059 6,260,127
Occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1,314,268 1,243,096 1,190,991
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,673 494,034 525,873
Deposit assessment fees. . . . . . . . . . . . . . . . . . . . . . 542,034 941,869 951,579
Amortization of intangibles. . . . . . . . . . . . . . . . . . . . 634,007 589,601 802,447
Other operating expenses . . . . . . . . . . . . . . . . . . . . . 2,720,530 2,612,517 2,790,691
---------- ---------- ----------

Total operating expenses . . . . . . . . . . . . . . . . . . . . . 13,483,056 12,733,176 12,521,708
---------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . 7,497,878 5,871,342 5,514,377
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . 1,8 2,459,213 1,852,709 1,806,029
---------- ---------- ----------

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,038,665 $ 4,018,633 $ 3,708,348
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE. . . . . . . . . . . . . . . . . . . . . 1 $1.21 $0.98 $ 0.91
----- ----- ------
----- ----- ------

AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4,171,524 4,110,913 4,075,495
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

STATE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,038,665 $ 4,018,633 $ 3,708,348
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible credit losses . . . . . . . . . . . . . . . . 1,200,000 1,950,000 3,000,000
Depreciation and amortization of bank premises
and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 532,136 486,484 499,298
Amortization of intangibles. . . . . . . . . . . . . . . . . . . . . 634,007 589,601 802,447
Deferred income tax (benefit) provision. . . . . . . . . . . . . . . (280,277) (153,290) 18,481
Amortization of net premium on securities . . . . . . . . . . . . . 1,234,306 1,279,221 854,994
Net security losses (gains). . . . . . . . . . . . . . . . . . . . . 55,162 30,272 (2,336,518)
Change in securities held for sale . . . . . . . . . . . . . . . . . 19,072,178
Decrease (increase) in other assets, net . . . . . . . . . . . . . . 373,044 (1,008,188) (981,538)
Increase (decrease) in accrued expenses, taxes
and other liabilities . . . . . . . . . . . . . . . . . . . . . . 1,455,836 73,382 (732,506)
----------- ----------- ------------
Net cash provided by operating activities. . . . . . . . . . . . . . . 10,242,879 7,266,115 23,905,184
----------- ----------- ------------
INVESTING ACTIVITIES:
Proceeds from sales of securities held to maturity . . . . . . . . . . 19,768,232
Proceeds from maturities of securities held to maturity. . . . . . . . 60,852,844 71,032,818 72,898,046
Purchases of securities held to maturity . . . . . . . . . . . . . . . (41,797,155) (86,787,664) (143,209,809)
Proceeds from sales of securities available for sale . . . . . . . . . 46,892,356 34,845,693
Proceeds from maturities of securities available for sale. . . . . . . 37,053,383 31,191,843
Purchases of securities available for sale . . . . . . . . . . . . . . (120,245,893) (61,076,933)
Increase in loans - net. . . . . . . . . . . . . . . . . . . . . . . . (33,558,101) (25,775,527) (13,827,362)
Purchases of bank premises and equipment . . . . . . . . . . . . . . . (771,721) (511,615) (485,834)
Proceeds from sales of bank premises and equipment . . . . . . . . . . 1,626
----------- ----------- ------------

Net cash used in investing activities. . . . . . . . . . . . . . . . . (51,574,287) (37,079,759) (64,856,727)
----------- ----------- ------------

FINANCING ACTIVITIES:
Increase (decrease) in demand and savings deposits . . . . . . . . . . 77,520,526 (16,628,137) (6,608,842)
Increase (decrease) in time deposits . . . . . . . . . . . . . . . . . 42,894,826 26,123,978 (17,406,473)
Increase in Federal funds purchased. . . . . . . . . . . . . . . . . . 1,000,000 15,575,000 425,000
Increase (decrease) in securities sold under agreements
to repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,301,479 (11,953,705) 86,870,000
Increase in other short-term borrowings. . . . . . . . . . . . . . . . 10,000,000
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,353,892) (1,182,519) (1,066,074)
Proceeds from shares issued under the dividend
reinvestment plan . . . . . . . . . . . . . . . . . . . . . . . . . 679,813 394,643 207,511
Proceeds from stock options exercised. . . . . . . . . . . . . . . . . 175,378
----------- ----------- ------------

Net cash provided by financing activities. . . . . . . . . . . . . . . 138,218,130 12,329,260 62,421,122
----------- ----------- ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 96,886,722 (17,484,384) 21,469,579

CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,966,956 42,451,340 20,981,761
----------- ----------- ------------

CASH AND CASH EQUIVALENTS AT
END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,853,678 $ 24,966,956 $ 42,451,340
----------- ----------- ------------
----------- ----------- ------------

SUPPLEMENTAL DATA:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,355,250 $ 11,656,559 $ 11,434,036
----------- ----------- ------------
----------- ----------- ------------
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,472,750 $ 1,463,416 $ 1,764,211
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

STATE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

Unrealized
Net Gain (Loss)
on Securities
Common Retained Available
Notes Stock Surplus Earnings for Sale Total
----- ----------- ----------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>

Balance, January 1, 1993 . . . . . . $15,229,625 $ 9,529,859 $ 6,240,974 $31,000,458
Cash dividend ($.26 per share) . . . 1 (1,066,074) (1,066,074)
10% stock dividend (304,596 shares
at market value) . . . . . . . . . 1 1,522,980 1,446,831 (2,969,811)
Shares issued under the dividend
reinvestment plan (23,530 shares at
95% of market value) . . . . . . . 117,650 89,861 207,511
Net income . . . . . . . . . . . . . 3,708,348 3,708,348
Unrealized net gain on securities
available for sale . . . . . . . . 2 $ 865,005 865,005
----------- ---------- ---------- ----------- -----------
Balance, December 31, 1993 . . . . . 16,870,255 11,066,551 5,913,437 865,005 $34,715,248
Cash dividend ($.29 per share) . . . 1 (1,182,519) (1,182,519)
10% stock dividend (337,863 shares
at market value) . . . . . . . . . 1 1,689,315 1,858,247 (3,547,562)
Shares issued under the dividend
reinvestment plan (40,905 shares at
95% of market value) . . . . . . . 204,525 190,118 394,643
Net income . . . . . . . . . . . . . 4,018,633 4,018,633
Change in unrealized net gain (loss)
on securities available for sale . 2 (1,775,535) (1,775,535)
---------- ---------- --------- ---------- -----------
Balance, December 31, 1994 . . . . . 18,764,095 13,114,916 5,201,989 (910,530) 36,170,470
Cash dividend ($.57 per share) . . . 1 (2,353,892) (2,353,892)
10% stock dividend (378,221 shares
at market value) . . . . . . . . . 1 1,891,105 2,836,657 (4,727,762)
Shares issued under the dividend
reinvestment plan (58,824 shares at
95% of market value) . . . . . . . 294,120 385,693 679,813
Stock options exercised . . . . . . 9 110,240 65,138 175,378
Net income . . . . . . . . . . . . .
5,038,665 5,038,665
Change in unrealized net loss
on securities available for sale . 2 877,118 877,118
---------- ---------- --------- ---------- -----------

Balance, December 31, 1995 . . . . . $21,059,560 $16,402,404 $ 3,159,000 $ (33,412) $40,587,552
---------- ---------- --------- ---------- -----------
---------- ---------- --------- ---------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

- --------------------------------------------------------------------------------

STATE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

ORGANIZATION AND NATURE OF OPERATIONS -

The consolidated financial statements include the accounts of State Bancorp,
Inc. and its wholly-owned subsidiary, State Bank of Long Island (the "Bank").
The Bank's consolidated financial statements include the accounts of its wholly-
owned subsidiaries, New Hyde Park Leasing Corporation and SB ORE Corp. State
Bancorp, Inc. and subsidiary are collectively referred to hereafter as the
"Company." All intercompany accounts and transactions have been eliminated.

The Company was incorporated as a bank holding company under the laws of the
state of New York in 1985 to provide consumer, commercial and municipal banking
services to clients located primarily in the Queens, Nassau and Suffolk county
areas. It offers a full range of deposit and loan products through eight full
service branches and two regional financial centers.

<PAGE>

In addition, the Company offers merchant credit card services, access to annuity
products and offers a consumer debit card with membership in a national ATM
network. The Company currently has ATMs at five of its eight branch locations.

BASIS OF PRESENTATION - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

The accounting and reporting policies of the Company conform with generally
accepted accounting principles and with general practice within the banking
industry. The following is a summary of the more significant accounting and
reporting policies:

SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE - At the time of
purchase of a security, the Bank designates the security as either available for
sale or held to maturity, depending upon investment objectives, liquidity needs
and intent. Securities held to maturity are stated at cost, adjusted for
premium amortized or discount accreted, if any. The Bank has the intent and
ability to hold such securities to maturity. Securities available for sale are
stated at estimated market value. Unrealized gains and losses are excluded from
earnings and reported as a net amount as a separate component of stockholder's
equity until realized. Trading securities are purchased and held principally
for the purpose of selling them in the near term. Trading generally reflects
active and frequent buying and selling, and trading securities are generally
used with the objective of generating profits on short-term differences in
price. As of December 31, 1995 and 1994, the Bank did not hold any trading
securities. Interest earned on investment securities is included in interest
income. The cost used in computing realized gains and losses is determined by
the specific identification method.

INCOME RECOGNITION - Unearned income on discounted commercial loans is amortized
to interest income using the interest method. The Bank discontinues the
accrual of interest on loans whenever there is reasonable doubt
that interest and/or principal will be collected, or when either principal or
interest is ninety days or more past due and the loan is not well collateralized
nor in the process of collection. Income is not accrued for installment loans
which are 90 days past due unless the Bank holds cash collateral therefor.
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 is accrued on restructured loans generally in
accordance with the revised terms.

ALLOWANCE FOR POSSIBLE CREDIT LOSSES - The allowance for possible credit losses
is established through a provision for credit losses charged to expenses. Loans
are charged against the allowance for possible credit losses when management
believes that the collectibility of the principal is unlikely. The balance in
the allowance for possible credit losses is maintained at a level that, in the
opinion of management, is sufficient to absorb future losses. To determine that
level, management identifies problem loans based on the financial condition of
the borrower, coupled with the value of any collateral and/or guarantor support.
Based upon the resultant risk categories assigned to each loan, an appropriate
reserve level is determined. Management also evaluates the quality of, and
changes in, the portfolio, the Bank's historical loss experience, the existing
economic climate of the service area in which the Bank operates, examinations by
regulatory authorities, internal reviews and other evaluations in determining
the appropriate allowance balance. While management utilizes all available
information to estimate the adequacy of the allowance for possible credit
losses, the ultimate collectibility of a substantial portion of the loan
portfolio and the need for future additions to the allowance will be based upon
changes in economic conditions and other relevant factors.

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 of a Loan - Income 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
mortgage and nonaccrual commercial and industrial loans over $250,000. The
allowance for credit losses related to loans that are identified for evaluation
in accordance with SAFS No. 114 is based on their expected future cash flows,
discounted at the loan's effective interest rate, or at the observable market
price or at the fair value of the underlying collateral. This evaluation is
inherently subjective as it requires material estimates, including the amount
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change.

BANK PREMISES AND EQUIPMENT-NET - Bank premises and equipment are stated at
cost, less accumulated depreciation and amortization. Depreciation expense is
computed on the straight-line method over the estimated useful lives of the
related assets which range from 3 to 40 years. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the remaining
terms of the leases.

LOAN ORIGINATION FEES AND COSTS - Loan origination fees and certain direct
origination costs are capitalized and recognized as an adjustment of the yield
on the related loan.

<PAGE>

INCOME TAXES - The Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
Company's consolidated financial statements or tax returns (see Note 8). Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

CASH DIVIDENDS - Cash dividends per common share have been restated to give
retroactive effect to stock dividends.

Stock Dividends - Stock dividends issued are recorded by transferring the
aggregate market value of the shares issued from retained earnings to common
stock and surplus. All per share information included in the consolidated
financial statements and the notes thereto has been restated to give retroactive
effect to stock dividends.

EARNINGS PER COMMON SHARE - Earnings per common share are computed based on the
weighted average number of shares outstanding after giving retroactive effect to
stock dividends. The impact of the assumed exercise of stock options is
immaterial or antidilutive in all years presented.

STATEMENTS OF CASH FLOWS - For the purpose of presenting the statements of cash
flows, the Company considers Federal funds sold and securities purchased under
agreements to resell to be cash equivalents because such assets are convertible
into fixed amounts of cash within several days of initial purchase.

LOANS IN-SUBSTANCE FORECLOSED - Loans considered to be in-substance foreclosed
were accounted for as foreclosed property and were included in other assets in
1994 at fair market value less estimated costs of disposal. Although the
collateral underlying these loans was not repossessed, the borrower had little
or no equity in the collateral at its then current estimated fair value,
proceeds for repayment were expected to come only from the operation or sale of
the collateral, and either the borrower had formally or effectively abandoned
control of the property or it was doubtful the borrower would have been able to
rebuild equity in the collateral or otherwise repay the loan.

INTANGIBLES - Intangibles consist of core deposit intangibles, the excess market
value of leases acquired and goodwill. Intangibles are carried at cost less
accumulated amortization. Amortization is provided over the period of
anticipated benefit (3 to 20 years).

RECLASSIFICATIONS - Certain reclassifications have been made to prior years'
amounts to conform them to the current year's presentation.

2. SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses, and estimated market
value of securities held to maturity and securities available for sale at
December 31, 1995, 1994 and 1993 are as follows:

DECEMBER 31, 1995
-----------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities Held to Maturity:
Obligations of states and political
subdivisions . . . . . . . . . . . . . . $ 28,222,798 $ 1,426 $ 28,224,224
----------- ------- -----------
Total Securities Held to Maturity. . . . . . 28,222,798 1,426 28,224,224
----------- ------- -----------
Securities Available for Sale:
U.S. Treasury securities . . . . . . . . . 25,482,454 249,146 25,731,600
Obligations of states and political
subdivisions . . . . . . . . . . . . . . 14,731,728 17,521 $ (3,248) 14,746,001
Corporate securities . . . . . . . . . . . 1,429,850 1,429,850
Government Agency securities . . . . . . . 24,989,444 78,056 25,067,500
Mortgage-backed securities and
collateralized mortgage obligations. . . 137,814,822 (398,343) 137,416,479
----------- ------- -------- -----------
Total Securities Available for Sale. . . . . 204,448,298 344,723 (401,591) 204,391,430
----------- ------- -------- -----------
Total Securities . . . . . . . . . . . . . . $232,671,096 $346,149 $(401,591) $232,615,654
----------- ------- -------- -----------
----------- ------- -------- -----------
</TABLE>

<PAGE>

DECEMBER 31, 1994
-----------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>

Securities Held to Maturity:
U.S. Treasury securities . . . . . . . . . $ 6,199,237 $ (187,677) $ 6,011,560
Obligations of states and political
subdivisions . . . . . . . . . . . . . . 35,490,031 $10,625 (183,654) 35,317,002
Corporate securities . . . . . . . . . . . 18,150 18,150
Government Agency securities . . . . . . . 10,000,000 (306,500) 9,693,500
Mortgage-backed securities . . . . . . . . 84,649,381 (5,674,781) 78,974,600
----------- ------ ---------- -----------
Total Securities Held to Maturity. . . . . . 136,356,799 10,625 (6,352,612) 130,014,812

----------- ------ ---------- -----------
Securities Available for Sale:
U.S. Treasury securities . . . . . . . . . 19,639,417 (516,417) 19,123,000
Obligations of states and political
subdivisions . . . . . . . . . . . . . . 25,227,064 (89,623) 25,137,441
Mortgage-backed securities and
collateralized mortgage obligations. . . 35,492,819 4,141 (955,728) 34,541,232
----------- ------ ---------- -----------
Total Securities Available for Sale. . . . . 80,359,300 4,141 (1,561,768) 78,801,673
----------- ------ ---------- -----------
Total Securities . . . . . . . . . . . . . . $216,716,099 $14,766 $(7,914,380) $208,816,485
----------- ------ ---------- -----------
----------- ------ ---------- -----------
</TABLE>

DECEMBER 31, 1993
-----------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>

Securities Held to Maturity:
Obligations of states and
political subdivisions . . . . . . . . . $ 54,129,156 $ 48,644 $ (97,839) $ 54,079,961
Corporate securities . . . . . . . . . . . 18,150 18,150
Mortgage-backed securities . . . . . . . . 67,019,864 242,758 (364,652) 66,897,970
----------- --------- -------- -----------

Total Securities Held to Maturity. . . . . . 121,167,170 291,402 (462,491) 120,996,081
----------- --------- -------- -----------
Securities Available for Sale:
U.S. Treasury securities . . . . . . . . . 17,296,940 839,680 18,136,620
Obligations of states and
political subdivisions . . . . . . . . . 12,622,902 13,883 (3,445) 12,633,340
Mortage-backed securities and
collateralized mortgage obligations . . 56,144,337 736,760 (99,572) 56,781,525
----------- --------- -------- -----------
Total Securities Available for Sale . . . . 86,064,179 1,590,323 (103,017) 87,551,485
----------- --------- -------- -----------

Total Securities . . . . . . . . . . . . . . $207,231,349 $1,881,725 $(565,508) $208,547,566
----------- --------- -------- -----------
----------- --------- -------- -----------
</TABLE>

The amortized cost and estimated market value of securities held to maturity and
securities available for sale at December 31, 1995, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.

ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ----------
Securities Held to Maturity:
Due in one year or less . . . . . . . . . $ 27,813,598 $ 27,796,359
Due after one year through five years . . 127,200 126,677
Due after five years through ten years. . 282,000 301,188
---------- ----------
Total Securities Held to Maturity . . . . $ 28,222,798 $ 28,224,224
---------- ----------

<PAGE>

ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ----------
Securities Available for Sale:
Due in one year or less . . . . . . . . . $ 30,704,551 $ 30,829,426
Due after one year through five years . . 29,414,631 29,602,600
Due after five years through ten years. . 5,084,444 5,113,075
Due after ten years . . . . . . . . . . . 1,429,850 1,429,850
----------- -----------
Subtotal. . . . . . . . . . . . . . . . . 66,633,476 66,974,951
Mortgage-backed securities and
collateralized mortgage obligations . . 137,814,822 137,416,479
----------- -----------
Total Securities Available for Sale . . . $204,448,298 $204,391,430
----------- -----------
----------- -----------

In 1995 and 1994, gross gains of $7,758 and $4,748 and gross losses of $62,920
and $35,020, respectively, were realized on the sale of securities available for
sale. In 1993, gross gains of $2,413,898 and gross losses of $77,380 were
realized on the sale of securities held to maturity and securities available for
sale.

At December 31, 1995, the Bank owned securities held to maturity and securities
available for sale in excess of ten percent of stockholder's equity for the
following issuers:

ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ----------

Town of North Hempstead $ 8,492,896 $ 8,498,490
Town of Smithtown $ 4,187,728 $ 4,191,338

Securities held to maturity and securities available for sale with an amortized
cost of $210,974,658 and $198,599,883 and an estimated market value of
$210,869,615 and $190,768,502 at December 31, 1995 and 1994, respectively, were
pledged for public deposits, securities sold under agreements to repurchase and
fiduciary purposes.

In November 1995, the Financial Accounting Standards Board issued a special
report entitled "A Guide to Implementation of SFAS No. 115 on Accounting for
Certain Investments in Debt and Equity Securities - Questions and Answers" (the
"Guide"). The Guide provided the Company with a one-time opportunity to transfer
securities from the held to maturity category during the November 15 through
December 31, 1995 period. After reconsideration of its original classifications,
the Company reclassified $86.5 million of securities from held to maturity to
available for sale. The fair value of such securities at the date of transfer
was $86.0 million and the net unrealized loss was $0.5 million and was reported,
net of deferred tax benefits, as a separate component of stockholders' equity.

3. LOANS - NET
At December 31, 1995 and 1994, net loans consisted of the following:

1995 1994
---- ----
Commercial and industrial. . . . . . . . .$130,617,409 $112,285,899
Real estate - mortgage . . . . . . . . . . 137,066,419 126,107,478
Real estate - construction . . . . . . . . 7,797,685 3,348,716
Loans to individuals . . . . . . . . . . . 6,323,169 6,745,694
Tax exempt and other . . . . . . . . . . . 5,838,035 6,742,392
----------- -----------
Gross loans. . . . . . . . . . . . . . . . 287,642,717 255,230,179
Less:
Unearned income. . . . . . . . . . . . . 63,976 85,234
Allowance for possible credit losses
(Note 4). . . . . . . . . . . . . . . . 5,004,216 4,928,521
------------ -----------
Loans - net. . . . . . . . . . . . . . . .$282,574,525 $250,216,424
------------ -----------
------------ -----------

<PAGE>

At December 31, 1995 and 1994, loans with unpaid principal balances aggregating
$8,246,847 and $6,707,378, respectively, on which the Bank is no longer accruing
interest income are included in the amounts set forth above. Interest income
would have been approximately $702,176, $570,769 and $686,011 greater in 1995,
1994 and 1993, respectively, had these loans been current. Interest income on
nonaccrual loans, which is recorded only when received, amounted to $60,580,
$124,079 and $47,897 for 1995, 1994 and 1993, respectively.

At December 31, 1995 and 1994, loans restructured, and still accruing interest
in accordance with the modified terms, were approximately $3,344,000 and
$3,608,000, respectively. Interest income would have been approximately $65,700
and $93,200 greater in 1995 and 1994, respectively, had the restructured loans
performed according to their original terms.

The Bank makes loans to its directors and executive officers, as well as to
other related parties, in the ordinary course of its business. These loans are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with unrelated
persons and, in the opinion of management, do not bear more than normal credit
risk. Loans made to directors and executive officers, either directly or
indirectly, exclusive of loans which did not exceed $60,000 in aggregate for any
one person during the year, totaled $2,380,989 and $3,698,510 at December 31,
1995 and 1994, respectively. New loans totaling $2,991,350 and $4,309,561 were
extended and payments of $2,553,743 and $3,919,066 were received in 1995 and
1994, respectively, on these loans.

The Bank adopted SFAS No. 114 and SFAS No. 118 in 1995. Due to the nature of
the Bank's loans, the adoption of SFAS No. 114 and SFAS No. 118 did not have a
material effect on the Bank's results of consolidated operations or financial
condition. As of December 31, 1995, total impaired loans amounted to $7,782,686.
As a result of the Bank's evaluation of impaired loans, an allowance for
possible credit losses of $1,177,013 was established for $6,416,198 of the total
impaired loans, with the balance of impaired loans requiring no specific
allowance according to SFAS No. 114. For the year ended December 31, 1995, the
total average impaired loan balance was $6,498,542. Total interest income
recognized for impaired, nonaccrual and restructured loans during the year ended
December 31, 1995 was $153,903.

Effective January 1, 1995 the Bank transferred $1,100,774 in loans in-substance
foreclosed from other assets to the loan portfolio. This transfer was made in
accordance with the provisions of SFAS No. 114.

4. ALLOWANCE FOR POSSIBLE CREDIT LOSSES
Activity in the allowance for possible credit losses for each of the three
years in the period ended December 31, 1995 is as follows:

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, January 1 . . . . . . . . . . . . $4,928,521 $4,725,033 $5,067,897
Provision charged to income . . . . . . . . 1,200,000 1,950,000 3,000,000
Charge-offs, net of recoveries of $69,744,
$168,053 and $67,910 . . . . . . . . . . (1,124,305) (1,746,512) (3,342,864)
--------- --------- ---------
Balance, December 31 . . . . . . . . . . . . $5,004,216 $4,928,521 $4,725,033
--------- --------- ---------
--------- --------- ---------
</TABLE>

5. BANK PREMISES AND EQUIPMENT - NET
At December 31, 1995 and 1994, Bank premises and equipment consisted of the
following:

ACCUMULATED
DEPRECIATION/ NET BOOK
COST AMORTIZATION VALUE
---- ------------- --------
December 31, 1995:
Building. . . . . . . . . $1,686,729 $ 546,259 $1,140,470
Leasehold improvements. . 1,218,281 428,834 789,447
Furniture and fixtures. . 3,711,800 2,682,318 1,029,482
--------- --------- ---------
Total. . . . . . . . . . . . $6,616,810 $3,657,411 $2,959,399
--------- --------- ---------
--------- --------- ---------
December 31, 1994:
Building. . . . . . . . . $1,540,618 $ 487,894 $1,052,724
Leasehold improvements. . 1,098,914 332,483 766,431
Furniture and fixtures. . 3,263,556 2,362,897 900,659
--------- --------- ---------
Total. . . . . . . . . . . . $5,903,088 $3,183,274 $2,719,814
--------- --------- ---------
--------- --------- ---------

<PAGE>

6. OTHER ASSETS
At December 31, 1995 and 1994, other assets consisted of the following:

1995 1994
---- ----
<S> <C> <C>
Core deposit intangibles (net of accumulated amortization
of $2,110,885 and $1,541,875). . . . . . . . . . . . . . . . . . . . $ 1,185,438 $ 1,754,448
Interest receivable - investments. . . . . . . . . . . . . . . . . . . 3,146,140 2,442,169
Interest receivable - loans. . . . . . . . . . . . . . . . . . . . . . 2,027,698 1,873,072
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 2,295,700 2,595,554
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 529,343 477,386
Excess market value of leases acquired (net of accumulated
amortization of $114,423 and $78,286) . . . . . . . . . . . . . . . 508,043 544,180
Cash surrender value of life insurance policies. . . . . . . . . . . . 864,135 735,635
Principal receivable - mortgage-backed securities. . . . . . . . . . . 218,556
Loans in-substance foreclosed. . . . . . . . . . . . . . . . . . . . . 1,100,774
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . 453,769
Goodwill (net of accumulated amortization of $94,165 and $69,926) . . 24,239
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,585 297,827
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,948,638 $12,299,053
----------- -----------
----------- -----------
</TABLE>

Statement of Financial Accounting Standards No. 121, "Accounting for Long-Lived
Assets to be Disposed of" ("SFAS No. 121"), establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of. SFAS No. 121 requires
that long-lived assets (such as foreclosed real estate as defined in SFAS No.
15,"Accounting by Debtors and Creditors for Troubled Debt Restructurings") and
certain identifiable intangibles to be disposed of, be reported at the lower of
carrying amount or fair value less cost to sell, except for assets that are
covered by APB Opinion No. 30, "Reporting the Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." The requirements of SFAS
No. 121 are effective for fiscal years beginning after December 15, 1995.
Impairment losses resulting from the application of SFAS No. 121 should be
reported in the period in which the recognition criteria are first applied and
met. The initial application of SFAS No. 121 to assets that are being held for
disposal at the date of adoption should be reported as a cumulative effect of a
change in accounting principle. The Company does not believe that the adoption
of SFAS No. 121 will have a material effect on the Company's consolidated
financial statements.

7. LINES OF CREDIT
At December 31, 1995, several correspondent banks extended informal lines of
credit aggregating $17,000,000 to the Bank for the purchase of Federal funds.
The average amount outstanding under these credit facilities was $2,577,945 in
1995 and $3,276,507 in 1994. At December 31, 1995 and 1994, $17,000,000 and
$16,000,000, respectively, were outstanding under these facilities.

