UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 2000
[ ] 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
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
699 HILLSIDE AVENUE, NEW HYDE PARK, NEW YORK 11040
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 437-1000
---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of April 27, 2000, there were 6,990,794 shares of Common Stock outstanding.
<PAGE>
STATE BANCORP, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 2000 and December 31, 1999
(Unaudited) 1.
Consolidated Statements of Income for the Three Months Ended
March 31, 2000 and 1999 (Unaudited) 2.
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2000 and 1999 (Unaudited) 3.
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(Loss) for the Three Months Ended March 31, 2000 and 1999 (Unaudited) 4.
Notes to Unaudited Consolidated Financial Statements 5.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
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 14.
SIGNATURES 15.
<PAGE>
- - -----------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- - -----------------------------------------------------
- - -----------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999 (UNAUDITED)
- - -----------------------------------------------------
- - -----------------------------------------------------
ASSETS: 2000 1999
- - ----------------------------------------------------- ----------- -------------
CASH AND DUE FROM BANKS $25,553,046 $37,428,471
FEDERAL FUNDS SOLD 4,000,000 27,000,000
----------- -------------
CASH AND CASH EQUIVALENTS 29,553,046 64,428,471
SECURITIES:
HELD TO MATURITY (ESTIMATED FAIR VALUE -
$516,119 IN 2000 AND $565,528 IN 1999) 517,600 569,002
AVAILABLE FOR SALE - AT ESTIMATED FAIR VALUE 391,475,569 376,861,995
------------- -------------
TOTAL SECURITIES 391,993,169 377,430,997
LOANS - NET OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
($7,352,889 IN 2000 AND $7,106,627 IN 1999) 480,099,527 481,841,758
BANK PREMISES AND EQUIPMENT - NET 3,899,156 3,639,681
OTHER ASSETS 22,108,873 22,488,503
- - -------------------------------------------------- ------------- -------------
TOTAL ASSETS $927,653,771 $949,829,410
- - -------------------------------------------------- ============= =============
- - --------------------------------------------------
LIABILITIES:
- - --------------------------------------------------
DEPOSITS:
DEMAND $142,045,732 $132,961,189
SAVINGS 181,593,593 198,396,801
TIME 461,015,804 473,104,936
------------- -------------
TOTAL DEPOSITS 784,655,129 804,462,926
FEDERAL FUNDS PURCHASED 10,000,000 16,450,000
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 41,635,000 26,888,000
OTHER SHORT-TERM BORROWINGS 29,000,000 40,000,000
ACCRUED EXPENSES, TAXES AND OTHER LIABILITIES 4,915,005 5,925,387
- - -------------------------------------------------- ------------- -------------
TOTAL LIABILITIES 870,205,134 893,726,313
- - -------------------------------------------------- ------------- -------------
- - --------------------------------------------------
STOCKHOLDERS' EQUITY:
- - --------------------------------------------------
PREFERRED STOCK, $.01 PAR VALUE, AUTHORIZED
250,000 SHARES - -
COMMON STOCK, $5.00 PAR VALUE, AUTHORIZED
20,000,000 SHARES; ISSUED 7,093,424 SHARES IN 2000
AND 7,078,221 SHARES IN 1999; OUTSTANDING 6,976,523
SHARES IN 2000 AND 6,962,606 SHARES IN 1999 35,467,120 35,391,105
SURPLUS 29,622,951 29,492,832
RETAINED EARNINGS 6,928,423 5,119,181
TREASURY STOCK (67,700 SHARES IN 2000
AND 62,200 SHARES IN 1999) (991,167) (918,649)
ACCUMULATED OTHER COMPREHENSIVE LOSS (13,136,650) (12,501,470)
UNEARNED COMPENSATION (442,040) (479,902)
- - -------------------------------------------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 57,448,637 56,103,097
- - -------------------------------------------------- ------------- -------------
- - --------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $927,653,771 $949,829,410
- - -------------------------------------------------- ============= =============
(1)
<PAGE>
- - ------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------
<TABLE>
- - -----------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- - -----------------------------------------------------------------------------
<CAPTION>
---------------------------------
THREE MONTHS
---------------------------------
--------------- ---------------
2000 1999
--------------- ---------------
- - ------------------------------------------------
INTEREST INCOME:
- - ------------------------------------------------
<S> <C> <C>
LOANS $ 11,373,623 $ 9,285,996
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL 132,084 357,254
SECURITIES HELD TO MATURITY AND
SECURITIES AVAILABLE FOR SALE:
