------------------------------------------
FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
-----------------------
For the quarter ended: March 31, 1996
-----------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____ to _____.
-----------------------------------------
STATE BANCORP, INC.
-----------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11 - 2846511
(I.R.S. Employer Identification Number)
699 Hillside Avenue, New Hyde Park, N.Y. 1 1 0 4 0
(Address of principal executive offices) (Zip Code)
(5 1 6) 4 3 7 - 1 0 0 0
(Registrant's telephone number, including area code)
Not Applicable
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------------- --------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the practicable date: 4,244,552 shares of common stock
outstanding as of April 30,1996
<PAGE>
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STATE BANCORP, INC.
---------------------------------------
FORM 10-Q
INDEX
- ------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
- ------------------------------------------------------------------------
Item 1. Consolidated Financial Statements Page
----
Consolidated Balance Sheets-March 31, 1996 and December 31, 1995 (Unaudited) 1.
Statements of Consolidated Earnings for the Three Months Ended
March 31, 1996 and 1995 (Unaudited) 2.
Statements of Consolidated Cash Flows for the Three Months
Ended March 31, 1996 and 1995 (Unaudited) 3.
Consolidated Statements of Stockholders'Equity for the Three Months
Ended March 31, 1996 and 1995 (Unaudited) 4.
Notes to Unaudited Consolidated Financial Statements 4.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6.
- ------------------------------------------------------------------------
PART II. OTHER INFORMATION
- ------------------------------------------------------------------------
Item 1. Legal Proceedings - None N/A
Item 2. Changes in Securities - None N/A
Item 3. Defaults upon Senior Securities - None N/A
Item 4. Submission of Matters to a Vote of Security Holders - None N/A
Item 5. Other Information - None N/A
Item 6. Exhibits and Reports on Form 8-K - None N/A
- --------------------------------
SIGNATURES 11.
- --------------------------------
<PAGE>
- ------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- ------------------------------------------------
- -------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------
- ------------------------------
ASSETS: 1996 1995
- ------------------------------ --------------- --------------
CASH & DUE FROM BANKS $18,486,057 $45,853,678
SECURITIES PURCHASED UNDER AGREEMENTS
TO RESELL 0 76,000,000
--------------- --------------
CASH AND CASH EQUIVALENTS 18,486,057 121,853,678
SECURITIES:
HELD TO MATURITY (APPROXIMATE MARKET VALUE -
$27,156,048 IN 1996 AND $28,224,224 IN 1995) 27,135,070 28,222,798
AVAILABLE FOR SALE - AT MARKET VALUE 191,918,737 204,391,430
--------------- -------------
TOTAL SECURITIES 219,053,807 232,614,228
LOANS - NET OF ALLOWANCE FOR POSSIBLE 295,882,671 282,574,525
CREDIT LOSSES($4,781,048 IN 1996 AND
$5,004,216 IN 1995)
BANK PREMISES AND EQUIPMENT - NET 3,007,935 2,959,399
OTHER ASSETS 11,748,391 10,948,638
- ------------------------------ --------------- -------------
TOTAL ASSETS $548,178,861 $650,950,468
- ------------------------------ =============== =============
- ------------------------------
LIABILITIES:
- ------------------------------
DEPOSITS:
DEMAND $82,513,481 $72,821,175
SAVINGS 176,939,919 245,970,879
TIME 175,949,140 178,947,900
--------------- -------------
TOTAL DEPOSITS 435,402,540 497,739,954
FEDERAL FUNDS PURCHASED 5,000,000 17,000,000
SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE 64,991,465 83,217,774
OTHER SHORT-TERM BORROWINGS 0 10,000,000
ACCRUED EXPENSES, TAXES AND OTHER LIABILITIES 2,024,098 2,405,188
- ------------------------------- --------------- -------------
TOTAL LIABILITIES 507,418,103 610,362,916
- ------------------------------- --------------- -------------
- -------------------------------
STOCKHOLDERS' EQUITY:
- -------------------------------
COMMON STOCK, $5.00 PAR VALUE,
AUTHORIZED 10,000,000 SHARES; ISSUED
4,222,307 IN 1996 AND 4,211,912 IN 1995 21,111,535 21,059,560
SURPLUS 16,490,132 16,402,404
RETAINED EARNINGS 4,164,937 3,159,000