8. INCOME TAXES
The components of income tax expense for the years ended December 31, 1995, 1994
and 1993 are as follows:

1995 1994 1993
---- ---- ----
Federal:
Current . . . . . . . . . . . . . . $1,915,595 $1,358,914 $1,234,161
Deferred . . . . . . . . . . . . . (204,411) (110,438) 13,234

Subtotal . . . . . . . . . . . . . . . 1,711,184 1,248,476 1,247,395
----------- ----------- ----------
State:
Current . . . . . . . . . . . . . . 823,895 647,085 553,387
Deferred . . . . . . . . . . . . . (75,866) (42,852) 5,247
----------- ----------- ----------
Subtotal . . . . . . . . . . . . . . . 748,029 604,233 558,634
----------- ----------- ----------
Total. . . . . . . . . . . . . . . . . $2,459,213 $1,852,709 $1,806,029
----------- ----------- ----------
----------- ----------- ----------

<PAGE>

Total income tax expense was less than the amounts computed by applying the
statutory Federal income tax rate to income before income taxes due to the
following:

1995 1994 1993
---- ---- ----
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at
statutory rate. . . . . . . . . . . . . . $2,549,279 34.0% $1,996,257 34.0% $1,874,888 34.0%
Increase (reduction) in taxes
resulting from:
Tax exempt interest on investments,
net of interest expense disallowed
of $269,939, $149,959 and $146,247
in 1995, 1994 and 1993, respectively. . (601,743) (8.0) (559,980) (9.5) (460,164) (8.3)
State income tax, net of Federal
tax benefit . . . . . . . . . . . . . . 493,699 6.6 398,794 6.8 368,698 6.7
Other . . . . . . . . . . . . . . . . . . 17,978 0.2 17,638 0.3 22,607 0.4
----------- ----- ----------- ----- ----------- -----
Income tax expense . . . . . . . . . . . . . $2,459,213 32.8% $1,852,709 31.6% $1,806,029 32.8%
----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- -----
</TABLE>

The components of the deferred tax (benefit) provision are as follows:

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Excess of book over tax depreciation . . . . . . . . . . . . $ (50,451) $ (26,395) $ (11,892)
(Excess) deficiency of book over tax bad debt provision. . . (31,334) (1,947) 440,772
Excess of book over tax amortization of
intangibles . . . . . . . . . . . . . . . . . . . . . (146,787) (131,911) (214,453)
Allowance for recapture of credit losses . . . . . . . . . . (60,505)
Section 197 election income. . . . . . . . . . . . . . . . . (181,595)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . 8,800 6,963 (14,351)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $(280,277) $(153,290) $ 18,481
--------- --------- ---------
--------- --------- ---------
</TABLE>

At December 31, 1995 and 1994, deferred tax assets are comprised of the
following:
1995 1994
---- ----
Allowance for possible credit losses . . . $1,526,967 $1,445,425
Securities available for sale . . . . . . . 23,456 647,097
Intangible assets . . . . . . . . . . . . . 602,374 459,415
Property and equipment . . . . . . . . . . . 77,333 17,519
Other. . . . . . . . . . . . . . . . . . . . 65,570 26,098
---------- ----------
Deferred income taxes . . . . . . . . . . . $2,295,700 $2,595,554
---------- ----------
---------- ----------

At December 31, 1995 and 1994, there were no deferred tax liabilities.

Income tax (benefit) expense associated with net realized security (losses)
gains amounted to approximately $(22,891), $(12,612) and $978,000 in 1995, 1994
and 1993, respectively.

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") during the first quarter of 1993.
The adoption of SFAS No. 109 was made as of the beginning of the year on a
prospective basis. The effect of this accounting change was not material to the
Company's consolidated financial statements as of the date of adoption, nor did
it have a material effect on the 1993 provision for income taxes.

<PAGE>

9. STOCKHOLDERS' EQUITY
Under the terms of the Company's incentive stock option plans adopted in January
1987 and April 1994, options have been granted to certain key personnel which
entitle each holder to purchase shares of the Company's common stock. The
option price is the higher of the fair market value or the book value of the
shares at the date of grant. Such options are exercisable commencing one year
from the date of grant, at the rate of 25 percent per year, and expire eight
years from the date of the grant.

A summary of stock option activity follows after giving retroactive effect to
all stock dividends:

OPTION PRICE
(APPROXIMATE FAIR
VALUE AT DATE OF GRANT)
-----------------------
NUMBER NUMBER
OF OPTIONS OF SHARES PER OPTION TOTAL
---------- --------- ---------- -----
<S> <C> <C> <C> <C>
Outstanding -
January 1, 1993 . . . . . . 70,200 142,247 $11.00 - $31.00 $1,094,139
Granted . . . . . . . . . . 21,900 29,149 $10.60 232,140
Cancelled . . . . . . . . . (2,300) (3,583) $10.60 - $13.63 (27,885)
-------- -------- ----------

Outstanding -
December 31, 1993 . . . . . 89,800 167,813 $10.60 - $31.00 1,298,394
Cancelled . . . . . . . . . (1,100) (2,464) $10.60 - $31.00 (18,850)
-------- -------- ----------
Outstanding -
December 31, 1994 . . . . . 88,700 165,349 $10.60 - $31.00 1,279,544
Granted . . . . . . . . . . 29,300 32,230 $12.63 369,913
Exercised . . . . . . . . . (5,659) (24,243) $30.00 - $31.00 (175,378)
Cancelled . . . . . . . . . (2,694) (5,234) $10.60 - $31.00 (41,716)
-------- -------- ----------
Outstanding -
December 31, 1995 . . . . . 109,647 168,102 $10.60 - $31.00 $1,432,363
-------- -------- ----------
-------- -------- ----------
</TABLE>

At December 31, 1995, 64,872 options for the purchase of 114,467 shares were
exercisable, and 183,578 shares were reserved for possible issuance. All
options are noncompensatory; therefore, the Company is not required to make any
charges to operations in connection with the plans.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans.

Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. For stock options, fair value is determined
using an option-pricing model that takes into account the stock price at the
grant date, the exercise price, the expected life of the option, the volatility
of the underlying stock and the expected dividends on it, and the risk-free
interest rate over the expected life of the option. The fair value of an option
estimated at the grant date is not subsequently adjusted for changes in the
price of the underlying stock or its volatility, the life of the option,
dividends on the stock, or the risk-free interest rate.

Entities electing to remain with the accounting in APB Opinion No. 25 must make
pro forma disclosures of net income and, if presented, earnings per share, as if
the fair value based method of accounting defined in SFAS No. 123 had been
applied. The accounting requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years beginning after December 15, 1995 and
the disclosure requirements of SFAS No. 123 are effective for financial
statements for fiscal years beginning after December 15, 1995. The Company does
not believe that the adoption of SFAS No. 123 will have a material effect on the
Company's consolidated financial statements.

<PAGE>

10. EMPLOYEE BENEFIT PLANS
The Bank has an Employee Stock Ownership Plan (the "ESOP") which is a defined
contribution plan covering substantially all full-time employees. Bank
contributions to the ESOP represent a minimum of three percent of an employee's
annual gross compensation. Employees become 20 percent vested after two years
of employment, with an additional 20 percent vesting each year. Full vesting
takes place upon the completion of six years of employment. Employee
contributions are not permitted. Contributions under the ESOP charged to
operations amounted to $346,284, $306,307 and $289,005 in 1995, 1994 and 1993,
respectively. The Bank funds all amounts when due. At December 31, 1995, the
ESOP had all of its assets invested in the Company's common stock and interest-
bearing deposit accounts.

The Bank has a 401(k) Retirement Plan and Trust (the "401(k) Plan"), which
covers substantially all full-time employees. Employees may elect to contribute
up to sixteen percent of their annual gross compensation to the 401(k) Plan, and
the Bank will match one half of the employee's contribution up to a maximum of
three percent of the employee's annual gross compensation. Employees are fully
vested in both their own and Bank contributions. Bank contributions under the
401(k) Plan amounted to $129,730, $121,413 and $110,047 in 1995, 1994 and 1993,
respectively. The Bank funds all amounts when due. At December 31, 1995,
contributions to the 401(k) Plan were invested in either a bond, equity, money
market, capital appreciation, international equity or diversified fund as
directed by each employee.

During 1995, the Bank adopted non-qualified deferred compensation plans ("the
Plan") for each officer for whom contributions under the ESOP are limited by the
applicable provisions of the Internal Revenue Code. Bank contributions under the
Plan totaled $24,923 in 1995.

11. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES - The Bank is obligated under various leases covering branches, office
space and the land on which its head office is built. The minimum payments
under these leases, certain of which contain escalation clauses, are:

1996. . . . . . $ 562,248
1997. . . . . . 316,603
1998. . . . . . . 208,025
1999. . . . . . . 211,775
2000. . . . . . . 167,775
Remainder to 2011 1,396,079
---------
Total . . . . . . $2,862,505
---------
---------

Rent expense was approximately $643,000, $570,000 and $547,000 for 1995, 1994
and 1993, respectively.

DIRECTORS' INCENTIVE RETIREMENT PLAN - The Company has a Directors' Incentive
Retirement Plan for former directors of the Company who elected to retire after
having completed certain minimum service requirements. Under the retirement
plan, directors who elected to retire are entitled to receive, for a period of
five years after such retirement, certain compensation, as defined in the
retirement plan, as long as such director continues to consult with the Company
in an advisory capacity (or, if the director expires prior to the completion of
the consulting period, the beneficiary or estate designated by the director is
entitled to receive such remaining compensation).

In 1992, the Company adopted a new retirement plan, whereby five individuals
(four directors and the secretary to the Board of Directors), who had been
eligible to receive benefits under the old retirement plan, agreed to cancel and
surrender their rights in the old retirement plan in exchange for the terms of
the new retirement plan. The new retirement plan provides for the payment of
certain compensation annually to these five individuals through March 1, 2007.
These individuals must be available to consult with the Company in an advisory
capacity during this period (or, if the director or secretary expires prior to
the completion of the consulting period, the beneficiary or estate designated by
the director or secretary is entitled to receive such remaining compensation).

During 1995, 1994 and 1993, the Bank charged $160,045, $211,967 and $261,244,
respectively, to operations relating to the retirement plans.

SEVERANCE COMMITMENTS - The Company has five Executive Severance Plans (the
"Plans") for certain key executives who are full-time employees of the rank of
First Vice President and above and who are designated as Plan participants by
the Board of Directors. The Plans provide for certain rights accruing to
participants in the event of a termination of the participant's employment
within one year after a change in control of the Company. These rights include
a cash payment and the continuation of certain employee benefits. In addition,
all stock options held by a participant will become immediately exercisable. In
the event that the participant enters into an employment contract, as defined in
the Plans, all rights to the severance payment and other benefits set forth
above will terminate. No amounts have been paid or accrued under the Plans.

<PAGE>

PENDING CLAIMS AND CONTINGENT LIABILITIES - There are various pending claims and
contingent liabilities arising in the normal course of business which are not
reflected in the accompanying consolidated financial statements. Management
considers that the aggregate liability, if any, resulting from pending claims
and contingent liabilities will not be material.

OTHER - The Bank is required to maintain balances with the Feeral Reserve Bank
of New York to satisfy reserve requirements. These balances averaged
approximately $2,017,000 in 1995 and $1,968,000 in 1994.

12. STATE BANCORP, INC. (PARENT COMPANY ONLY)
(IN THOUSANDS OF DOLLARS)

Certain condensed financial information follows:

DECEMBER 31
------------------

1995 1994
---- ----

BALANCE SHEET
ASSETS - Investment in the Bank. . . . . . $40,588 $36,170
------- -------
------- -------

Stockholders' Equity:
Common stock . . . . . . . . . . . . . . . $21,060 $18,764
Surplus. . . . . . . . . . . . . . . . . . 16,402 13,115
Retained earnings. . . . . . . . . . . . . 3,159 5,202
Unrealized net loss on
securities available for sale . . . . (33) (911)
------- -------

TOTAL STOCKHOLDERS' EQUITY . . . . . . . . $40,588 $36,170
------- -------
------- -------

FOR THE YEARS ENDED DECEMBER 31,
--------------------------------

INCOME STATEMENT 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>

Dividends from the Bank. . . . . . . . . . . . . . . . $2,354 $1,183 $1,066
Equity in the undistributed earnings of the Bank . . . 2,685 2,836 2,642
------ ------ ------

NET INCOME . . . . . . . . . . . . . . . . . . . . . . $5,039 $4,019 $3,708
------ ------ ------
------ ------ ------

CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
--------------------------------

OPERATING ACTIVITIES: 1995 1994 1993
---- ---- ----
Net income . . . . . . . . . . . . . . . . . . . . . . $5,039 $4,019 $3,708
Less - equity in the undistributed earnings
of the Bank . . . . . . . . . . . . . . . . . . 2,685 2,836 2,642
------ ------ ------

Net cash provided by operating activities. . . . . . . 2,354 1,183 1,066
------ ------ ------

FINANCING ACTIVITIES:
Cash dividends . . . . . . . . . . . . . . . . . . . . (2,354) (1,183) (1,066)
Proceeds from shares issued under the dividend
reinvestment plan. . . . . . . . . . . . . . . . . . 680 395 208
Proceeds from stock options exercised. . . . . . . . . 175
Capital contribution to the Bank . . . . . . . . . . . (855) (395) (208)
------ ------ ------

Net cash used in financing activities. . . . . . . . . (2,354) (1,183) (1,066)
------ ------ ------

NET CHANGE IN CASH . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0
------ ------ ------
------ ------ ------
</TABLE>

13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, standby letters of credit and
financial guarantees. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated financial statements.

The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial statement for commitments to extend credit, standby
letters of credit and financial guarantees written is represented by the
contractual

<PAGE>

notional amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance sheet
instruments.

Unless noted otherwise, the Bank does not require collateral or other security
to support financial instruments with credit risk.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counter-party. Collateral held varies, but may include
accounts receivable, inventory, equipment, real estate, and income-producing
commercial properties. At December 31, 1995 and 1994, the unused portion of loan
commitments for which the Bank is obligated amounted to approximately
$53,372,000 and $45,059,000, respectively.

Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank holds cash as collateral supporting those commitments for which
collateral is deemed necessary.

At December 31, 1995 and 1994, the Bank had standby letters of credit
outstanding of approximately $2,903,000 and $2,300,000, respectively, of which
approximately $623,000 and $656,000, respectively, were collateralized by cash.
Additionally, at December 31, 1995 and 1994, the Bank had unutilized letters of
credit outstanding of approximately $287,000 and $696,000, respectively.