STATES AND POLITICAL SUBDIVISIONS 722,536 162,228
MORTGAGE-BACKED SECURITIES 321,460 469,622
GOVERNMENT AGENCY SECURITIES 4,921,128 3,402,921
OTHER SECURITIES 127,954 44,786
------------ ------------
TOTAL INTEREST INCOME 17,598,785 13,722,807
------------ ------------
- - ------------------------------------------------
INTEREST EXPENSE:
- - ------------------------------------------------
TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE 4,893,033 2,742,153
OTHER DEPOSITS AND TEMPORARY BORROWINGS 3,314,196 2,480,524
------------ ------------
TOTAL INTEREST EXPENSE 8,207,229 5,222,677
------------ ------------
NET INTEREST INCOME 9,391,556 8,500,130
PROVISION FOR POSSIBLE LOAN LOSSES 1,000,000 750,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 8,391,556 7,750,130
------------ ------------
- - ------------------------------------------------
OTHER INCOME:
- - ------------------------------------------------
SERVICE CHARGES ON DEPOSIT ACCOUNTS 498,362 298,097
NET SECURITY (LOSSES) GAINS (88,506) 45,552
OTHER OPERATING INCOME 315,047 153,856
------------ ------------
TOTAL OTHER INCOME 724,903 497,505
------------ ------------
INCOME BEFORE OPERATING EXPENSES 9,116,459 8,247,635
------------ ------------
- - ------------------------------------------------
OPERATING EXPENSES:
- - ------------------------------------------------
SALARIES AND OTHER EMPLOYEE BENEFITS 3,645,578 3,093,520
OCCUPANCY 444,599 447,488
EQUIPMENT 217,563 195,786
MARKETING AND ADVERTISING 180,000 144,000
DEPOSIT ASSESSMENT FEES 40,101 38,390
AMORTIZATION OF INTANGIBLES 9,034 9,034
OTHER OPERATING EXPENSES 767,261 1,049,821
------------ ------------
TOTAL OPERATING EXPENSES 5,304,136 4,978,039
------------ ------------
INCOME BEFORE INCOME TAXES 3,812,323 3,269,596
PROVISION FOR INCOME TAXES 1,096,063 1,020,831
- - ------------------------------------------------ ------------ ------------
NET INCOME $ 2,716,260 $ 2,248,765
- - ------------------------------------------------ ------------ ------------
- - ------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ 0.39 $ 0.33
- - ------------------------------------------------ ------------ ------------
- - ------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ 0.39 $ 0.32
- - ------------------------------------------------ ------------ ------------
- - ------------------------------------------------
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,974,808 6,918,443
- - ------------------------------------------------ ------------ ------------
</TABLE>
(2)
<PAGE>
- - ----------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- - ----------------------------------------------------------------
- - ---------------------------------------------------- ----------- ------------
OPERATING ACTIVITIES: 2000 1999
- - ---------------------------------------------------- ----------- ------------
NET INCOME $2,716,260 $2,248,765
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE LOAN LOSSES 1,000,000 750,000
DEPRECIATION AND AMORTIZATION OF BANK
PREMISES AND EQUIPMENT 215,034 199,640
AMORTIZATION OF INTANGIBLES 9,034 9,034
(ACCRETION) AMORTIZATION OF NET (DISCOUNT)
PREMIUM ON SECURITIES (339,685) 48,046
AMORTIZATION OF UNEARNED COMPENSATION 48,703 64,914
NET SECURITY LOSSES (GAINS) 88,506 (45,552)
DECREASE IN OTHER ASSETS, NET 737,303 1,019,870
DECREASE IN ACCRUED EXPENSES, TAXES
AND OTHER LIABILITIES (1,010,927) (559,194)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,464,228 3,735,523
------------ ------------
- - -----------------------------------------------------
INVESTING ACTIVITIES:
- - -----------------------------------------------------
PROCEEDS FROM MATURITIES OF SECURITIES HELD
TO MATURITY 51,400 200,000
PURCHASES OF SECURITIES HELD TO MATURITY - (257,000)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE
FOR SALE 15,255,942 32,863,181
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE
FOR SALE 18,745,058 43,501,398
PURCHASES OF SECURITIES AVAILABLE FOR SALE (49,365,280) (70,976,717)
DECREASE (INCREASE) IN LOANS - NET 742,231 (16,904,526)
PURCHASES OF BANK PREMISES AND EQUIPMENT - NET (474,509) (206,515)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (15,045,158) (11,780,179)
------------ ------------
- - -----------------------------------------------------
FINANCING ACTIVITIES:
- - -----------------------------------------------------
DECREASE IN DEMAND AND SAVINGS DEPOSITS (7,718,665) (3,963,148)
(DECREASE) INCREASE IN TIME DEPOSITS (12,089,132) 17,819,092
(DECREASE) INCREASE IN FEDERAL FUNDS PURCHASED (6,450,000) 5,200,000
INCREASE IN SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE 14,747,000 181,000
(DECREASE) INCREASE IN OTHER SHORT-TERM
BORROWINGS (11,000,000) 3,500,000
CASH DIVIDENDS PAID (906,473) (779,044)