UNREALIZED NET LOSS ON SECURITIES AVAILABLE
FOR SALE (NET OF DEFFERED INCOME TAX BENEFIT
OF $706,232 IN 1996 AND $23,456 IN 1995) (1,005,846) (33,412)
- -------------------------------- --------------- -------------
TOTAL STOCKHOLDERS' EQUITY 40,760,758 40,587,552
- -------------------------------- --------------- -------------
- ------------------------------------------ --------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $548,178,861 $650,950,468
- ------------------------------------------ =============== =============
<PAGE>
- ------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------
- -------------------------------------------------------------------------------
STATE BANCORP AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
THREE MONTHS
-------------------------------------------
---------------- -----------------
1996 1995
---------------- -----------------
- ------------------------
INTEREST INCOME:
- ------------------------
LOANS $6,894,725 $5,860,842
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL 424,001 126,146
SECURITIES HELD TO MATURITY AND
SECURITIES AVAILABLE FOR SALE:
U.S. TREASURY SECURITIES 339,160 398,439
STATES AND POLITICAL SUBDIVISIONS 372,978 560,141
MORTGAGE-BACKED SECURITIES 2,258,514 1,805,068
GOVERNMENT AGENCY SECURITIES 418,395 10,853
OTHER SECURITIES 25,333 175,000
---------------- -----------------
TOTAL INTEREST INCOME 10,733,106 8,936,489
---------------- -----------------
- ------------------------
INTEREST EXPENSE:
- ------------------------
TIME CERTIFICATES OF DEPOSIT OF
$100,000 OR MORE 1,815,654 1,183,383
OTHER DEPOSITS AND TEMPORARY BORROWINGS 3,081,940 2,895,047
---------------- -----------------
TOTAL INTEREST EXPENSE 4,897,594 4,078,430
---------------- -----------------
NET INTEREST INCOME 5,835,512 4,858,059
PROVISION FOR POSSIBLE CREDIT LOSSES 375,000 375,000
---------------- -----------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE CREDIT LOSSES 5,460,512 4,483,059
---------------- -----------------
- ------------------------
OTHER INCOME:
- ------------------------
SERVICE CHARGES ON DEPOSIT ACCOUNTS 320,247 274,897
NET SECURITY GAINS (LOSSES) 25,193 (41,443)
OTHER OPERATING INCOME 99,080 112,889
---------------- -----------------
TOTAL OTHER INCOME 444,520 346,343
---------------- -----------------
INCOME BEFORE OPERATING EXPENSES 5,905,032 4,829,402
---------------- -----------------
- -------------------------
OPERATING EXPENSES:
- -------------------------
SALARIES AND OTHER EMPLOYEE
BENEFITS 2,194,914 1,859,197
OCCUPANCY 346,162 327,238
EQUIPMENT 130,244 124,642
DEPOSIT ASSESSMENT FEES 59,558 205,989
AMORTIZATION OF INTANGIBLES 152,221 159,367
OTHER OPERATING EXPENSES 783,306 688,706
---------------- -----------------
TOTAL OPERATING EXPENSES 3,666,405 3,365,139
---------------- -----------------
INCOME BEFORE INCOME TAXES 2,238,627 1,464,263
PROVISION FOR INCOME TAXES 810,477 435,323
- -------------------------- ---------------- -----------------
NET INCOME $1,428,150 $1,028,940
- -------------------------- ---------------- -----------------
- --------------------------
EARNINGS PER COMMON SHARE $0.34 $0.25
- -------------------------- ---------------- -----------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,220,259 4,133,916
- -------------------------- ---------------- -----------------
<PAGE>
- -----------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------
- --------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND 1995 (UNAUDITED)
- --------------------------------------------------------------
- ---------------------------------- -------------- --------------
OPERATING ACTIVITIES: 1996 1995
- ---------------------------------- -------------- --------------
NET INCOME $1,428,150 $1,028,940
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE CREDIT LOSSES 375,000 375,000
DEPRECIATION AND AMORTIZATION OF BANK
PREMISES AND EQUIPMENT 132,446 89,743
AMORTIZATION OF INTANGIBLES 152,221 159,367
AMORTIZATION OF NET PREMIUM ON SECURITIES 335,059 271,093
NET SECURITY (GAINS) LOSSES (25,193) 41,443
(INCREASE) DECREASE IN OTHER ASSETS, NET (269,199) 740,471
(DECREASE) INCREASE IN ACCRUED EXPENSES,
TAXES AND OTHER LIABILITIES (382,112) 352,694
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,746,372 3,058,751