See Note 3 for additional information regarding concentrations of credit risk.

14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Bank is required to disclose the fair value of certain financial
instruments, including both assets and liabilities recognized and not recognized
in the consolidated balance sheets.

Markets do not exist for a portion of the Bank's financial instruments and, as a
result, fair value estimates require judgements regarding future cash flows.
These judgements are subjective in nature, involve uncertainties and therefore
may change significantly at future measurement dates. The fair value information
that follows is intended to supplement, but not replace, the basic consolidated
financial statements and other traditional financial data presented throughout
this report. In addition, the calculation of estimated fair values is based on
market conditions at December 31, 1995 and 1994 and is not reflective of current
or future fair values.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.

CASH AND SHORT-TERM INVESTMENTS - For cash and short-term investments (due from
banks, Federal funds sold, securities purchased under agreements to resell,
accrued interest receivable and certain other short-term assets), the carrying
amount is a reasonable estimate of fair value.

SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE - For securities
held to maturity and securities available for sale, fair value equals quoted
market price, if available. If a quoted market price is not available, fair
value is estimated using a quoted market price for similar securities.

LOANS - The fair value of loans is estimated by discounting the expected future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.

DEPOSITS - The fair value of demand deposits, savings accounts and time deposits
is the same amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

<PAGE>

OTHER SHORT-TERM LIABILITIES - Other short-term liabilities (Federal funds
purchased, securities sold under agreements to repurchase, accrued interest
payable and certain other short-term liabilities) are considered to have fair
values equal to their carrying amounts due to their short-term nature. These
instruments are presented in the table below as other short-term liabilities.

COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND COMMERCIAL LETTERS
OF CREDIT - The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties.
For fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The fair
value of standby letters of credit and commercial letters of credit is based on
fees currently charged for similar agreements.

The estimated fair values of the Bank's financial instruments are as follows:

1995 1994
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments . . . $127,438,734 $127,438,734 $ 29,282,197 $ 29,282,197
Securities held to maturity and
securities available for sale . . 232,614,228 232,615,654 215,158,472 208,816,485
Loans - net of the allowance
for credit losses . . . . . . . . 282,574,525 288,429,361 250,216,424 252,230,815
----------- ----------- ----------- -----------
Total. . . . . . . . . . . . . . . . . . $642,627,487 $648,483,749 $494,657,093 $490,329,497
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
1995 1994
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>

Financial liabilities:
Deposits. . . . . . . . . . . . . . . $497,739,954 $498,556,926 $377,324,602 $374,691,358
Other short-term liabilities. . . . . 111,076,275 111,076,275 91,460,477 91,460,477
----------- ----------- ----------- -----------

Total. . . . . . . . . . . . . . . . . . $608,816,229 $609,633,201 $468,785,079 $466,151,835
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

As of December 31, 1995 and 1994, the fair value of the net deferred income
arising from unrecognized financial instruments (commitments to extend credit,
standby letters of credit and commercial letters of credit) approximated the
carrying value.

15. REGULATORY MATTERS
Dividends paid by the Bank are subject to restrictions by certain regulatory
agencies. Under these restrictions, approximately $4,512,000 was available for
payment of dividends at December 31, 1995, without prior approval of those
regulatory agencies.

Banks must maintain a minimum ratio of qualifying total capital and core (Tier
I) capital to risk weighted assets of 8% and 4%, respectively. Regulatory
authorities have also established a minimum leverage ratio of Tier I capital to
total adjusted assets (leverage) of 3% to 5%. The following is a summary of
the Bank's capital ratios as of December 31, 1995:

MINIMUM
ACTUAL REQUIRED
------ --------
<S> <C> <C>
Tier I Capital to Total Adjusted Assets (Leverage) . . . 6.56% 3.00%-5.00%

Tier I Capital to Risk Weighted Assets . . . . . . . . . 11.35% 4.00%
Total Capital to Risk Weighted Assets. . . . . . . . . . 12.81% 8.00%
</TABLE>

<PAGE>

---------------------------------------------------------
Two Jericho Plaza Telephone: (516) 935-9000
Jericho, New York 11753-1683 Facsimile: (516) 935-9056

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF STATE BANCORP, INC.:

We have audited the accompanying consolidated balance sheets of State Bancorp,
Inc. and subsidiary (the "Company") as of December 31, 1995 and 1994 and the
related statements of consolidated earnings, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995 and the
consolidated statements of condition of State Bank of Long Island and
subsidiaries as of December 31, 1995 and 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of State Bancorp, Inc.
and subsidiary at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 and the financial position of State Bank of Long Island and
subsidiaries at December 31, 1995 and 1994 in conformity with generally accepted
accounting principles.

/s/ Deloitte & Touche LLP

January 26, 1996

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

State Bancorp, Inc. (the "Company"), is a one-bank holding company which was
formed on June 24, 1986. The Company operates as the parent for its wholly-
owned subsidiary, State Bank of Long Island and subsidiaries (the "Bank"), a New
York State chartered commercial bank founded in 1966. The income of the Company
is derived through the operation of the Bank and its subsidiaries, the New Hyde
Park Leasing Corporation and SB ORE Corp.

For the year ended December 31, 1995, the Company achieved record levels of
earnings, equity, deposits and assets. The following discussion is intended to
provide the reader with further insight into the principal factors contributing
to the Company's 1995 financial results.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SUMMARY
The Company achieved its nineteenth consecutive year of record earnings during
1995. Net income increased by 25.4% to $5.0 million or $1.21 per common share
in 1995 versus $4.0 million or $0.98 per share in 1994. Higher net interest
income, improved other income and a lower provision for credit losses were the
primary reasons for the growth in earnings during 1995. Somewhat offsetting the
foregoing factors was an increase in operating expenses, principally salaries
and benefits, coupled with a higher effective tax rate.

The Company's capital position, by various measures, remains strong. The
ratio of average total stockholders' equity to average total assets was 7.15%
and 7.18% in 1995 and 1994, respectively. Based upon banking industry
regulatory guidelines, a "well capitalized" institution must maintain a Tier
I leverage ratio of at least 5.00% and Tier I and total capital to
risk-adjusted assets ratios of at least 6.00% and 10.00%, respectively. At
December 31, 1995, the Company's Tier I leverage ratio was 6.56% while its
risk-adjusted ratios were 11.35% for Tier I capital and 12.81% for total
capital. These ratios are substantially in excess of the foregoing
regulatory guidelines and also compare favorably to the Company's peers.

The growth in net income recorded in 1995 yielded improvements in key
measures of the Company's financial performance. During 1995, return on
average assets was 0.94%, an 11 basis point improvement over 1994 while the
return on average equity amounted to 13.11%, a 166 basis point increase
versus last year. The Long Island economy, still lagging national measures
of growth and job creation, showed some improvement during 1995. During the
latter part of the year, the Company saw an increase in loan demand from its
commercial and industrial middle-market clientele that appears likely to
carry over into 1996. This scenario bodes well for the Company if it
continues throughout the year. Lower interest rates and a flatter yield curve
have limited opportunities in the investment arena during the past year. A
shift in the asset mix from investments to loans will improve the Company's
interest rate spread and earnings and, as a result, enhance financial
performance ratios.

CUSTOMER SERVICE AND TECHNOLOGY
A recurring theme in all industries during the 1990's has been a focus on
improving customer service and operating efficiency by leveraging technology.
The Company operates in one of the most competitive banking markets in the
country and, therefore, it is imperative that it remain on technology's cutting
edge with respect to the introduction of new products and the enhancement of
existing services. Highlights of the Company's efforts during 1995 to utilize
technology to improve service quality and delivery systems are as follows.

During 1995, the Company's ATMs were embraced by its customer base as
evidenced by the increase in transaction volumes at each machine throughout
the year. The installation of ATMs is the first step in improving customer
service through enhanced technology. During 1996, it is expected that a
customer bill payment module will be introduced and P.C.-banking will also be
evaluated during the year. The Company's automated voice response system,
Touch24, also gained wide acceptance in 1995. Retail customers utilize
Touch24 to handle account inquiries, provide deposit and loan rate
information and perform financial transactions 24 hours a day, seven days a
week. It is anticipated that early in 1996, this system will be available for
business and municipal customers as well. Commercial clients seeking a more
sophisticated means of electronic banking will be able to utilize a real-time
P.C.-based cash management system in 1996. This product is expected to be
offered during the second quarter of the year after the completion of beta
testing.

The Company's technology initiatives during 1996 will improve internal
management reporting systems as well. To fulfill this mandate during the
coming year, technology projects involving the installation of a wide area
network utilizing frame relay technology and the roll-out of a customer
profitability system are already in progress. Additionally, we have also
begun to explore utilizing the Internet to advertise the Company's products
and services as well as to post earnings reports and update stockholders on
matters of interest. In summary, the Company continues to explore all
technological avenues to enhance products, services, delivery systems and to
improve productivity.

<PAGE>

NET INTEREST INCOME
The Company's primary source of earnings is net interest income, the difference
between interest earned on loans and investments and interest paid on deposits
and borrowed funds. Net interest income increased by 7.6% to $20.8 million in
1995 due to a $48 million or 10.3% increase in average interest-earning assets.
The growth in earning assets was centered in the loan portfolio as commercial
loans, commercial mortgages and, to a lesser extent, residential mortgages, all
showed year over year increases. Average investment securities, mainly AAA-rated
taxable Government Agency issues, increased by $17 million or 7.9% and
short-term money market instruments advanced by $4 million or 19.2%, on average.
The increase in earning assets recorded during 1995 followed growth rates of
2.0% and 17.8% in 1994 and 1993, respectively. Funding the asset expansion were
increases in retail and municipal certificates of deposit, demand deposits and
securities sold under agreements to repurchase. These increases more than offset
the continued outflow of savings balances, which occurred despite the successful
introduction of the Company's Prosperity Savings account in early 1995. The
Prosperity account has attracted over $12 million in balances to date and
continues to draw new customers to the Company, thereby providing excellent
cross-selling opportunities for other products and services. The Company
continues to address the problem of retail core deposit disintermediation and is
actively developing products to improve core deposit retention in 1996.

Average loans, up 11.6% in 1995, experienced their strongest rate of growth
in several years. Previous increases of 4.5% and 8.4% were achieved in 1994
and 1993, respectively. The 1995 increase was largely due to an improved
local economy which saw the Company's commercial and industrial middle market
clientele take down previously approved lines of credit to expand their
businesses and invest in plant and equipment. At December 31, 1995, loans
outstanding totaled $288 million, up 12.7% when compared to the comparable
1994 date. For the reasons previously discussed, management of the Company is
encouraged that this trend will continue into the coming year. During the
latter part of 1995, several seasoned lenders were added to the Company's
commercial loan department. These lenders are expected to provide significant
assistance in the Company's expansion plans in both Queens and Suffolk
counties. Management is optimistic that the improved economy, coupled with
the ongoing consolidation in the local banking industry, will provide
significant opportunity for loan growth over the next year.

SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE
Due to the decline in interest rates experienced during 1995 and the
relatively flat yield curve that prevailed throughout the year, the Company
chose to selectively add to its investment portfolio in 1995. Maturities and
principal paydowns were replaced at higher yields within specific criteria
established by the Company's Funds Management Committee. SFAS No. 115
requires the Company, at the time of purchase, to designate each investment
security as either "available for sale," "held to maturity" or "trading,"
depending upon investment objectives, liquidity needs and ultimate intent.
Securities available for sale are stated at market value, with unrealized
gains or losses reported as a separate component of stockholders' equity
until realized. Securities held to maturity are stated at cost, adjusted for
amortization of premium or accretion of discount, if any. Trading securities
are generally purchased with the intent of capitalizing on short-term price
differences by selling them in the near term. The Company did not hold any
trading securities at December 31, 1995 and 1994. At December 31, 1995, the
Company held $204 million in available for sale securities at a pre-tax
unrealized net loss of $57 thousand. At December 31, 1994, the Company held
$79 million in available for sale securities at a pre-tax unrealized net loss
of $1.6 million.

SUMMARY OF LOAN LOSS EXPERIENCE AND ALLOWANCE FOR POSSIBLE CREDIT LOSSES
The Company's senior lending personnel work in conjunction with line lenders
to determine the level of risk in the Company's loan-related assets and
establish an adequate level for the allowance for possible credit losses. An
outside credit risk consultant is also utilized to independently verify the
loan classifications and the adequacy of the allowance for possible credit
losses. Management actively seeks to reduce the level of nonperforming
assets through aggressive collection efforts and, where necessary, litigation
and charge-off. As illustrated in Table I, the Company's nonperforming
assets increased only nominally at year-end 1995 versus 1994.

At December 31, 1995, total nonperforming assets as a percentage of loans
and other real estate was 2.87% as compared to 3.22% and 3.53% at year-end
1994 and 1993, respectively. Nonaccrual loans as a percentage of total loans
increased slightly to 2.87% at year-end 1995. Although the level of
nonperforming assets has only declined nominally during 1995, the overall
quality of the Company's credit portfolio has improved since last year.
Total classified assets have been reduced and, where necessary, additional
collateral has been obtained to fully secure problem credits. Accordingly,
management reduced the 1995 provision for credit losses by 38.5% to $1.2
million. Net charge-offs also declined substantially to $1.1 million from
$1.7 million in 1994. The resulting allowance for credit losses balance of
$5.0 million at December 31, 1995 amounted to 1.74% of loans outstanding
versus 1.93% in 1994 and 2.04% in 1993. Although the local economy has shown
some signs of improvement during the past year, weakness in certain sectors
of the economy continues to prevail. The potential impact of this scenario on
the Company's borrowers makes it difficult to forecast the impact on asset
quality that will result during 1996 or any additional charge-offs that will
be required during the year.