PROCEEDS FROM SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN 188,693 208,208
PROCEEDS FROM STOCK OPTIONS EXERCISED 6,600 170,623
PURCHASE OF TREASURY STOCK (72,518) -
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (23,294,495) 22,336,731
------------ ------------
- - -----------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (34,875,425) 14,292,075
- - -----------------------------------------------------
- - -----------------------------------------------------
CASH AND CASH EQUIVALENTS - JANUARY 1 64,428,471 19,274,435
- - -----------------------------------------------------
- - ----------------------------------------------------- ----------- ------------
CASH AND CASH EQUIVALENTS - MARCH 31 $29,553,046 $33,566,510
- - ----------------------------------------------------- ----------- ------------
- - -----------------------------------------------------
SUPPLEMENTAL DATA:
- - -----------------------------------------------------
INTEREST PAID $8,775,038 $5,225,059
INCOME TAXES PAID $156,000 $503,000
ADJUSTMENT TO UNREALIZED NET LOSS ON SECURITIES
AVAILABLE FOR SALE ($1,001,887) ($2,511,066)
DIVIDENDS DECLARED BUT NOT PAID AS OF QUARTER
END $907,018 $786,421
(3)
<PAGE>
- - --------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------
<TABLE>
- - -----------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- - -----------------------------------------------------------------------------
<CAPTION>
ACCUMULATED
OTHER
COMPRE- UNEARNED COMPRE-
COMMON RETAINED TREASURY HENSIVE COMPEN- HENSIVE
STOCK SURPLUS EARNINGS STOCK LOSS SATION TOTAL INCOME
----- ------- -------- ----- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 2000 $35,391,105 $29,492,832 $5,119,181 ($918,649) ($12,501,470) ($479,902) $56,103,097
COMPREHENSIVE INCOME:
NET INCOME 2,716,260 2,716,260 $2,716,260
----------
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
UNREALIZED HOLDING LOSSES
ARISING DURING THE PERIOD (663,733)
RECLASSIFICATION ADJUSTMENT
FOR LOSSES INCLUDED IN NET INCOME 28,553
----------
TOTAL OTHER COMPREHENSIVE LOSS (635,180) (635,180) (635,180)
----------
TOTAL COMPREHENSIVE INCOME $2,081,080
----------
CASH DIVIDEND
($0.13 PER SHARE) (907,018) (907,018)
SHARES ISSUED UNDER THE DIVIDEND
REINVESTMENT PLAN (13,936 SHARES
AT 95% OF MARKET VALUE) 69,680 119,013 188,693
STOCK OPTIONS EXERCISED 6,335 265 6,600
TREASURY STOCK PURCHASED (72,518) (72,518)
AMORTIZATION OF UNEARNED
COMPENSATION 10,841 37,862 48,703
----------- ----------- ---------- --------- ------------ ---------- ------------
- - -----------------------------
BALANCE, MARCH 31, 2000 $35,467,120 $29,622,951 $6,928,423 ($991,167) ($13,136,650) ($442,040) $57,448,637
- - -----------------------------
----------- ----------- ---------- --------- ------------ ---------- ------------
BALANCE, JANUARY 1, 1999 $32,966,700 $24,236,479 $4,866,852 ($188,375) ($364,710) ($659,054) $60,857,892
COMPREHENSIVE INCOME:
NET INCOME 2,248,765 2,248,765 $2,248,765
----------
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
UNREALIZED HOLDING LOSSES ARISING
DURING THE PERIOD (1,598,231)
RECLASSIFICATION ADJUSTMENT
FOR GAINS INCLUDED IN NET INCOME (34,109)
----------
TOTAL OTHER COMPREHENSIVE LOSS (1,632,340) (1,632,340)(1,632,340)
----------
TOTAL COMPREHENSIVE INCOME $616,425
-----------
CASH DIVIDEND
($0.11 PER SHARE) (784,981) (784,981)
SHARES ISSUED UNDER THE DIVIDEND
REINVESTMENT PLAN (13,485 SHARES
AT 95% OF MARKET VALUE) 67,425 140,783 208,208
STOCK OPTIONS EXERCISED 140,220 30,403 170,623
AMORTIZATION OF UNEARNED
COMPENSATION 21,057 43,857 64,914
------------ ----------- ---------- ---------- ---------- ---------- -----------
- - -----------------------------
BALANCE, MARCH 31, 1999 $33,174,345 $24,428,722 $6,330,636 ($188,375) ($1,997,050) ($615,197) $61,133,081
- - ----------------------------- ------------ ----------- ---------- ---------- ---------- ---------- -----------
</TABLE>
(4)
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - ----------------------------------------------------
FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
- - --------------------------------------------------------------------
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, 2000 and December 31, 1999, its
consolidated earnings for the three months ended March 31, 2000 and 1999 and
cash flows and changes in stockholders' equity and comprehensive income (loss)
for the three months ended March 31, 2000 and 1999. The results of operations
for the three months ended March 31, 2000 are not necessarily indicative of the
results of operations to be expected for the remainder of the year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's 1999 annual report on Form 10-K. Certain
amounts have been reclassified to conform with the current year's presentation.