------------- ------------
- ----------------------------------
INVESTING ACTIVITIES:
- ----------------------------------
PROCEEDS FROM MATURITIES OF SECURITIES
HELD TO MATURITY 2,323,601 3,841,923
PURCHASES OF SECURITIES HELD TO MATURITY (1,247,000) (2,324,355)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE
FOR SALE 12,421,815 18,075,111
PROCEEDS FROM MATURITIES OF SECURITIES
AVAILABLE FOR SALE 48,256,047 5,952,443
PURCHASES OF SECURITIES AVAILABLE FOR SALE (50,159,118) (24,321,067)
(INCREASE) DECREASE IN LOANS - NET (13,683,146) 2,566,136
PURCHASES OF BANK PREMISES AND EQUIPMENT (180,982) (223,166)
-------------- --------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (2,268,783) 3,567,025
-------------- --------------
- ----------------------------------
FINANCING ACTIVITIES:
- ----------------------------------
(DECREASE) INCREASE IN DEMAND AND SAVINGS
DEPOSITS (59,338,654) 17,337,758
(DECREASE) INCREASE IN TIME DEPOSITS (2,998,760) 3,118
DECREASE IN FEDERAL FUNDS PURCHASED (12,000,000) (12,700,000)
DECREASE IN SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE (18,226,309) (30,448,730)
(DECREASE) INCREASE IN OTHER SHORT-TERM
BORROWINGS (10,000,000) 8,000,000
CASH DIVIDENDS PAID (421,191) 0
PROCEEDS FROM SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN 138,325 31,752
PROCEEDS FROM STOCK OPTIONS EXERCISED 1,378 847
--------------- ---------------
NET CASH USED IN FINANCING ACTIVITIES (102,845,211) (17,775,255)
--------------- ---------------
- -----------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (103,367,621) (11,149,479)
- -----------------------------------------
- -------------------------------------
CASH AND CASH EQUIVALENTS - JANUARY 1 121,853,678 24,966,956
- -------------------------------------
- ------------------------------------- --------------- ---------------
CASH AND CASH EQUIVALENTS - MARCH 31 $18,486,057 $13,817,477
- ------------------------------------- --------------- ---------------
- -------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------
INTEREST PAID $5,060,275 $4,136,176
TAXES PAID $422,875 $87,780
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<CAPTION>
UNREALIZED
NET (LOSS) GAIN
ON SECURITIES
COMMON RETAINED AVAILABLE
STOCK SURPLUS EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $21,059,560 $16,402,404 $3,159,000 $ (33,412) $40,587,552
NET INCOME 1,428,150 1,428,150
CASH DIVIDENDS DECLARED
($0.10 PER SHARE) (422,213) (422,213)
SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN (10,216 SHARES
AT 95% OF MARKET VALUE) 51,080 87,245 138,325
STOCK OPTIONS EXERCISED 895 483 1,378
NET CHANGE IN UNREALIZED NET LOSS ON
SECURITIES AVAILABLE FOR SALE (972,434) (972,434)
- ------------------------------ --------------- -------------- ------------- --------------- ------------
BALANCE, MARCH 31, 1996 $21,111,535 $16,490,132 $4,164,937 $ (1,005,846) $40,760,758
- ------------------------------ --------------- -------------- ------------- --------------- ------------
BALANCE, JANUARY 1, 1995 $18,764,095 $13,114,916 $5,201,989 $ (910,530) $36,170,470
NET INCOME 1,028,940 1,028,940
SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN (3,260 SHARES
AT 95% OF MARKET VALUE) 16,300 15,452 31,752
STOCK OPTIONS EXERCISED 500 347 847
NET CHANGE IN UNREALIZED NET LOSS ON
SECURITIES AVAILABLE FOR SALE 553,688 553,688
- ----------------------------- ---------------- -------------- ------------ --------------- -------------
BALANCE, MARCH 31, 1995 $18,780,895 $13,130,715 $6,230,929 $ (356,842) $37,785,697
- ----------------------------- ---------------- -------------- ------------ --------------- -------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
- ---------------------------------
FINANCIAL STATEMENT PRESENTATION
- ---------------------------------
In the opinion of the management of State Bancorp, Inc. (the "Company"),
the preceding unaudited consolidated financial statements contain all
adjustments, consisting of normal accruals, necessary for a fair presentation
of its consolidated financial condition as of March 31, 1996 and December 31,
1995 and its consolidated results of operations and changes in cash flows and
stockholders' equity for the three months ended March 31, 1996 and 1995.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K.