<PAGE>

TABLE I ANALYSIS OF NONPERFORMING ASSETS
AT DECEMBER 31
--------------

(Dollars in thousands) 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans . . . . . . . . . . . . . . . . . . . $ 8,247 $ 6,707 $ 7,142 $ 8,381 $ 5,784

Other Real Estate. . . . . . . . . . . . . . . . . . . 1,555 1,053 396 275
-------- -------- ------- -------- --------

Total Nonperforming Assets . . . . . . . . . . . $ 8,247 $ 8,262 $ 8,195 $ 8,777 $ 6,059
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------

Restructured, Accruing Loans . . . . . . . . . . . . . $ 3,344 $ 3,608 $ 1,084 $ 1,181 $ 97
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------

Loans 90 Days or More Past Due and Still Accruing. . . $ 337 $ 1,162 $ 3,289 $ 4,188 $ 5,518
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------

Gross Loans Outstanding. . . . . . . . . . . . . . . . $287,643 $255,230 $231,116 $220,631 $195,975
Total Stockholders' Equity . . . . . . . . . . . . . . $ 40,588 $ 36,170 $ 34,715 $ 31,000 $ 28,451
Allowance for Credit Losses. . . . . . . . . . . . . . $ 5,004 $ 4,929 $ 4,725 $ 5,068 $ 3,039

Key Ratios at December 31:

Allowance for Credit Losses as a % of Total Loans. . . 1.74% 1.93% 2.04% 2.30% 1.55%
Nonaccrual Loans as a % of Total Loans . . . . . . . . 2.87% 2.63% 3.09% 3.80% 2.95%
Nonperforming Assets as a % of Total Loans and
Other Real Estate . . . . . . . . . . . . . . . . . 2.87% 3.22% 3.53% 3.97% 3.09%
Allowance for Credit Losses as a % of
Nonaccrual Loans. . . . . . . . . . . . . . . . . . 60.68% 73.49% 66.16% 60.47% 52.54%
Allowance for Credit Losses as a % of
Nonperforming Assets. . . . . . . . . . . . . . . . 60.68% 59.66% 57.66% 57.74% 50.16%
</TABLE>

It is the present intent of management to further increase the level of the
allowance for possible credit losses to reflect any exposure represented by
weakness in the Long Island real estate market, and the underlying value that
market provides as collateral to certain segments of the loan portfolio. In
recognition of the economic uncertainties previously discussed, the normal risks
present in any credit portfolio and anticipated growth in the loan portfolio,
management anticipates that the 1996 provision for credit losses will
approximate, or moderately exceed, 1995's level. The provision is constantly
evaluated relative to portfolio risk and to regulatory guidelines and will
continue to be reviewed throughout 1996.

The Company has no foreign loans outstanding nor do any identifiable
concentrations of credit exist.

OTHER INCOME
Other income increased by 12.6% to $1.4 million in 1995. The 1995 improvement
followed declines of 61.6% in 1994 and 26.4% in 1993. The declines in both
1994 and 1993 were mainly due to reductions in securities transaction income.
Excluding net security (losses) gains from each of the past three years, other
income improved by 14.2%, 35.3% and 23.5% in 1995, 1994 and 1993, respectively.

Deposit service charges, the primary component of other income, again displayed
strong growth in 1995. An active cross-selling program, effective pricing
strategies and continued expansion of the commercial demand deposit account base
contributed to the 14.5% increase in service charge income during 1995. Other
operating income improved by 13.3% during 1995 as the result of higher letter of
credit issuance fees, annuity commission income, wire transfer fees and ATM
transaction income. The Company's fee income committee actively pursues new
strategies to increase other income through the introduction of new products.
During 1996, a cash management system will be offered to commercial and
municipal customers and it is expected that bill payment by telephone and home
banking products will be evaluated and introduced prior to year-end 1996. The
rapid growth in ATM usage is also expected to add significantly to other income
during 1996.

OPERATING EXPENSES
During 1995, operating expenses increased by 5.9% to $13.5 million. The
principal reason for the increase in operating expenses in 1995 was a $0.9
million or 13.3% increase in salaries and other employee benefits. Growth in
staff count, mainly in the commercial lending area, along with related
increases in supplementary compensation, pension contributions and health
insurance costs accounted for the growth in this expense category. Excluding
the aforementioned increase in staff-related expenses, total operating
expenses declined by $0.2 million or 2.8%.

<PAGE>

The Company measures its expense control efforts in several ways, primarily
through the use of its operating efficiency ratio and the ratio of operating
expenses to average assets. The operating efficiency ratio improved to 58.1%
in 1995 versus 59.3% in 1994 and 64.4% in 1993. The Company's goal is a ratio
of 50% or less, which will be achieved through a combination of revenue
enhancements and, where possible, prudent expense reductions. A second
measure of expense control is total operating expenses as a percentage of
average assets. The Company's ratios of 2.51%, 2.61% and 2.62% in 1995,
1994 and 1993, respectively, display ongoing improvement as the Company
continues to grow and expand. This ratio compares very favorably to the
Company's industry competitors and again places it in the top 20% of its peer
group. Improvement in each of these ratios is expected during 1996 as the
result of ongoing bankwide cost saving initiatives currently in place as well
as through planned revenue enhancements resulting from the roll-out of new
products and an anticipated increase in commercial lending activity. An
analysis of the components of operating expenses, by category, follows.

Occupancy costs totaled $1.3 million in 1995, up 5.7% over 1994. This
increase followed growth rates of 4.4% and 29.6% in 1994 and 1993,
respectively. The increases experienced during 1995 and 1994 mainly resulted
from a combination of an increase in building maintenance and depreciation
expense. The substantial increase recorded in 1993 was due to the
significant branch acquisition activity that took place in 1992 and 1993.

Equipment expenses increased by 2.6% when compared to 1994 due to a higher
level of depreciation in 1995. Somewhat offsetting this increase was a 2.8%
decline in expenses associated with equipment maintenance, repairs and
service contracts during 1995. As was reported last year, the Company entered
into an agreement in 1994 with a third-party vendor to consolidate existing
equipment service contracts under an umbrella maintenance agreement. This
agreement has resulted in lower maintenance costs for a wide variety of
covered equipment.

Deposit assessment fees declined substantially during 1995 to $542 thousand
from $942 thousand a year ago. This reduction resulted from a decline in the
Company's assessment rate on its deposits in the Bank Insurance Fund (BIF).
The Company, classified by the FDIC risk rating system as "well capitalized,"
was assessed during 1995 at the lowest premium rates allowed. Effective June
1, 1995, the FDIC lowered the deposit assessment premium on BIF deposits from
$0.23 per $100 of deposits to $0.04 on an annual basis. Due to branch
acquisitions made in 1992 under the OAKAR provision, the Company has
assessable deposits in both the BIF and Savings Association Insurance Fund
(SAIF). The FDIC did not lower the assessment rate on SAIF deposits during
1995 due to that fund's current financial condition, therefore, the Company
continues to be assessed at a rate of $0.23 per $100 of deposits on its SAIF
deposits. Due to the current budget impasse in Washington, it is not known at
this point in time what will happen to the SAIF assessment rate during 1996.
The Company anticipates that its deposit assessment fees will likely rise
during 1996 due to the possibility of a one-time assessment on all SAIF
deposits. Based upon the latest proposals made public by House and Senate
Banking Committee officials, it is estimated that the Company may be
assessed, on a one-time basis, up to $850 thousand in 1996 on its OAKAR
deposits.

Intangibles amortization expense increased by 6.6% in 1995 to $629 thousand
due to adjustments made in 1994 related to the final amortization of certain
intangibles acquired as a result of 1992 branch purchase activity. Excluding
any further acquisition activity, this expense is expected to remain flat in
1996 and 1997 before declining dramatically in 1998.

Other operating expenses grew by 4.1% to $2.7 million in 1995, after
declining by 6.4% in 1994 versus 1993. The increase in 1995 resulted from
higher marketing and advertising, other real estate and computer software
costs. Somewhat offsetting these negative factors were decreases in credit
and collection fees related to the Company's loan portfolio, combined with
lower legal fees related to normal banking operations. The improvement in
operating expenses during 1994 was due to reductions in credit and collection
costs, lower consulting expenses and a reduction in correspondent service
charges.

The Company's effective tax rate increased slightly during 1995 to 33% from
32% in 1994. The higher tax rate in 1995 resulted from a higher proportion of
taxable income, principally related to loans and Government Agency
securities, which is taxed at the combined Federal and state marginal rate
of 41%. The Company's effective tax rate was 33% in 1993. The Company's
effective tax rate is expected to rise slightly in 1996 as the result of
faster anticipated growth in taxable income vis-a-vis tax-exempt loans and
investments.

CAPITAL RESOURCES
At December 31, 1995, stockholders' equity totaled $40.6 million, an increase
of $4.4 million or 12.2% over year-end 1994. Total equity at December 31,
1994 and 1993 was $36.2 million and $34.7 million, respectively. The
application of SFAS No. 115 resulted in a $33 thousand reduction in
stockholders' equity at December 31, 1995 and a $0.9 million reduction in
equity at December 31, 1994. Excluding the impact of SFAS No. 115 in 1995
and 1994, stockholders' equity has grown at a rate of 9% or more during each
of the past three years. This rate of internal capital generation provides
the vehicle for the Company's future growth, both in terms of assets and,
more importantly, stockholder value. Management constantly evaluates the
Company's capital position in light of current and future growth objectives.
Steady growth in earnings has been sufficient to fund recent expansion while
also providing stockholders with a competitive cash dividend. Although the
debt or equity markets have not been accessed in recent years, the Company
currently intends to strengthen capital during 1996 through a rights
offering. Management of the Company has utilized this tool successfully in
the past and, based upon stockholder participation, anticipates raising
approximately $10 million in 1996 through this current offering. The
additional capital will be utilized to support anticipated loan growth, other
investment opportunities and for general corporate purposes. Based upon
December 31, 1995 assets, a successful rights offering would increase the
Company's Tier I leverage ratio to approximately 8.25% from 6.56% currently.

<PAGE>

The Company introduced a dividend reinvestment plan to its stockholders in
1993. This plan allows existing stockholders to reinvest cash dividends in
Company stock and/or to purchase additional shares through optional cash
investments on a quarterly basis. Shares are purchased at a 5% discount from
the current market price under either plan option. During 1995, $680
thousand was added to stockholders' equity through plan participation. Since
inception, $1.3 million in additional equity has been added through this
plan. Management anticipates continued future growth in equity through the
program.

The Federal Reserve Board, in conjunction with the other bank regulatory
authorities, has issued guidelines for measuring capital adequacy on a
risk-adjusted assets basis. These guidelines provide a method of monitoring
capital adequacy that is more sensitive to the risk factors inherent in a
bank's asset base, including off-balance sheet exposures. The guidelines
assign various weights to different asset types depending upon their risk
profile. Generally speaking, assets with greater risk require more capital
support than do less risky assets. In addition, a leverage standard has been
established to supplement the risk-based ratios in assessing an institution's
overall capital adequacy. Failure to maintain capital ratios in excess of
minimum regulatory guidelines requires bank regulatory authorities to take
prompt corrective action in accordance with the provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). The
regulations arising from FDICIA established five categories of capitalization
for depository institutions: (1) well capitalized, (2) adequately
capitalized, (3) undercapitalized, (4) significantly undercapitalized and (5)
critically undercapitalized. A well capitalized institution is one that
significantly exceeds the following minimum ratios: total risk-based capital
of 10% or greater, a Tier I risk-based capital ratio of 6% or greater and a
leverage ratio of 5% or greater. Based upon its December 31, 1995 capital
position as outlined in Table II, the Company's capital ratios exceed the
minimums established for a well capitalized institution. The Company has no
plans or commitments for capital utilization or expenditures that would
affect its current capital position or would impact its future financial
performance.

TABLE II REGULATORY
RATIOS AS OF DECEMBER 31, CRITERIA FOR
REGULATORY ------------------------- WELL CAPITALIZED
MINIMUM 1995 1994 1993 INSTITUTION
------- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Leverage Ratio - Tier I Capital to
Total Adjusted Assets. . . . . . . . . . . . . . 3.00%-5.00% 6.56% 6.75% 6.12% 5.00%
Tier I Capital/Risk Weighted Assets. . . . . . . . 4.00% 11.35% 11.83% 11.01% 6.00%
Total Capital/Risk Weighted Assets . . . . . . . . 8.00% 12.81% 13.51% 12.70% 10.00%
</TABLE>

LIQUIDITY AND INTEREST RATE SENSITIVITY
The principal objective of the Company's liquidity management strategy is to
ensure the ability to access funding which will maintain cash flows sufficient
to meet immediate and future demands for credit, deposit withdrawals, maturing
liabilities and operating expenses and to do so without incurring significant
losses. After assessing actual and projected cash flow needs, management seeks
to obtain funding at the most economical cost to the Company. These funds can
be obtained by converting liquid assets to cash or by attracting new deposits or
other sources of funding. Many factors affect the Company's ability to meet its
liquidity needs, including variations in the markets served, its asset/liability
mix and its reputation and credit standing in its markets. Although scheduled
loan amortization, maturing investment securities and short-term investments are
relatively stable and predictable sources of funds, deposit flows and loan
prepayments are directly influenced by market interest rates, general economic
conditions and competition.

The Funds Management Committee is responsible for oversight of the Company's
liquidity position and management of the asset/liability structure. This
Committee monitors the loan and investment portfolios while also examining the
maturity structure, volatility characteristics and pricing of the Company's
liabilities to develop an optimum asset/liability mix. Funding sources
available to the Company include retail, commercial and municipal deposits,
purchased liabilities and stockholders' equity. If needed for short-term
liquidity purposes, the Company has access to $17 million in informal unsecured
lines of credit extended by correspondent banks. Additionally, the Company can
access up to $45 million in Federal Home Loan Bank of New York ("FHLB-NY") lines
of credit when the need arises. The Company is able to utilize the FHLB-NY as a
source of market rate funds for overnight or term borrowings with maturities of
up to thirty years. The Company does not utilize brokered deposits as a source
of funds.

The Company's primary source of asset liquidity is provided by short-term
investments and the marketability of securities available for sale. At December
31, 1995, the Company had $280 million in such liquid assets. The Company's
loan portfolio and investment securities held to maturity also provide an
excellent source of internal liquidity. At year-end 1995, approximately $58
million of these assets were due to mature within one year.