STOCKHOLDERS' EQUITY
The Company has 250,000 shares of preferred stock authorized. No shares were
issued as of March 31, 2000.
Stock held in treasury by the Company is accounted for using the cost method,
which treats stock held in treasury as a reduction to total stockholders'
equity.
In connection with the rights offering in July 1996, the Bank's Employee Stock
Option Plan (the "ESOP") borrowed $1,200,000 from the Company to purchase
133,560 (adjusted for stock dividends and splits) of the Company's shares. As
such, the Company recognizes a deduction from stockholders' equity to reflect
the unearned compensation for the shares. The unearned ESOP shares, pledged as
collateral for the ESOP loan, are held in a suspense account and legally
released for allocation among the participants as principal and interest on the
loan is repaid annually. Shares are committed to be released monthly from the
suspense account, and the Company recognizes compensation expense equal to the
current market price of the common shares. As of March 31, 2000, 84,359 shares
have been released from the suspense account and are considered outstanding for
earnings per share computations.
During 1998, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires an entity to present, as a
component of comprehensive income, the amounts from transactions and other
events which currently are excluded from the statement of income and are
recorded directly to stockholders' equity. The adoption of SFAS No. 130, which
concerns disclosure standards only, did not have a material impact on the
Company's financial position and results of operations.
(5)
<PAGE>
EARNINGS PER SHARE
Basic earnings per common share is computed based on the weighted average number
of shares outstanding. Diluted earnings per share is computed based on the
weighted average number of shares outstanding, increased by the number of common
shares that are assumed to have been purchased with the proceeds from the
exercise of stock options (treasury stock method). These purchases were assumed
to have been made at the average market price of the common stock. The average
market price is based on the average closing bid price for the common stock.
Retroactive recognition has been given for stock dividends and splits, as well
as for the adoption of SFAS No.
128, "Earnings Per Share."
For the Three Months Ended March 31, 2000 1999
- - --------------------------------------- ---- ----
Net income $2,716,260 $2,248,765
Average dilutive stock options outstanding 268,481 273,572
Average exercise price per share $6.42 $8.56
Average market price - diluted basis $13.45 $17.27
Average common shares outstanding 6,974,808 6,918,443
Increase in shares due to exercise of options -
diluted basis 81,685 108,028
----------- ----------
Adjusted common shares outstanding - diluted 7,056,493 7,026,471
=========== ==========
Net income per share-basic $0.39 $0.33
=========== ==========
Net income per share-diluted $0.39 $0.32
=========== ==========
UNREALIZED NET GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE
Securities available for sale are stated at estimated fair 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.
LOANS
As a result of the Company's evaluation of impaired loans, an allowance for
possible loan losses of approximately $1,305,000 and $608,000 was established
for $5,359,378 and $3,981,474 of the total impaired loans at March 31, 2000 and
December 31, 1999, respectively, with the balance of impaired loans in 2000
requiring no specific allowance. The total average impaired loan balance was
$5,991,441 for the quarter ended March 31, 2000 and $6,581,068 for the year
ended December 31, 1999. Total impaired loans amounted to $5,893,378 and
$3,981,474 at March 31, 2000 and December 31, 1999, respectively. At March 31,
2000, all impaired loans are collateral-dependent loans, and are measured based
on the fair value of the underlying collateral. Total interest income recognized
for impaired, nonaccrual and restructured loans was $42,947 and $20,166 for the
three months ended March 31, 2000 and 1999, respectively.
(6)
<PAGE>
Activity in the allowance for possible loan losses for the three months ended
March 31, 2000 and 1999 is as follows:
2000 1999
---- ----
Balance, January 1 $7,106,627 $5,788,440
Provision charged to income 1,000,000 750,000
Charge-offs, net of recoveries of
$40,227 in 2000 and $136,961 in 1999 (753,738) (27,941)
----------- -----------
Balance, March 31 $7,352,889 $6,510,499
=========== ===========
(7)
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - 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, SB Portfolio Management Corp. ("SB Portfolio"), SB Financial
Services Corp. ("SB Financial"), New Hyde Park Leasing Corporation and SB ORE
Corp.