Certain amounts have been reclassified to conform with the current year's
presentation.
- ---------------------
STOCKHOLDERS' EQUITY
- ---------------------
Common shares issued have been adjusted to reflect a 10% stock dividend
issued on July 5, 1995.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- -------------------
EARNINGS PER SHARE
- -------------------
Earnings per share are computed based on the weighted average number of
common shares outstanding after giving retroactive effect to stock dividends.
The impact of the assumed exercise of stock options is immaterial or anti-
dilutive in all periods presented.
- ------------------------------------------------------------
UNREALIZED NET (LOSS) GAIN ON SECURITIES AVAILABLE FOR SALE
- ------------------------------------------------------------
Securities available for sale are stated at estimated market value and
unrealized gains and losses are excluded from earnings and reported as a
separate component of stockholders' equity until realized. Securities held to
maturity are stated at amortized cost. Management designates each security,
at the time of purchase, as either available for sale or held to maturity
depending upon investment objectives, liquidity needs and intent.
- ------------------------------------------------------------
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
- ------------------------------------------------------------
Activity in the allowance for possible credit losses for the three months
ended March 31, 1996 and 1995 is as follows:
--------------- ----------------
1996 1995
--------------- ----------------
Balance, January 1 $5,004,216 $4,928,521
Provision charged to income 375,000 375,000
Charge-offs, net of recoveries
of $35,705 in 1996 and
$19,221 in 1995 (598,168) (49,238)
--------------- ----------------
Balance, March 31 $4,781,048 $5,254,283
=============== ================
- ------
LOANS
- ------
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" in 1995. A loan is considered impaired
under SFAS No. 114 when, based on current information and events, it is
probable that the lender will not be able to collect all the principal and
interest due under the contractual terms of the loan. Impaired loans subject
to individual analysis consist of all nonaccrual commercial mortgages and
nonaccrual commercial and industrial loans over $250,000. At March 31, 1996,
total impaired loans amounted to $5,918,904 and $7,782,686 at December 31, 1995.
As a result of the Company's evaluation of impaired loans, an allowance for
credit losses of $798,688 and $1,177,013 was established for $4,552,416 and
$6,416,198 of the total impaired loans at March 31, 1996 and December 31, 1995,
respectively,with the balance of impaired loans requiring no specific allowance
according to SFAS No. 114. The total average impaired loan balance was
$6,450,009 for the quarter ended March 31, 1996 and $6,498,542 for the year
ended December 31, 1995.
Interest received on nonaccrual loans is either applied against principal
or reported as income, according to management's judgement as to the
collectibility of the principal. Interest for impaired, restructured loans is
accrued in accordance with their revised terms. Total interest income
recognized for impaired, nonaccrual and restructured loans was $14,734 and
$14,809 during the three months ended March 31, 1996 and March 31, 1995,
respectively.
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1. Material Changes in Financial Condition - Total assets of the
Company declined by $102.8 million or 15.8% to $548.2 million at
March 31, 1996, when compared to December 31, 1995. A reduction of
$103.4 million in cash and cash equivalents accounted for much of
the asset reduction experienced by the Company. In addition to the
foregoing decline, the investment securities portfolio contracted
by $13.6 million to $219.1 million. Total loans outstanding,
however, grew by $13.3 million or 4.7% due to a combination of an
improvement in the local economy and an influx of new business due
to the ongoing consolidation in the Long Island banking market.
Gross loans outstanding at March 31, 1996 totaled $300.7 million,
a record level for the Company.
At March 31, 1996, total deposits decreased by $62.3 million to
$435.4 million versus year-end 1995. This decline was mainly due to
a $69.0 million reduction in savings deposits, the result of a
seasonal outflow of short-term municipal tax deposits. The
Company's municipal finance department is among the most active on
Long Island and enjoys relationships with dozens of local Towns,
Villages and School Districts in Nassau and Suffolk counties. The
Company also experienced a decline in short-term borrowings of
$40.2 million due to reductions in Federal funds purchased,
securities sold under agreements to repurchase (SSUAR) and Federal
Home Loan Bank overnight advances. On a positive note, demand
deposits increased by $9.7 million or 13.3%, largely due to an
expanded customer base arising from the ongoing efforts of the
Company's lending staff.