The Company's asset/liability management policy emphasizes adequate liquidity
and the protection of net interest income from the effect of adverse movements
in the level of interest rates as well as changes in the shape of the interest
rate yield curve. The Funds Management Committee evaluates the Company's
interest rate risk through the use of simulation models and other techniques and
adjusts the interest rate sensitivity position of the Company as necessary.
This process utilizes both static and dynamic analyses of interest rate
sensitivity mismatches or gaps at a variety of time intervals. As of December
31, 1995, the Company had not entered into any off-balance sheet arrangements to
ensure compliance with internal asset/liability guidelines. Management believes
that, at year-end 1995, the Company's balance sheet is relatively interest rate
neutral, thereby making its net interest income less vulnerable to changing
interest rates. The table that follows presents the Company's interest rate
sensitivity position as of December 31, 1995.

<PAGE>

TABLE III (DOLLARS IN THOUSANDS) SENSITIVITY TIME HORIZON

NONINTEREST-
INTEREST-SENSITIVE ASSETS 1) 0-6 MONTHS 6-12 MONTHS OVER 1 YEAR SENSITIVE TOTAL
---------- ----------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Loans (net of unearned income) 2) . . . . . . . . . . . . $193,198 $15,523 $ 69,830 $ 9,028 $287,579
Securities Purchased Under Agreements to Resell . . . . . 76,000 76,000
Securities Held to Maturity . . . . . . . . . . . . . . . 22,826 4,987 410 28,223
Securities Available for Sale 3). . . . . . . . . . . . . 57,200 25,460 120,358 1,430 204,448
Unrealized Net Loss on Securities Available for Sale. . . (57) (57)
--------- ------ ------- ------- -------
Total Interest-Earning Assets . . . . . . . . . . 349,167 45,970 190,958 10,458 596,193
Cash and Due from Banks . . . . . . . . . . . . . . . . 45,854 45,854
All Other Assets 6) . . . . . . . . . . . . . . . . . . . 4,866 1,688 2,349 8,903
--------- ------ ------- ------- -------
Total Assets . . . . . . . . . . . . . . . . . . $399,887 $47,658 $190,598 $ 12,807 $650,950
--------- ------ ------- ------- -------
--------- ------ ------- ------- -------

INTEREST-BEARING LIABILITIES 1)
Savings Accounts 4) . . . . . . . . . . . . . . . . . . . $ 17,807 $17,807 $ 71,232 $106,846
Money Fund and Now Accounts 5). . . . . . . . . . . . . . 70,013 23,037 46,075 139,125
Time Deposits . . . . . . . . . . . . . . . . . . . . . . 113,536 33,609 31,803 178,948
--------- ------ ------- -------
Total Interest-Bearing Liabilities . . . . . . . 201,356 74,453 149,110 424,919
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and Other
Short-term Borrowings . . . . . . . . . . . . . . . 110,218 110,218
All Other Liabilities, Equity & Demand Deposits 6). . . . 897 478 41 $114,397 115,813
--------- ------ ------- ------- -------
Total Liabilities and Equity . . . . . . . . . . $ 312,471 $74,931 $ 149,151 $114,397 $650,950
--------- ------ ------- ------- -------
--------- ------ ------- ------- -------
Cumulative Interest-Sensitivity Gap. . . . . . . $ 87,416 $60,143 $ 101,590 $ 0 $ 0
--------- ------ ------- ------- -------
--------- ------ ------- ------- -------
Cumulative Interest-Sensitivity Ratio. . . . . . 128.0% 115.5% 118.9% 100.0% 100.0%
Cumulative Interest-Sensitivity Gap
As a Percent of Total Assets. . . . . . . . . 21.9% 13.4% 15.9% -- % -- %
</TABLE>

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 non-interest 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 their contractual
payment schedule or a reasonable estimate thereof.

At December 31, 1995, the Company's cumulative interest-sensitivity gap at
the one year interval amounted to $60.1 million. This gap, the difference
between interest-earning assets and interest-bearing liabilities, will yield
an improvement in net interest income over the next year if interest rates
were to rise. The reason for this is that the Company will have a greater
amount of interest-earning assets reprice at higher rates than
interest-bearing liabilities during this period. Conversely, a decline in
rates would have a detrimental effect.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be disposed of, be
reported at the lower of carrying amount or fair value less cost to sell,
except for assets that are covered by APB Opinion No. 30. The requirements of
SFAS No. 121 are effective for years beginning after December 15, 1995. The
Company does not believe that the adoption of SFAS No. 121 will have a
material effect on the Company's consolidated financial statements.

SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to
adopt that method of accounting for all of their employee stock compensation
plans. Entities electing to remain with the accounting in APB Opinion No. 25
must make proforma disclosures of net income and, if presented, earnings per
share, as if the fair value based method of accounting defined in SFAS No.
123 had been applied. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years beginning after
December 15, 1995 and the disclosure requirements of SFAS No. 123 are
effective for fiscal years beginning after December 15, 1995. The Company
does not believe that the adoption of SFAS No. 123 will have a material
effect on the Company's consolidated financial statements.

<PAGE>

STATISTICAL INFORMATION

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY:
NET INTEREST INCOME AND RATES

The following table presents the average daily balances of the Bank's assets,
liabilities and stockholder's equity, together with an analysis of net
interest earnings and average rates, for each major category of
interest-earning assets and interest-bearing liabilities. Interest and
average rates are computed on a fully taxable-equivalent basis, adjusted for
certain disallowed interest expense deductions, using a tax rate of 34% in
1995, 1994 and 1993. Nonaccruing loans are included in the average balances
(in thousands):

FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
---- ---- ----
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:

Securities held to maturity and
securities available for sale:
Taxable . . . . . . . . . . . . . $171,924 $10,813 6.29% $150,713 $ 8,906 5.91% $147,967 $ 9,494 6.42%
Tax-exempt. . . . . . . . . . . . 51,834 2,872 5.54 56,585 2,382 4.21 52,207 1,920 3.68
-------- ------- -------- ------- -------- -------
Total Securities . . . . . . . . . . 223,758 13,685 6.12 207,298 11,288 5.45 200,174 11,414 5.70
Federal funds sold
and securities purchased
under agreements to
resell. . . . . . . . . . . . . . 24,776 1,467 5.92 20,779 907 4.36 28,969 889 3.07
Loans (net of unearned income):
Taxable . . . . . . . . . . . . . 255,993 24,582 9.60 228,341 19,366 8.48 217,464 16,971 7.80
Tax-exempt. . . . . . . . . . . . 5,683 659 11.60 6,182 608 9.84 7,063 608 8.61
-------- ------- -------- ------- -------- -------

Total loans-net. . . . . . . . . . . 261,676 25,241 9.65 234,523 19,974 8.52 224,527 17,579 7.83

Total interest-earning assets. . . . 510,210 40,393 7.92% 462,600 32,169 6.95% 453,670 29,882 6.59%
------- ----- ------- ----- ------- -----
Allowance for credit losses. . . . . (5,050) (5,171) (5,236)
-------- -------- --------

505,160 457,429 448,434

Cash and due from banks. . . . . . . 18,453 17,431 14,069
Bank premises and
equipment-net . . . . . . . . . . 2,935 2,692 2,532
Other assets . . . . . . . . . . . . 10,664 11,007 12,124
-------- -------- --------

Total Assets . . . . . . . . . . . . $537,212 $488,559 $477,159
-------- -------- --------
-------- -------- --------

LIABILITIES AND
STOCKHOLDER'S EQUITY:

Savings and time deposits:
Savings . . . . . . . . . . . . . $190,518 $ 5,179 2.72% $210,587 $ 4,558 2.16% $239,221 $ 5,557 2.32%
Time. . . . . . . . . . . . . . . 210,244 11,926 5.67 152,035 6,381 4.20 139,972 5,461 3.90
-------- ------- -------- ------- -------- -------

Total savings and time
deposits. . . . . . . . . . . . . 400,762 17,105 4.27 362,622 10,939 3.02 379,193 11,018 2.91
Federal funds purchased. . . . . . . 2,578 160 6.21 3,277 149 4.55 1,815 60 3.31
Securities sold under
agreements to
repurchase. . . . . . . . . . . . 23,273 1,387 5.96 20,341 890 4.38 9,612 319 3.32
Other borrowed funds . . . . . . . . 263 17 6.46
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities . . . . . . . . . . . 426,876 18,669 4.37 386,240 11,978 3.10 390,620 11,397 2.92
------- ----- ------- ----- ------- -----
Demand deposits. . . . . . . . . . . 69,177 64,577 50,847
Other liabilities. . . . . . . . . . 2,735 2,640 3,532
-------- -------- --------

Total liabilities. . . . . . . . . . 498,788 453,457 444,999
Stockholder's equity . . . . . . . . 38,424 35,102 32,160
-------- -------- --------
Total Liabilities and
Stockholder's Equity. . . . . . . $537,212 $488,559 $477,159
-------- -------- --------
-------- -------- --------
Net interest income/rate -
tax-equivalent basis. . . . . . . 21,724 4.26% 20,191 4.36% 18,485 4.07%
----- ----- -----
----- ----- -----
Less - tax equivalent basis
adjustment . . . . . . . . . . . 967 902 743
-------- -------- --------

Net Interest Income. . . . . . . . . $20,757 $19,289 $17,742
-------- -------- --------
-------- -------- --------

</TABLE>

<PAGE>

ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table presents a comparative analysis of the changes in the Bank's
interest income and interest expense due to the changes in the average volume
and the average rates earned on interest-earning assets and due to the changes
in the average volume and the average rates paid on interest-bearing
liabilities. Interest and average rates are computed on a fully taxable-
equivalent basis, adjusted for certain disallowed interest expense deductions,
using a tax rate of 34% in 1995, 1994 and 1993. Variances in rate/volume
relationships have been allocated proportionately to average volume and average
rate as they compare to each other (in thousands):

YEAR 1995 OVER 1994 YEAR 1994 OVER 1993
------------------- -------------------
DUE TO CHANGE IN: DUE TO CHANGE IN:
----------------- -----------------
NET NET
AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
------ ---- ---------- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C>

INTEREST INCOME:

Securities held to maturity and
securities available for sale:
Taxable . . . . . . . . . . . . $1,309 $ 598 $1,907 $ 174 $ (762) $ (588)
Tax-exempt. . . . . . . . . . . (213) 703 490 170 292 462
------ ------ ------ ------ ------ ------

Total securities . . . . . . . . . 1,096 1,301 2,397 344 (470) (126)
Federal funds sold and securities
purchased under agreements
to resell . . . . . . . . . . . 196 364 560 (294) 312 18

Loans (net of unearned income):
Taxable . . . . . . . . . . . . 2,493 2,723 5,216 876 1,519 2,395
Tax-exempt. . . . . . . . . . . (52) 103 51 (81) 81
------ ------ ------ ------ ------ ------

Total loans - net. . . . . . . . . 2,441 2,826 5,267 795 1,600 2,395

Total Interest Income. . . . . . . 3,733 4,491 8,224 845 1,442 2,287
------ ------ ------ ------ ------ ------

INTEREST EXPENSE:

Savings and time deposits:
Savings . . . . . . . . . . . . (465) 1,086 621 (636) (363) (999)
Time. . . . . . . . . . . . . . 2,891 2,654 5,545 490 430 920
------ ------ ------ ------ ------ ------

Total savings and time deposits. . 2,426 3,740 6,166 (146) 67 (79)
Federal funds purchased. . . . . . (36) 47 11 61 28 89
Securities sold under agreements
to repurchase . . . . . . . . . 142 355 497 444 127 571
Other borrowed funds . . . . . . . 17 17
------ ------ ------ ------ ------ ------

Total Interest Expense . . . . . . 2,549 4,142 6,691 359 222 581
------ ------ ------ ------ ------ ------

Change in Net Interest Income
(Tax-Equivalent Basis). . . . . $1,184 $ 349 $1,533 $ 486 $1,220 $1,706
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>

<PAGE>

INVESTMENT PORTFOLIO

The following table presents the book value of held to maturity and available
for sale securities held by the Bank for each reported period (in thousands):

DECEMBER 31,
------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

TYPE
- ----

U.S. Treasury securities . . . . . . . . . . . . . . . . . . $ 25,732 $ 25,322 $ 18,137
Obligations of states and political
subdivisions. . . . . . . . . . . . . . . . . . . . . . . 42,969 60,627 66,763
Mortgage-backed securities and collateralized
mortgage obligations. . . . . . . . . . . . . . . . . . . 137,416 119,191 123,801
Government Agency securities . . . . . . . . . . . . . . . . 25,067 10,000
Corporate securities . . . . . . . . . . . . . . . . . . . . 1,430 18 18
-------- -------- --------

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $232,614 $215,158 $208,719
-------- -------- --------
-------- -------- --------
</TABLE>

The following table presents the maturity distribution and the weighted average
yield of the Bank's investment portfolio at December 31, 1995 (in thousands):

MATURING
--------
WITHIN AFTER ONE BUT AFTER FIVE BUT AFTER
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS TEN YEARS
-------- ----------------- ---------------- ---------
AMOUNT YIELD* AMOUNT YIELD* AMOUNT YIELD* AMOUNT YIELD*
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

TYPE
- ----

U.S. Treasury
securities. . . . . . . . . $16,187 6.79% $ 9,545 6.16%
Obligations of states
and political
subdivisions. . . . . . . . 42,457 6.04 127 6.36 $ 385 9.50%
Mortgage-backed
securities and
collateralized mortgage
obligations** . . . . . . . 6,088 6.77 123,198 6.27 8,130 6.61
Government Agency
securities. . . . . . . . . 25,067 7.27
Corporate securities . . . . . $1,430 -- %
------- -------- ------ ------ -----

Total. . . . . . . . . . . . . $89,799 6.57% $132,870 6.26% $8,515 6.74% $1,430 -- %
------- ---- -------- ---- ------ ---- ------ -----
------- ---- -------- ---- ------ ---- ------ -----
</TABLE>

*Fully tax-equivalent basis using a tax rate of 34%.
**Assumes maturity dates pursuant to average life as determined by constant
prepayment rates.