Material Changes in Financial Condition - Total assets of the Company amounted
to $927.7 million at March 31, 2000, a decrease off $22.2 million or 2.4% when
compared to December 31, 1999, primarily due to a $34.9 million decrease in cash
and cash equivalents. This decrease was slightly offset by a $14.6 million
increase in investments, primarily due to the activity of SB Portfolio. The loan
portfolio decreased less than 1.0% during the first quarter but management
anticipates continued expansion of the loan portfolio throughout the balance of
the year. The decrease in assets correlates to the decrease in deposits
described below.
At March 31, 2000, total deposits decreased by $19.8 million to $784.7 million
when compared to December 31, 1999. This decrease was primarily due to declines
of $12.1 million in certificates of deposit, predominantly certificates of
deposit over $100,000 ("Jumbo certificates of deposit") and $16.8 million in
savings deposits. Somewhat offsetting these reductions was a $9.1 million
increase in demand deposits. The Company also experienced a decrease in
short-term borrowings of $2.7 million during the first quarter. Management
expects higher time deposit balances in the second quarter due to a retail
certificate of deposit promotion that began in April. In addition, core deposit
balances are also expected to grow as a result of anticipated branch openings
during the second half of 2000.
Average assets for the first quarter of 2000 were up by $161.4 million or 21.2%
to $922.1 million from the comparable 1999 period. Sources of asset expansion
included a $110.9 million or 41.0% average increase in securities available for
sale, primarily taxable Agency securities, and an increase in average commercial
loans and mortgages of approximately $56.0 million or 14.0%. Total growth in the
loan portfolio was up on average $57.8 million or 13.6%. Funding this growth
were increases in demand deposits, money fund accounts and Jumbo certificates of
deposit. Average borrowed funds, primarily securities sold under agreements to
repurchase, increased by $1.7 million during the first quarter of 2000, compared
to 1999. The net result of these activities was a shift in the mix of the
Company's balance sheet that yielded a 38 basis point narrowing of the first
quarter net interest margin to 4.23%. Management anticipates that growth in
loans during the balance of 2000 coupled with a continued increase in core
deposit balances will serve to widen the net interest rate spread during the
last three quarters of the year.
The Company's capacity to grow its assets and earnings stems, in part, from the
significance of its capital strength. The Company strives to maintain an optimal
level of capital, commensurate with
(8)
<PAGE>
its risk profile, on which an attractive rate of return to stockholders will be
realized over both the short and long term, while serving the needs of
depositors, creditors and regulators. In determining an optimal capital level,
the Company also considers the capital levels of its peers and the evaluations
of its primary regulators. At March 31, 2000, management believes that the
Company and the Bank meet all capital adequacy requirements to which they are
subject. The Bank's capital adequacy ratios are 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). Total stockholders' equity amounted to $57.4 million at March
31, 2000, a decrease of $3.7 million or 6.0% versus the comparable 1999 date.
Excluding valuations related to SFAS No. 115 at March 31, 2000 and 1999, total
stockholders' equity grew at a year-to-year rate of 11.8%. 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.
The following table (2-1) summarizes the Company's capital ratios as of March
31, 2000 and compares them to current regulatory guidelines and December 31 and
March 31, 1999 actual results.
TABLE 2-1
Tier I capital/ Total Capital/
Tier I Risk-Weighted Risk-Weighted
Leverage Assets Assets
Regulatory Minimum 3.00%-4.00% 4.00% 8.00%
Ratios as of:
March 31, 2000 7.45% 12.07% 13.32%
December 31, 1999 7.02% 11.78% 13.01%
March 31, 1999 8.22% 12.75% 14.00%
Regulatory Criteria for
a "Well Capitalized"
Institution 5.00% 6.00% 10.00%
Liquidity management is a fundamental component of the Company's business
strategy. The objective of liquidity management is to assure the ability of the
Company and its subsidiary to meet their financial obligations. These
obligations include the withdrawal of deposits on demand or at their contractual
maturity, the repayment of borrowings as they mature, the ability to fund new
and existing loan commitments and to take advantage of business opportunities as
they arise. Liquidity is composed of the maintenance of a strong base of core
customer funds, maturing short-term assets, the ability to sell marketable
securities and access to lines of credit and the capital markets. Liquidity at
the Company is measured and monitored daily, thereby allowing management to
better understand and react to emerging balance sheet trends. After assessing
actual and projected cash flow needs, management seeks to obtain funding at the
most economical cost to the Company.