Average assets for the first quarter of 1996 advanced by $85.1
million or 17.1% to $582.0 million from the comparable 1995 period.
Increases in loans (up $40.8 million or 16.2%), money market
instruments (up $22.4 million) and investment securities (up $18.1
million or 8.6%) accounted for the asset growth during the first
quarter of 1996. Funding this growth were increases in demand
deposits, Super NOW accounts and certificates of deposit over
$100,000. Short-term money market borrowings, primarily SSUARs,
also increased during the first quarter of 1996.
At March 31, 1996, the Company continued to maintain capital
adequacy ratios significantly in excess of those necessary for it
to be classified as a "well capitalized" institution pursuant to
the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). The following table (2-1)
summarizes the Company's capital ratios as of March 31, 1996 and
compares them to current regulatory guidelines and December 31 and
March 31, 1995 actual results. As previously discussed in the 1995
Annual Report to Stockholders, the Company recently announced the
terms of a Rights Offering that is expected to increase capital by
approximately $10 million during the early part of the third
(6)
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
quarter of this year. This increase in capital will be utilized to
support anticipated loan growth, other investment opportunities and
for general corporate purposes. It is expected that the Company's
Tier I leverage ratio will approximate 8.50% after completion of a
fully subscribed offering.
TABLE 2-1
Tier I capital/ Total Capital/
Tier I Risk-Weighted Risk-Weighted
Leverage Assets Assets
Regulatory Minimum 3.00%-5.00% 4.00% 8.00%
Ratios as of:
March 31, 1996 6.91% 12.19% 13.64%
December 31, 1995 6.56% 11.35% 12.81%
March 31, 1995 7.26% 12.49% 14.27%
Regulatory Criteria for
a "Well Capitalized"
Institution 5.00% 6.00% 10.00%
The Company's liquidity policy emphasizes adequate, but not
excessive, liquidity and the protection of net interest income from
the effect of adverse movements in interest rates and the shape of
the interest rate yield curve. Throughout the first quarter of
1996, the Company's liquidity position remained stable and well
within acceptable industry standards. At March 31, 1996, the
Company had access to $82 million in Federal Home Loan Bank lines
of credit for overnight or term borrowings with maturities of up to
thirty years. In addition, the Company had $17 million in informal
lines of credit extended by correspondent banks to be utilized, if
needed, for short-term funding purposes as well as approximately
$11 million in securities available to be pledged to secure
repurchase agreements or Federal Reserve Discount Window borrowings
at quarter-end 1996.
2. Material Changes in Results of Operations - Net income for the
three months ended March 31, 1996 was $1,428,000, a 38.8%
improvement over the comparable 1995 period. The 1996 earnings
increase was attributable to higher net interest income and an
improvement in other income, primarily service charges on deposit
accounts and higher securities transaction income.
(7)
<PAGE>
Net interest income rose by 20.1% to $5.8 million, the result of an
expanded earning asset base, primarily commercial loans, commercial
mortgages and mortgage-backed investment securities. Other income,
excluding the impact of securities transactions, improved by 8.1%
in 1996 due to higher deposit service charges, and increases in ATM
and wire transfer fees.
Total operating expenses grew by 9.0% during the first quarter of
1996, mainly due to increases in salaries and employee benefits
arising from staff expansion in the lending group and product
support areas. In addition, occupancy costs increased due to higher
real estate taxes at various locations. Somewhat offsetting the
operating expense increases previously described was a decline in
FDIC assessment expenses due to the lowering of the assessment rate
on Bank Insurance Fund (BIF) deposits during the third quarter of
1995. Despite the overall increase in operating expenses, the
Company's operating efficiency ratio (total operating expenses as
a percentage of fully taxable equivalent net interest revenue,
excluding securities transactions) improved to 57% for the first
quarter of 1996 versus 60% a year ago. It continues to be the
Company's stated goal to reduce this ratio to a sub-50% level as
part of its efforts to improve efficiencies and, ultimately,
stockholder value.