<PAGE>

LOAN PORTFOLIO

The following table categorizes the Bank's loan portfolio for each reported
period (in thousands):

DECEMBER 31,
------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

Commercial and industrial. . . . . . . . . . . . . $130,617 $112,286 $ 95,644 $ 91,063 $ 85,986
Real estate-mortgage . . . . . . . . . . . . . . . 137,067 126,107 117,275 104,916 89,128
Real estate-construction . . . . . . . . . . . . . 7,798 3,349 3,203 5,743 5,294
Loans to individuals . . . . . . . . . . . . . . . 6,323 6,746 8,193 11,022 11,023
Tax-exempt and other . . . . . . . . . . . . . . . 5,838 6,742 6,801 7,893 4,554
-------- -------- -------- -------- --------

Gross loans. . . . . . . . . . . . . . . . . . . . 287,643 255,230 231,116 220,637 195,985
Less unearned income . . . . . . . . . . . . . . . 64 85
-------- -------- -------- -------- --------
Loans - net of unearned income . . . . . . . . . . $287,579 $255,145 $231,116 $220,637 $195,985
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

The following table presents the maturities of selected loans and the
sensitivities of those loans to changes in interest rates at December 31, 1995
(in thousands):

ONE YEAR ONE THROUGH OVER
OR LESS FIVE YEARS FIVE YEARS TOTAL
------- ---------- ---------- -----
<S> <C> <C> <C> <C>

Commercial and industrial. . . . . . . . . . . . . $120,451 $ 7,480 $ 2,686 $130,617
Real estate-construction . . . . . . . . . . . . . 7,798 7,798
-------- -------- -------- --------

Total. . . . . . . . . . . . . . . . . . . . . . . $128,249 $ 7,480 $ 2,686 $138,415
-------- -------- -------- --------
-------- -------- -------- --------
Loans maturing after
one year with:
Fixed interest rates . . . . . . . . . . . . $ 7,480 $ 2,686 $ 10,166
Variable interest rate . . . . . . . . . . . $ -- $ -- $ --
</TABLE>

The following table presents the Bank's nonaccrual, past due and restructured
loans for each reported period (in thousands):

AT DECEMBER 31, OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

Nonaccrual loans . . . . . . . . . . . . . . . . . $8,247 $6,707 $7,142 $8,381 $5,784
Loans 90 days or more past due and still accruing
interest. . . . . . . . . . . . . . . . . . . . $ 337 $1,162 $3,289 $4,188 $5,518
Restructured, accruing loans . . . . . . . . . . . $3,344 $3,608 $1,084 $1,181 $ 97
Interest income on nonaccrual and restructured
loans which would have been recorded under
original loan terms . . . . . . . . . . . . . . $ 837 $ 571 $ 686 $ 813 $ 490
Interest income on nonaccrual and restructured
loans recorded during the period. . . . . . . . $ 260 $ 124 $ 48 $ 22 $ 53
</TABLE>

The Bank discontinues the accrual of interest on loans whenever there is
reasonable doubt that interest and/or principal will be received.

<PAGE>

SUMMARY OF LOAN LOSS EXPERIENCE

The determination of the balance of the allowance for possible credit losses is
based upon a review and analysis of the Bank's loan portfolio and reflects an
amount which, in management's judgement, is adequate to provide for possible
future losses. Management's review includes monthly analysis of past due and
nonaccrual loans and detailed, periodic loan by loan analyses.

The principal factors considered by management in determining the adequacy of
the allowance are the growth and composition of the loan portfolio, historical
loss experience, the level of nonperforming loans, economic conditions, the
value and adequacy of collateral and the current level of the allowance. While
management utilizes all available information to estimate the adequacy of the
allowance for credit losses, the ultimate collectibility of a substantial
portion of the loan portfolio and the need for future additions to the allowance
will be based upon changes in economic conditions and other relevant factors.

The following table presents an analysis of the Bank's allowance for possible
credit losses for each reported period (in thousands):

1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

Balance, January 1 . . . . . . . . . . . . . . . . $4,929 $4,725 $5,068 $3,039 $1,881
------ ------ ------ ------ ------
Charge-offs:
Commercial and industrial . . . . . . . . . . . 777 1,175 1,645 840 599
Real estate - mortgage. . . . . . . . . . . . . 239 694 1,663 66 158
Loans to individuals. . . . . . . . . . . . . . 133 45 103 25 43
Loans to others . . . . . . . . . . . . . . . . 45
------ ------ ------ ------ ------

Total charge-offs. . . . . . . . . . . . . . . . . 1,194 1,914 3,411 931 800
------ ------ ------ ------ ------

Recoveries:
Commercial and industrial . . . . . . . . . . . 52 119 59 53 5
Real estate - mortgage. . . . . . . . . . . . . 6 47 5
Loans to individuals. . . . . . . . . . . . . . 11 2 4 2 3
------ ------ ------ ------ ------
Total recoveries . . . . . . . . . . . . . . . . . 69 168 68 55 8
------ ------ ------ ------ ------

Net charge-offs. . . . . . . . . . . . . . . . . . 1,125 1,746 3,343 876 792
------ ------ ------ ------ ------

Additions charged to operations. . . . . . . . . . 1,200 1,950 3,000 2,905 1,950
------ ------ ------ ------ ------

Balance at end of period . . . . . . . . . . . . . $5,004 $4,929 $4,725 $5,068 $3,039
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of net charge-offs
during the period to average loans
outstanding during the period . . . . . . . . . 0.43% 0.74% 1.49% 0.42% 0.42%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>

The following table presents the allocation of the Bank's allowance for possible
credit losses for each reported period (in thousands):

PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
1995 LOANS 1994 LOANS 1993 LOANS 1992 LOANS 1991 LOANS
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Commercial and industrial. $1,254 45.4% $1,492 44.0% $2,527 41.4% $2,465 41.3% $1,839 43.9%
Real estate-mortgage . . . 991 47.7 929 49.4 1,726 50.7 1,086 47.5 607 45.5
Real estate-construction . 2.7 4 1.3 167 1.4 271 2.6 141 2.7
Loans to individuals . . . 123 2.2 23 2.7 149 3.6 26 5.0 5 5.6
Tax exempt and other . . . 39 2.0 9 2.6 48 2.9 21 3.6 113 2.3
Unallocated. . . . . . . . 2,597 2,472 108 1,199 334
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Total. . . . . . . . . . . $5,004 100.0% $4,929 100.0% $4,725 100.0% $5,068 100.0% $3,039 100.0%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>

<PAGE>

DEPOSITS

The following table presents the average balance and the average rate paid on
the Bank's deposits for each reported period (in thousands):

1995 1994 1993
---- ---- ----
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>

Demand deposits. . . . . . . . . . . . . . . . . . $ 69,177 $ 64,577 $ 50,847
Interest-bearing transaction accounts. . . . . . . 22,286 1.79% 21,226 1.38% 16,857 1.57%
Money market deposit accounts. . . . . . . . . . . 60,307 2.40 66,591 1.87 75,168 1.89
Savings deposits . . . . . . . . . . . . . . . . . 107,925 3.09 122,770 2.46 147,196 2.62
Time certificates of deposit of
$100,000 or more. . . . . . . . . . . . . . . . 106,510 5.79 75,988 4.11 61,282 3.23
Other time deposits. . . . . . . . . . . . . . . . 103,734 5.56 76,047 4.29 78,690 4.44
-------- -------- --------

Total. . . . . . . . . . . . . . . . . . . . . . . $469,939 3.64% $427,199 2.56% $430,040 2.56%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
</TABLE>

The following table sets forth, by time remaining to maturity, the Bank's
certificates of deposit of $100,000 or more, at December 31, 1995 (in
thousands):

3 months or less . . . . . . . . . . . . . . . . . . . . . . $66,835
Over 3 months through 6 months . . . . . . . . . . . . . . . 4,587
Over 6 months through 12 months. . . . . . . . . . . . . . . 4,340
Over 12 months . . . . . . . . . . . . . . . . . . . . . . . 3,903
-------

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $79,665
-------
-------

RETURN ON EQUITY AND ASSETS

The following table presents the Bank's return on average stockholder's equity
and assets, the dividend payout ratio and the average equity to average assets
ratio for each reported period:

1995 1994 1993
---- ---- ----

Return on average stockholder's equity . . . 13.11% 11.45% 11.53%
Return on average assets . . . . . . . . . . 0.94% 0.83% 0.78%
Dividend payout ratio. . . . . . . . . . . . 46.72% 29.43% 28.75%
Average equity to average assets . . . . . . 7.15% 7.21% 6.74%

SHORT-TERM BORROWINGS

The following information is provided on the Bank's short-term borrowings for
each reported period (in thousands):

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

BALANCE, DECEMBER 31 -
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . $83,218 $74,916 $86,870
Federal Funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 16,000 425
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 10,000
WEIGHTED AVERAGE INTEREST RATE ON
BALANCE, DECEMBER 31 -
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . 5.85% 6.01% 3.44%
Federal Funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.00 6.38 3.50
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 6.05
MAXIMUM OUTSTANDING AT ANY MONTH END -
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . $89,358 $77,687 $86,870
Federal Funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 16,000 15,700
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 10,000
AVERAGE DAILY AMOUNTS OUTSTANDING -
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . $23,273 $20,341 $9,612
Federal Funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,578 3,277 1,815
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 263
WEIGHTED AVERAGE INTEREST RATE ON AVERAGE
DAILY AMOUNTS OUTSTANDING -
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . 5.96% 4.38% 3.32%
Federal Funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.22 4.54 3.33
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 6.34
</TABLE>

<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (IN THOUSANDS OF DOLLARS)

1995 1994
---- ----

1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Interest income. . . . . . . . . . . . . $ 8,936 $ 9,820 $ 9,826 $10,844 $ 6,983 $ 7,612 $ 7,706 $ 8,966
Interest expense . . . . . . . . . . . . 4,078 4,773 4,604 5,214 2,608 2,796 2,918 3,655
------- ------- ------- ------- ------- ------- ------- -------
Net interest income. . . . . . . . . . . 4,858 5,047 5,222 5,630 4,375 4,816 4,788 5,311
Provision for possible
credit losses . . . . . . . . . . . . 375 375 375 75 750 750 450
------- ------- ------- ------- ------- ------- ------- -------

Net interest income after
provision for possible
credit losses . . . . . . . . . . . . 4,483 4,672 4,847 5,555 3,625 4,066 4,338 5,311
Other income . . . . . . . . . . . . . . 347 344 365 368 278 316 309 362
Operating expenses . . . . . . . . . . . 3,365 3,494 3,187 3,437 3,016 3,182 3,207 3,328
------- ------- ------- ------- ------- ------- ------- -------

Income before
income taxes. . . . . . . . . . . . . 1,465 1,522 2,025 2,486 887 1,200 1,440 2,345
Provision for
income taxes. . . . . . . . . . . . . 436 454 693 876 227 354 457 815
------- ------- ------- ------- ------- ------- ------- -------

Net income . . . . . . . . . . . . . . . $ 1,029 $ 1,068 $ 1,332 $ 1,610 $ 660 $ 846 $ 983 $ 1,530
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------

Earnings per
common share. . . . . . . . . . . . . $ .27 $ .25 $ .31 $ .38 $ .16 $ .21 $ .24 $ .37
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>

MARKET DATA

The following is a three-year comparison of dividends and stock prices:

1995 1994 1993
---- ---- ----

Annual cash dividends paid . . . . . $.57 $.29 $.26
Annual stock dividends issued. . . . 10% 10% 10%

The Company's common stock trades on the NASDAQ Small-Cap market under the
symbol STBC. As quoted by the National Association of Securities Dealers, Inc.,
the approximate high and low prices for the years ended December 31, 1995, 1994
and 1993 were as follows:

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>

1995
High Trade. . . . . . . . . 12 1/2 13 1/4 13 15 1/4
Low Trade . . . . . . . . . 10 1/4 11 7/8 12 12 1/4

1994
High Trade. . . . . . . . . 11 11 1/2 11 3/4 11 1/2
Low Trade . . . . . . . . . 10 9 3/4 10 1/2 10

1993
High Trade. . . . . . . . . 11 1/2 10 3/4 10 10 1/2
Low Trade . . . . . . . . . 10 1/8 9 8 3/4 9 1/4
</TABLE>

<PAGE>

STATE BANCORP, INC. AND SUBSIDIARY
FIVE YEAR SUMMARY OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

Interest income. . . . . . . . . . . . . . . . . . $ 39,426,356 $ 31,267,004 $ 29,139,761 $ 27,481,046 $ 26,800,819
Interest expense . . . . . . . . . . . . . . . . . 18,669,569 11,977,716 11,397,441 13,529,510 15,353,954
------------ ------------ ------------ ------------ ------------

Net interest income. . . . . . . . . . . . . . . . 20,756,787 19,289,288 17,742,320 13,951,536 11,446,865
Provision for possible credit
losses. . . . . . . . . . . . . . . . . . . . . 1,200,000 1,950,000 3,000,000 2,905,367 1,950,000
------------ ------------ ------------ ------------ ------------

Net interest income after
provision for possible
credit losses . . . . . . . . . . . . . . . . . 19,556,787 17,339,288 14,742,320 11,046,169 9,496,865
Other income . . . . . . . . . . . . . . . . . . . 1,424,147 1,265,230 3,293,765 4,474,728 2,101,880
Operating expenses . . . . . . . . . . . . . . . . 13,483,056 12,733,176 12,521,708 10,347,956 7,364,580
------------ ------------ ------------ ------------ ------------

Income before income taxes . . . . . . . . . . . . 7,497,878 5,871,342 5,514,377 5,172,941 4,234,165
Provision for income taxes . . . . . . . . . . . . 2,459,213 1,852,709 1,806,029 1,709,856 1,088,150
------------ ------------ ------------ ------------ ------------