(9)
<PAGE>
Throughout the first quarter of 2000, the Company's liquidity position remained
stable and well within acceptable industry standards. During the first quarter
of 2000, paydowns on mortgage-backed securities and loans provided a source of
readily available funds to meet general liquidity needs. In addition, at March
31, 2000, the Company had access to $35.4 million in Federal Home Loan Bank
lines of credit for overnight or term borrowings with maturities of up to thirty
years. The Company also had $6.5 million in formal and $10.0 million in informal
lines of credit extended by correspondent banks to be utilized, if needed, for
short-term funding purposes as well as approximately $6.0 million in securities
available to be pledged to secure repurchase agreements or other borrowings at
March 31, 2000.
Material Changes in Results of Operations - Despite a 33% increase in the
provision for loan losses during 2000 versus 1999, net income for the three
months ended March 31, 2000 was $2.7 million, a 20.8% improvement over the
comparable 1999 period. The higher level of earnings in 2000 resulted from 10.5%
and 80.0% improvements in net interest income and noninterest income,
respectively, coupled with a lower effective income tax rate. Somewhat
offsetting these improvements were increases in total operating expenses and net
security losses during the first quarter of 2000.
The increase in net interest income, up $900 thousand to $9.4 million, resulted
from an expanded interest-earning asset base, principally commercial loans and
mortgages, and an increase in the prime rate (9.00% in March 2000 versus 7.75%
in March 1999.) The Company's average loan portfolio grew by $57.8 million or
13.6% compared to the first quarter of 1999, with $56 million attributable to
increases in commercial loans and mortgages. The strength of the Long Island
economy and the ongoing consolidation of the local banking market continue to
provide opportunity for the Company to increase the loan portfolio. The Company,
offering superior service and response time coupled with competitive product
pricing, has been able to steadily improve its market share through conservative
underwriting and credit standards. Products such as the Small Business Line of
Credit have been extremely well received by the local business community and are
generating loan volume and creating new cross sell opportunities for the
Company's full range of deposit and credit products. In addition, management has
added full time staff who will concentrate on the marketing and sales efforts of
new and existing retail products. Management of the Company has also targeted
the Suffolk and Queens County markets as the most obvious candidates for
expansion of the loan portfolio during 2000.
The Company's investment portfolio expanded, on average, by 41.0% in 2000 versus
1999, primarily through growth in callable Government agency securities (up on
average $84.5 million or 40.0%) and local municipal securities (up on average
$62.8 million). A decrease in mortgage-backed securities of $17.2 million and a
$20.6 million increase in unrealized losses offset the net increase in the
portfolio. Management of the Company continues to be an active purchaser of
agency securities due to their attractive yields and their pledgeability to
secure municipal deposits.
Other income increased by 45.7% in the first quarter of 2000 due to an increase
in service charges on deposit accounts. Excluding the impact of securities
transactions, other income increased by
(10)
<PAGE>
80.0% in 2000. Annuity sales, wire transfer fees and ATM fees were the primary
drivers behind this growth. Management expects that other income will grow at a
somewhat slower rate during the balance of 2000 when compared to last year's
results. Improved deposit service and return item charges, growth in annuity
sales and wire transfer fees and the imposition of an ATM surcharge on
non-customers are all expected to contribute to this growth.
Total operating expenses rose by 6.6% during the first quarter of 2000, mainly
due to increases in salaries and employee benefits arising from staff expansion
in product support areas offset by slight decreases in miscellaneous other
operating expenses. There were no expenses related to Y2K compliance during the
first quarter 2000.
The increase in operating expenses during the first quarter of 2000 was offset
by an increase in net revenue, resulting in a lower operating efficiency ratio
(total operating expenses as a percentage of fully taxable equivalent net
interest revenue, excluding securities transactions). The 2000 efficiency ratio
decreased to 50.0% from 54.5% a year ago. The Company's other primary measure of
expense control, the ratio of total operating expenses to average total assets,
decreased during the first three months of 2000 to 2.31% from a level of 2.65%
in 1999. This ratio places the Company in the top 15% of its peer group for this
efficiency measure. It continues to be the Company's stated goal to reduce each
of these ratios as part of its efforts to improve efficiencies and, ultimately,
stockholder value.
Nonperforming assets (defined by the Company as nonaccrual loans and other real
estate owned) totaled $6.2 million at March 31, 2000, an increase from $5.2
million at December 31, 1999 and $5.9 million at the comparable 1999 date. As of
March 31, 2000, restructured, accruing loans declined by $91 thousand. Although
classified as nonperforming for reporting purposes, restructured loans continue
to accrue and pay interest in accordance with their revised terms. Loans 90 days
or more past due and still accruing interest increased by $357 thousand when
compared to year-end 1999.