Nonperforming assets totaled $8.0 million at March 31, 1996, a
decrease of $0.3 million versus December 31, 1995. This reduction
was the result of a $1.0 million decline in nonaccrual loans, which
was offset in part by a $700 thousand increase in Other Real Estate
(ORE). In addition, the level of restructured, accruing loans at
March 31, 1996 decreased by $1.6 million when compared to year-end
1995. When compared to March 31, 1995, nonperforming assets
increased by a modest $200 thousand, the result of a higher level
of ORE. Management of the Company anticipates continued improvement
in the level of nonperforming loans during 1996 as workout efforts
move forward on several large credits. The provision for possible
credit losses was flat (at $375 thousand) versus the first quarter
of 1995. The allowance for possible credit losses amounted to $4.8
million or 1.59% of total loans at March 31, 1996 versus $5.3
million and 2.08%, respectively, at the comparable 1995 date. The
allowance for credit losses as a percentage of nonperforming assets
declined to 60.0% from 60.7% and 67.5% at December 31, 1995 and
March 31, 1995, respectively. A further review of the Company's
nonperforming assets may be found in Table 2-3 following this
analysis.
(8)
<PAGE>
- ------------------------------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
=========================================================================================
MARCH 31, 1996
- ----------------
TABLE 2-2 LIQUIDITY AND INTEREST RATE SENSITIVITY
- ---------------- =========================================================================================
=========================================================================================
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS) SENSITIVITY TIME HORIZON
- ------------------------------- Noninterest
INTEREST - SENSITIVE ASSETS : <F1> 0 - 6 Months 6-12 Months Over 1 Year Sensitive Total
- ------------------------------- -------------- ------------ ------------- ----------- -------------
Loans (net of unearned income) <F2> $197,538 $3,048 $92,812 $7,266 $300,664
Securities Held to Maturity <F3> 23,700 3,056 379 27,135
Securities Available for Sale 31,181 16,772 143,707 1,971 193,631
Unrealized Net Loss on Securities
Available for Sale (1,712)
-------------- ------------- ------------- ----------- -------------
Total Interest-Sensitive Assets 250,707 22,876 236,898 9,237 519,718
Cash and Due from Banks 18,486 18,486
All Other Assets <F6> 4,194 1,970 3,812 9,975
-------------- ------------- ------------- ----------- -------------
Total Assets $273,387 $24,846 $236,898 $13,049 $548,179
-------------- ------------- ------------- ----------- -------------
- ---------------------------------
INTEREST - BEARING LIABILITIES : <F1>
- ---------------------------------
Savings Accounts <F4> $17,923 $17,923 $71,693 $0 $107,538
Money Fund and Now Accounts <F5> 57,459 3,981 7,962 0 69,402
Time Deposits 109,485 35,379 31,085 0 175,949
-------------- ------------- --------------- ------------ -----------
Total Interest-Bearing Liabilities 184,867 57,283 110,740 0 352,889
Securities Sold Under Agreements to Repurchase
Federal Funds Purchased, and Other
Borrowings 69,991 69,991
All Other Liabilities, Equity and
Demand Deposits <F6> 1,142 772 111 123,274 125,299
--------------- ------------- --------------- ------------- -----------
Total Liabilities and Equity $256,000 $58,055 $110,851 $123,274 $548,179
--------------- --------------- --------------- ------------- -----------
Cumulative Interest-Sensitivity Gap $17,387 ($15,821) $110,226 $0 $0
Cumulative Interest-Sensitivity Ratio 106.% 95.% 125.% 100.% 100.%
Cumulative Interest-Sensitivity Gap
As a % of Total Assets 6.% (5.%) 20.% -- % -- %
<FN>
<F1>1) Allocations to specific interest sensitivity periods are based on the
earlier of the repricing or maturity date.
<F2>2) Nonaccrual loans are shown in the non-interest sensitive category.
<F3>3) Estimated principal reductions have been assumed for mortgage-backed
securities based upon their current constant prepayment rates.
<F4>4) Savings deposits are assumed to decline ratably over a three-year period.
<F5>5) Now accounts are assumed to decline ratably over a two-year period.
<F6>6) Other Assets and Liabilities are shown according to payment schedule
or reasonable estimate.
</FN>
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
- ----------------------
TABLE 2 - 3
- ----------------------
- --------------------------------------------------------------------------------
STATE BANCORP, INC.