Net income . . . . . . . . . . . . . . . . . . . . $ 5,038,665 $ 4,018,633 $ 3,708,348 $ 3,463,085 $ 3,146,015
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------

Earnings per common share. . . . . . . . . . . . . $1.21 $ .98 $ .91 $ .85 $ .77
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Stock dividends. . . . . . . . . . . . . . . . . . 10% 10% 10% 10% 10%
Cash dividends per common
share . . . . . . . . . . . . . . . . . . . . . $ .57 $ .29 $ .26 $ .22 $ .20
Weighted average number of
shares outstanding adjusted
for stock dividends . . . . . . . . . . . . . . 4,171,524 4,110,913 4,075,495 4,066,602 4,066,602
Total assets . . . . . . . . . . . . . . . . . . . $650,950,468 $505,360,719 $490,714,979 $424,453,010 $289,138,867
Total deposits . . . . . . . . . . . . . . . . . . $497,739,954 $377,324,602 $367,828,761 $391,844,076 $241,944,014
Total stockholders' equity . . . . . . . . . . . . $ 40,587,552 $ 36,170,470 $ 34,715,248 $ 31,000,458 $ 28,451,150
Return on total average assets . . . . . . . . . . 0.94% 0.83% 0.78% 0.86% 1.01%
Return on total average
stockholders' equity. . . . . . . . . . . . . . 13.11% 11.45% 11.53% 11.65% 11.57%
</TABLE>

<PAGE>

STATE BANCORP, INC. AND
STATE BANK OF LONG ISLAND

BOARD OF DIRECTORS

THOMAS F. GOLDRICK, JR.
Chairman, President & C.E.O.
State Bancorp, Inc. & State Bank of Long Island
GARY HOLMAN
Vice Chairman
State Bancorp, Inc. & State Bank of Long Island
Partner, Holman & Rosenberg, Attorneys
J. ROBERT BLUMENTHAL
President, Harwyn Enterprises, Inc.
CARL R. BRUNO
Chief Financial Officer
Di Fazio Electric
ROBERT J. GRADY
Retired
RICHARD W. MERZBACHER
Executive Vice President, State Bank of Long Island
Treasurer, State Bancorp, Inc.
JOSEPH F. MUNSON
President, TRM International, Inc.
RAYMOND M. PIACENTINI
Partner, Dunne & Piacentini,
Accountants and Consultants
JOHN F. PICCIANO, ESQ.
Attorney
DANIEL T. ROWE
Executive Vice President, State Bank of Long Island
Secretary, State Bancorp, Inc.
SUZANNE H. RUECK
Manager, New Hyde Park Inn

STATE BANCORP, INC.

OFFICERS

THOMAS F. GOLDRICK, JR.
Chairman, President & C.E.O.
RICHARD W. MERZBACHER
Treasurer
DANIEL T. ROWE
Secretary
BRIAN K. FINNERAN
Comptroller

STATE BANK OF LONG ISLAND

EXECUTIVE OFFICERS

THOMAS F. GOLDRICK, JR.
Chairman, President & C.E.O.
RICHARD W. MERZBACHER
Executive Vice President
DANIEL T. ROWE
Executive Vice President

<PAGE>

STATE BANK OF LONG ISLAND
OFFICERS AND ADMINISTRATION

FINANCIAL GROUP
BRIAN K. FINNERAN
SENIOR VICE PRESIDENT & COMPTROLLER
THERESA DIVITTORIO
VICE PRESIDENT
PHILIP J. NARDELLA
VICE PRESIDENT
JOHN P. ROM
VICE PRESIDENT
WILLIAM M. HOLLAND
ASSISTANT VICE PRESIDENT
KATHERINE A. O'BRIEN
MANAGER
NICK CAMPANELLA
ADMINISTRATIVE ASSISTANT
JENNIFER M. STOODY
ADMINISTRATIVE ASSISTANT

BANK OPERATIONS/FACILITIES
RAYMOND D. WAGNER
FIRST VICE PRESIDENT
JOSEPH M. MCNEILL
VICE PRESIDENT
CAROL J. BERGMANN
ASSISTANT VICE PRESIDENT & ASSISTANT SECRETARY
VINCENT J. DILLUVIO
ASSISTANT MANAGER
CYNTHIA MONAHAN
ASSISTANT MANAGER
ANNETTE DIRE
ADMINISTRATIVE ASSISTANT

MANAGEMENT INFORMATION SYSTEMS
SUSANNE PHEFFER
FIRST VICE PRESIDENT
DIANE BECK
MANAGER
JANINE MARTINI
ADMINISTRATIVE ASSISTANT

CORPORATE SERVICES
JOHN MCWHIRK
VICE PRESIDENT
DIRECTOR OF MARKETING & PRODUCT DEVELOPMENT
ROBERT J. VALLI
VICE PRESIDENT
DIRECTOR OF MUNICIPAL FINANCE & COMMUNITY RELATIONS
MARY E. DURKIN
ASSISTANT VICE PRESIDENT
DIRECTOR OF HUMAN RESOURCES & TRAINING
LILLIAN C. HEGLER
ASSISTANT TO THE PRESIDENT

BRANCH ADMINISTRATION
THOMAS A. ARNONE
SENIOR VICE PRESIDENT
KEVIN J. CARROLL
MANAGER
ELIZABETH A MEAD
ASSISTANT MANAGER

GARDEN CITY SOUTH BRANCH
PAUL R. CRONEN
ASSISTANT MANAGER
LISA A. PANDOLFO
ASSISTANT MANAGER

HAUPPAUGE BRANCH
JOHN J. KUREK
ASSISTANT VICE PRESIDENT

HUNTINGTON BRANCH
KAREN M. WILLIAMS
MANAGER
HELEN GILFEDDER
ASSISTANT MANAGER
DENISE PETRONE
ADMINISTRATIVE ASSISTANT

JERICHO BRANCH
ROCCO REDA
VICE PRESIDENT
BLANCHE STANFORD
MANAGER
ROBERT INSALACO
ASSISTANT MANAGER

NEW HYDE PARK BRANCH
EDWARD L. KELLY
VICE PRESIDENT
LUCILLE N. JESSEN
MANAGER
ROSEMARY DIMARIO
ASSISTANT MANAGER
RINA MILETIC
ADMINISTRATIVE ASSISTANT
ANJANA MOHAN
ADMINISTRATIVE ASSISTANT

OYSTER BAY BRANCH
ROBERT J. CONNORS
VICE PRESIDENT
MAUREEN MCTIERNAN
MANAGER
DIANE GROCHOCKI
ASSISTANT MANAGER

REGIONAL FINANCIAL CENTER
ROCKVILLE CENTRE
DOMINICK PRINCIPATO
VICE PRESIDENT
LISA RAMOS-LOPEZ
ADMINISTRATIVE ASSISTANT

COMMERCIAL LENDING GROUP
SENIOR VICE PRESIDENTS:
FREDERICK C. BRAUN
CHARLES A. HOFFMAN
ROBERT J. NICOLS
KENNETH M. SCHERIFF
WILLIAM H. TUCKER
FIRST VICE PRESIDENT:
GEORGE K. DEHAVEN
VICE PRESIDENTS:
JAMES T. BURNS
ANTHONY CATANIA
PATRICK M. DEMERY
KEVIN T. HENNESSY
FRED A. HERUTH
KEVIN R. MCHALE
STEPHEN B. MISCHO
RICHARD E. RYAN
THOMAS SCOTT SWAIN
ASSISTANT VICE PRESIDENTS:
JEFFREY N. BARBER
RICHARD J. O'BRIEN
MANAGER
KARYN F. RODRIGUEZ
ASSISTANT MANAGER:
GERALDINE HARDEN
ADMINISTRATIVE ASSISTANTS:
ANNE N. CAPOGROSSO
DEANNE L. FITTERON
THOMAS E. FERGUSON
DIANE V. LYNCH
SUZANNE E. SHEA

JERICHO LENDING GROUP
JEAN-ANN YNGSTROM
FIRST VICE PRESIDENT
MICHAEL P. SABALA
VICE PRESIDENT
MARIA BILLIRIS
ASSISTANT MANAGER

CONSUMER LOAN DEPARTMENT
JEAN CASSESE
ASSISTANT VICE PRESIDENT
JOHN J. MCENIRY
MANAGER
LISA PRETE
ADMINISTRATIVE ASSISTANT

LOAN OPERATIONS GROUP
MARY S. KOCH
ASSISTANT VICE PRESIDENT
SIU CHAN
ASSISTANT MANAGER
NORMA N. CASELLO
ADMINISTRATIVE ASSISTANT
PATRICIA SALVATORE
ADMINISTRATIVE ASSISTANT

<PAGE>

ADVISORY BOARD

Henry Alpert, SECRETARY
Spartan Petroleum Corp.

Andrew C. Andron, PRESIDENT
Century 21 Andron Realty

Maureen Keller Appel, HEADMISTRESS
Connelly School of the Holy Child

Marvin Buchner, PRESIDENT
Council Commerce Corp.

Salvatore Catania, SECRETARY
Murray M. Braunstein, Inc.

Angelo Francis Corva, PRESIDENT
Angelo Francis Corva & Associates

Monroe Diefendorf, Jr., PRESIDENT
Diefendorf Capital Planning Associates

Arthur Dulik, Jr., VICE PRESIDENT
Altana, Inc.

Fred H. Fellows, PRESIDENT
Fibre Materials Co., Inc.

Ronald F. Friedenthal, ASSOCIATE
Surre & Goldberg Associates

Frank Giorgio, Jr., Esq.
Giorgio & DePoto

George Goettelmann, Jr., PRESIDENT
A. E. Goettelmann & Co.

Kermit Gordon
Kermit Enterprises

Henry P. Greve, CPA
Greve & Schmidt

Joan Griesmeyer, CONSULTANT
Bradley & Parker

Joseph M. Gunning, PRESIDENT
Gunning Business Machines

Conrad P. Homler, CPA
Homler & Dalessandro

Seymour Katchen, CPA
Katchen, Palmetto & Company

Robert F. Kearns, EXECUTIVE VICE PRESIDENT
B. H. Aircraft Company, Inc.

Owen Kilgannon, CPA
Kilgannon, Furey & Dufek

Patrick McAllister
Great Eastern Printing Co.

Lynn McAuley, Ph.D.
Madonna Heights Services

Gerard J. McKeon, RETIRED
The New York Racing Association

Robert E. Meyer
Real Estate Appraiser

Donald Monti, PRESIDENT
Darren Enterprises

Dominick Nuzzi
Nuzzi Transportation Services

John J. Nuzzi
Nuzzi Fuel Co.

Peter N. Paternostro, CPA
Paternostro, Ruckh, Callahan & DeFreitas

Charles Peluso, CPA
Margolin, Winer & Evens

Joseph Provenzano, PRESIDENT
Long Island Floors, Inc.

Fred Scott, CHAIRMAN
State Bank of Long Island Advisory Board

Ralph Somma, VICE PRESIDENT
Brueton Industries, Inc.

William G. Spanos
Attorney at Law

Charles I. Steinberg, CFO
Continental Dynamics Corp.

Jerome Stubenhaus, CLU
Nassau Radiologic Group, P.C.

<PAGE>

- --------------------------------------------------------------------------------

IN MEMORIAM

GLADYS DANILEK

It is with a deep sense of regret that we mourn the death of Gladys Danilek, a
long-time member and former Secretary of the State Bank Advisory Board. Mrs.
Danilek had served on the Advisory Board since 1966 and was a strong supporter
of the Bank for many years. We are truly grateful for her contribution and are
saddened by her passing.

- --------------------------------------------------------------------------------

COUNSEL
Holman & Rosenberg
99 Powerhouse Road
Roslyn Heights, NY 11577

AUDITORS
Deloitte & Touche LLP
2 Jericho Plaza
Jericho, New York 11753

TRANSFER AGENT
Mellon Financial Services
85 Challenger Road
Ridgefield Park, NJ 07660

- --------------------------------------------------------------------------------

10-K REPORT

Copies of the Company's annual report on Form 10-K and quarterly reports on Form
10-Q, filed with the Securities and Exchange Commission, may be obtained without
charge upon written request to Brian K. Finneran, Comptroller, State Bancorp,
Inc., 699 Hillside Avenue, New Hyde Park, New York 11040.

FDIC RULES AND REGULATIONS, PART 350.4(d)

This statement has not been reviewed, or confirmed for accuracy or relevance, by
the Federal Deposit Insurance Corporation.

<PAGE>

STATE BANCORP, INC.
Main Office
699 Hillside Avenue
New Hyde Park, NY 11040-2512
(516) 437-1000

135 South Street
Oyster Bay, NY 11771-2283
(516) 922-0200

339 Nassau Boulevard
Garden City South, NY 11530-5313
(516) 481-3900

Lincoln Plaza
2 Lincoln Avenue
Rockville Centre, NY 11570-5724
(516) 678-6000

Jerico, NY 11753-2107
(516) 822-4000

580 E. Jericho Turnpike
Huntington Station, NY 11746-7378
(516) 271-5900

Triad IV
1981 Marcus Avenue
Lake Success, NY 11042-1038
(516) 437-8200

740 Veterans Memorial Highway
Hauppauge, NY 11788-1231
(516) 979-0700

REGIONAL LENDING FACILITIES

Triad IV
1981 Marcus Avenue
Lake Success, NY 11042-1038
(516) 437-8200

Jericho Atrium
500 North Broadway
Jericho, NY 11753-2107
(516) 822-4000

<PAGE>

EXHIBIT (24) - INDEPENDENT AUDITORS' CONSENT

<PAGE>

Deloitte & Touche LLP
Two Jericho Plaza
Jericho, New York 11753-1683

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No. 33-
15167 and No. 33-82172 of State Bancorp, Inc. on Forms S-8 of our report dated
January 26, 1996, appearing in this Annual Report on Form 10-K of State Bancorp,
Inc. for the year ended December 31, 1995.

s/Deloitte & Touche LLP

March 29, 1996