The allowance for possible loan losses amounted to $7.4 million or 1.5% of total
loans at March 31, 2000 versus $6.5 million and 1.49%, respectively, at the
comparable 1999 date. The allowance for possible loan losses as a percentage of
nonaccrual loans, restructured and accruing loans and loans 90 days or more past
due and still accruing improved to 106.5% at March 31, 2000 from 60.8% at March
31, 1999. This is down slightly from 126.5% at December 31, 1999. The higher
2000 provision for possible loan losses during the first quarter reflects the
increase in nonperforming loans at March 31, 2000. A further review of the
Company's nonperforming assets may be found in Table 2-3 following this
analysis.
(11)
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
===============================================================================
MARCH 31, 2000
- - -----------------
TABLE 2-2 LIQUIDITY AND INTEREST RATE SENSITIVITY
- - ----------------- ===============================================================================
<CAPTION>
==================================================================
SENSITIVITY TIME HORIZON
($ IN THOUSANDS)
- - --------------------------------------------------------- Over Noninterest
INTEREST - SENSITIVE ASSETS : 1) 0-6 Months 6-12 Months 1-5 Years 5 Years Sensitive Total
- - --------------------------------------------------------- ========== =========== ========= ========= =========== =========
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income) 2) $ 310,746 $ 14,270 $ 97,941 $ 58,282 $ 6,213 $ 487,452
Federal Funds Sold 4,000 - - - - 4,000
Securities Held to Maturity 242 - 276 - - 518
Securities Available for Sale 3) 68,659 33,557 38,190 267,183 4,286 411,875
--------- --------- --------- --------- --------- ---------
Total Interest-Earning Assets 383,647 47,827 136,407 325,465 10,499 903,845
Unrealized Net Loss on Securities Available for Sale (20,399) - - - - (20,399)
Cash and Due from Banks 25,553 - - - - 25,553
All Other Assets 7) 6,632 2,638 - - 9,385 18,655
--------- --------- --------- --------- --------- ---------
Total Assets $ 395,433 $ 50,465 $ 136,407 $ 325,465 $ 19,884 $ 927,654
--------- --------- --------- --------- --------- ---------
- - ---------------------------------------------------------
INTEREST - SENSITIVE LIABILITIES : 1)
- - ---------------------------------------------------------
Savings Accounts 4) $ 4,982 $ 4,982 $ 39,859 $ 49,824 $ - $ 99,647
Money Fund and Now Accounts 5) 39,535 4,712 37,700 - - 81,947
Time Deposits 6) 415,776 24,808 19,883 549 - 461,016
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Deposits 460,293 34,502 97,442 50,373 - 642,610
Securities Sold Under Agreements to Repurchase,
Federal Funds Purchased, and Other Borrowings 80,635 - - - - 80,635
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Liabilities 540,928 34,502 97,442 50,373 - 723,245
All Other Liabilities, Equity and Demand Deposits 7) 3,745 1,113 57 - 199,494 204,409
--------- --------- --------- --------- --------- ---------
Total Liabilities and Equity $ 544,673 $ 35,615 $ 97,499 $ 50,373 $ 199,494 $ 927,654
--------- --------- --------- --------- --------- ---------
Cumulative Interest-Sensitivity Gap 8) ($ 157,281) ($ 143,956)($ 104,991) $ 170,101 $ 180,600
Cumulative Interest-Sensitivity Ratio 9) 70.9% 75.0% 84.4% 123.5% 125.0%
Cumulative Interest-Sensitivity Gap
As a % of Total Assets (17.0%) (15.5%) (11.3%) 18.3% 19.5%
<FN>
1) Allocations to specific interest sensitivity periods are based on the
earlier of the repricing or maturity date.
2) Nonaccrual loans are shown in the 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 at a rate of 10% per year over a
ten-year period based upon the nature of their historically stable core
deposit relationships.
5) Money Fund and NOW accounts of individuals, partnerships and corporations
are assumed to decline at a rate of 20% per year over a five-year period
based upon the nature of their historically stable core deposit
relationships. Money Fund and NOW accounts of municipalities are included
in the 0 - 6 months category.
6) Reflected as maturing in each instrument's period of contractual maturity.
7) Other Assets and Liabilities are shown according to payment schedule or a
reasonable estimate thereof.
8) Total interest-earning assets minus total interest-bearing liabilities.
9) Total interest-earning assets as a percentage of total interest bearing
liabilities.