ANALYSIS OF NONPERFORMING ASSETS AND THE ALLOWANCE FOR CREDIT LOSSES
MARCH 31, 1996 VERSUS DECEMBER 31, 1995 AND MARCH 31, 1995
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED:
--------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING ASSETS BY TYPE 3/31/96 12/31/95 3/31/95
-------------- -------------- --------------
NONACCRUAL LOANS $7,266 $8,247 $7,287
OTHER REAL ESTATE 700 0 493
-------------- -------------- --------------
-------------- -------------- --------------
TOTAL NONPERFORMING ASSETS $7,966 $8,247 $7,780
-------------- -------------- --------------
RESTRUCTURED, ACCRUING LOANS 1,748 3,344 1,843
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING $4,525 $337 $716
GROSS LOANS OUTSTANDING $300,731 $287,643 $252,610
TOTAL STOCKHOLDERS' EQUITY $40,761 $40,588 $37,786
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED:
------------------------------------------------------------
<S> <C> <C> <C>
ANALYSIS OF THE ALLOWANCE FOR
CREDIT LOSSES 3/31/96 12/31/95 3/31/95
-------------- -------------- --------------
BEGINNING BALANCE $5,004 $5,279 $4,929
ADD: PROVISION 375 75 375
LESS: NET CHARGE-OFFS 598 350 50
-------------- -------------- --------------
-------------- -------------- --------------
ENDING BALANCE $4,781 $5,004 $5,254
-------------- -------------- --------------
KEY RATIOS AT PERIOD-END:
ALLOWANCE AS A % OF TOTAL LOANS 1.59% 1.74% 2.08%
NONACCRUAL LOANS AS A % OF TOTAL LOANS 2.42% 2.87% 2.88%
NONPERFORMING ASSETS AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE 2.64% 2.87% 3.07%
ALLOWANCE FOR CREDIT LOSSES AS A %
OF NONACCRUAL LOANS 65.80% 60.68% 72.10%
ALLOWANCE FOR CREDIT LOSSES AS A %
OF NONPERFORMING ASSETS 60.02% 60.68% 67.53%
</TABLE>
<PAGE>
-------------------------------
SIGNATURES
-------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
-------------------------------------------------------------
STATE BANCORP, INC.
-------------------------------------------------------------
5/9/96 s / Daniel T. Rowe
- ---------------- ----------------------------------------------
Date Daniel T. Rowe, Secretary
(Principal Financial Officer)
5/9/96 s / Brian K. Finneran
- ---------------- ----------------------------------------------
Date Brian K. Finneran, Comptroller
(11)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,407,071
<INT-BEARING-DEPOSITS> 78,986
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 191,918,737
<INVESTMENTS-CARRYING> 27,135,070
<INVESTMENTS-MARKET> 27,156,048
<LOANS> 295,882,671
<ALLOWANCE> 4,781,048
<TOTAL-ASSETS> 548,178,861
<DEPOSITS> 435,402,540
<SHORT-TERM> 69,991,465
<LIABILITIES-OTHER> 2,024,098
<LONG-TERM> 0
0
0
<COMMON> 21,111,535
<OTHER-SE> 19,649,223
<TOTAL-LIABILITIES-AND-EQUITY> 548,178,861
<INTEREST-LOAN> 6,894,725
<INTEREST-INVEST> 3,414,380
<INTEREST-OTHER> 424,001
<INTEREST-TOTAL> 10,733,106
<INTEREST-DEPOSIT> 4,369,072
<INTEREST-EXPENSE> 4,897,594
<INTEREST-INCOME-NET> 5,835,512
<LOAN-LOSSES> 375,000
<SECURITIES-GAINS> 25,193
<EXPENSE-OTHER> 3,666,405
<INCOME-PRETAX> 2,238,627
<INCOME-PRE-EXTRAORDINARY> 1,428,150
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,428,150
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 7.76
<LOANS-NON> 7,266,474
<LOANS-PAST> 4,525,342
<LOANS-TROUBLED> 1,747,691
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,004,216
<CHARGE-OFFS> 633,873
<RECOVERIES> 35,705
<ALLOWANCE-CLOSE> 4,781,048
<ALLOWANCE-DOMESTIC> 3,036,600
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,744,448
</TABLE>