</FN>
</TABLE>
(12)
<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 POSSIBLE LOAN LOSSES
MARCH 31, 2000 VERSUS DECEMBER 31, 1999 AND MARCH 31, 1999
(DOLLARS IN THOUSANDS)
- - -----------------------------------------------------------------------------
NONPERFORMING ASSETS BY TYPE: PERIOD ENDED:
----------------------------------
3/31/00 12/31/99 3/31/99
--------- ---------- ---------
NONACCRUAL LOANS $6,213 (1) $5,194 (1) $5,171
OTHER REAL ESTATE OWNED - - 704
-------- ---------- ---------
TOTAL NONPERFORMING ASSETS $6,213 $5,194 $5,875
-------- ---------- ---------
RESTRUCTURED, ACCRUING LOANS $ 331 $ 422 $ 492
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING $ 360 $ 3 $5,039 (1)
GROSS LOANS OUTSTANDING $487,452 $488,948 $437,513
TOTAL STOCKHOLDERS' EQUITY $57,449 $56,103 $61,133
ANALYSIS OF THE ALLOWANCE FOR QUARTER ENDED:
POSSIBLE LOAN LOSSES: ----------------------------------
3/31/00 12/31/99 3/31/99
--------- ---------- ---------
BEGINNING BALANCE $7,107 $6,961 $5,788
PROVISION 1,000 750 750
NET CHARGE-OFFS (754) (604) (28)
--------- ---------- ---------
ENDING BALANCE $7,353 $7,107 $6,510
--------- ---------- ---------
KEY RATIOS AT PERIOD-END:
ALLOWANCE AS A % OF TOTAL LOANS 1.51% 1.45% 1.49%
NONACCRUAL LOANS AS A % OF TOTAL LOANS 1.27% 1.06% 1.18%
NONPERFORMING ASSETS (2) AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE OWNED 1.27% 1.06% 1.34%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS
A % OF NONACCRUAL LOANS 118.35% 136.83% 125.89%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS A %
OF NONACCRUAL LOANS, RESTRUCTURED,
ACCRUING LOANS AND LOANS 90 DAYS OR
MORE PAST DUE AND STILL ACCRUING 106.50% 126.48% 60.83%
(1) INCLUDES ONE CREDIT TOTALING $3.4 MILLION AT MARCH 31, 2000, $3.5 MILLION
AT DECEMBER 31, 1999 AND $5.0 MILLION AT MARCH 31, 1999, WHICH IS
COLLATERALIZED BY COMMERCIAL REAL ESTATE WITH A CURRENT APPRAISED
VALUE IN EXCESS OF THE CARRYING VALUE OF THE CREDIT.
(2) EXCLUDES RESTRUCTURED, ACCRUING LOANS AND LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING INTEREST.
(13)
<PAGE>
PART II
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
On March 8, 2000, the Company filed a report on Form 8-K indicating that on
February 29, 2000, the Company's Board of Directors authorized an increase in
its stock repurchase program under which the Company may now buy up to 500,000
shares of its common stock. The Board had previously authorized the repurchase
of up to 200,000 shares at its November 1998 meeting. The repurchases may be
made from time to time as market conditions permit, at prevailing prices on the
open market. The program may be discontinued at any time. State Bancorp, Inc.
currently has 7.0 million shares of common stock outstanding.
(14)
<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.
5/15/00 s/Daniel T. Rowe
- - -------- -------------------------
Date Daniel T. Rowe, President
5/15/00 s/Brian K. Finneran
- - -------- ----------------------------
Date Brian K. Finneran, Secretary
(Principal Financial Officer)
(15)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000723458
<NAME> STATE BANCORP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 25,220,291
<INT-BEARING-DEPOSITS> 332,755
<FED-FUNDS-SOLD> 4,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 411,874,953
<INVESTMENTS-CARRYING> 517,600
<INVESTMENTS-MARKET> 516,119
<LOANS> 487,452,416
<ALLOWANCE> 7,352,889
<TOTAL-ASSETS> 927,653,771
<DEPOSITS> 784,655,129
<SHORT-TERM> 80,635,000
<LIABILITIES-OTHER> 4,915,005
<LONG-TERM> 0
0
0
<COMMON> 35,467,120
<OTHER-SE> 21,981,517
<TOTAL-LIABILITIES-AND-EQUITY> 927,653,771
<INTEREST-LOAN> 11,373,623
<INTEREST-INVEST> 6,056,841
<INTEREST-OTHER> 168,321
<INTEREST-TOTAL> 17,598,785
<INTEREST-DEPOSIT> 7,518,644
<INTEREST-EXPENSE> 8,207,229
<INTEREST-INCOME-NET> 9,391,556
<LOAN-LOSSES> 1,000,000
<SECURITIES-GAINS> (88,506)
<EXPENSE-OTHER> 5,304,136
<INCOME-PRETAX> 3,812,323
<INCOME-PRE-EXTRAORDINARY> 2,716,260
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,716,260
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 7.97
<LOANS-NON> 6,213,062
<LOANS-PAST> 360,015
<LOANS-TROUBLED> 330,906
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,106,627
<CHARGE-OFFS> 793,965
<RECOVERIES> 40,227
<ALLOWANCE-CLOSE> 7,352,889
<ALLOWANCE-DOMESTIC> 7,908,406
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (555,517)
</TABLE>
