form8k_oct2007ex991.htm

State Bancorp, Inc. Reports Third Quarter Earnings

and Declares Cash Dividend of $0.15

Jericho, N.Y., October 24, 2007 - State Bancorp, Inc. (NASDAQ – STBC), parent company of State Bank of Long Island, today reported net income for the third quarter of 2007 of $3.1 million versus $2.4 million a year ago, representing an increase of 29.3%. Diluted earnings per common share were $0.22 in the third quarter of 2007 and $0.20 in the comparable 2006 period. The increase in third quarter net income in 2007 is primarily attributable to a $1.6 million reduction in operating expenses. Third quarter net income was impacted negatively by a reduction in net interest income resulting from a lower net interest margin in 2007 versus 2006. However, net interest margin improved by seven basis points to 3.89% in the third quarter of 2007 when compared to the second quarter of 2007. Year-to-date 2007 net income was $5.8 million, or $0.41 per diluted share, compared to $8.1 million or $0.71 per diluted share in 2006.

Third Quarter Performance Highlights

·	Average loans and leases outstanding increased by 5% to $1.0 billion versus the third quarter of 2006;

·	Average core deposits totaled $885 million or 67% of total deposits in the third quarter of 2007 versus $935 million or 65% of total deposits in the third quarter of 2006. Average demand deposits were $317 million in the third quarter of 2007 versus $321 million a year ago;

·	Non-accrual loans and leases totaled $8 million (0.8% of loans and leases outstanding) at September 30, 2007 versus $3 million (0.3% of loans and leases outstanding) at September 30, 2006 and $9 million (0.9% of loans and leases outstanding) at June 30, 2007;

·	$7 million in Watch List loans ($5 million after write-down), were reclassified as held for sale pending disposition at September 30, 2007;

·	Total operating expenses decreased by $1.6 million or 13.2% to $10.8 million in the third quarter of 2007 versus the third quarter of 2006;

Provision for loan and lease losses declined by $136 thousand (17.2%) in the third quarter of 2007 versus the third quarter of 2006. The provision for loan and lease losses increased by $26 thousand (4.1%) versus the second quarter of 2007 and decreased by $921 thousand (58.5%) versus the first quarter of 2007;

·	Net interest margin declined to 3.89% in the third quarter of 2007 from 4.05% in the comparable 2006 period but increased from 3.82% in the second quarter of 2007;

·	Returns on average assets and stockholders’ equity were 0.74% and 11.21%, respectively, in the third quarter of 2007 and 0.58% and 15.22% in 2006, respectively;

·	Tier I leverage capital ratio increased to 7.51% at September 30, 2007 versus 4.48% at September 30, 2006 and 7.06% at June 30, 2007.

Commenting on the third quarter results, President and CEO, Thomas M. O’Brien stated, “As noted in previous quarters, 2007 remains a transitional time for the Company as we reorganize our management team and implement strategies for future growth and development. This is evidenced by our year to date increase in operating expenses related to our previously disclosed Voluntary Exit Window Program. However, our third quarter performance reflects the initial results of initiatives recently implemented in order to achieve greater efficiency and profitability for the Company. Most unfortunately, the purported shareholder derivative action that commenced in July required the Company to incur an initial legal expense of $500 thousand in the third quarter. This additional expense somewhat masks a consistent improvement in our core operating efficiency. We will continue to strengthen our balance sheet and capital position by focusing on our core competencies of delivering high quality banking products and personalized service to small and middle-market businesses, professional service firms, and commercial real estate owners, developers and operators.

The banking industry remains challenged by economic pressures from the yield curve and most recently, the current subprime mortgage crisis. To date, the impact of this crisis on the Company’s loan portfolio has been minimal since, by policy, we do not engage in subprime lending. The softening of the local real estate market and the associated downward trend in the local economy have thus far impacted the Company’s loan portfolio to a limited extent. The Company’s securities portfolio contains no subprime structured debt, exotic structures or other hard to value instruments. At September 30, 2007, the market value of the securities portfolio represented 99.8% of book value thereby exhibiting virtually no depreciation. Additionally the Company’s liquidity remains strong as a result of our stable deposit base, ample borrowing capacity secured by liquid assets and other funding sources.

We remain fully focused on our strategy of delivering high quality service to our customers, building long term sustainable earnings, and creating value for our shareholders. Management continues to conduct an orderly review of each business unit and administrative support department to make certain that we are making the best use of our expense budget.”

Earnings Summary for the Quarter Ended September 30, 2007

Net interest income decreased by $336 thousand (down 2.2%) to $14.9 million in the third quarter of 2007 versus 2006 as the result of a 16 basis point decline in the Company’s net interest margin to 3.89% in 2007. Partially offsetting the narrower margin was a 2% increase in average interest-earning assets, primarily loans and leases. Growth in commercial loans, commercial mortgages, and leases resulted in a 5% increase in average loans and leases outstanding to $1.0 billion during the third quarter of 2007 versus 2006. The average investment portfolio declined by 2% to $517 million in the third quarter, principally due to a decline in government agency securities. Funding the overall growth in average interest-earning assets were increases in other temporary borrowings and stockholders equity of $142 million and $47 million, respectively. Other temporary borrowings consisted primarily of Federal Home Loan Bank overnight and short-term advances which are fully secured by marketable collateral. Average total deposits decreased by $108 million (8%) during the third quarter of 2007 primarily due to reductions in savings deposits and retail CDs. Average core deposit balances (demand, savings, money fund and super NOW deposits) declined by $50 million during the third quarter of 2007 to $885 million at an average cost of 1.91%.

The Company’s fully taxable equivalent (FTE) net interest margin narrowed to 3.89% in the third quarter of 2007 from 4.05% a year ago. This decline resulted from a 34 basis point increase in the Company’s cost of funds, principally due to competitive liability pricing pressure combined with a shift in the funding mix from core deposits to borrowings and CDs. This higher cost of funds was offset somewhat by an 18 basis point increase in the Company’s earning asset yield to a weighted average rate of 7.13% in the third quarter of 2007. The higher asset yield resulted primarily from the impact of higher rates in 2007 and growth in loans and leases from the comparable 2006 period. However, net interest margin compared to the second quarter of 2007 improved by seven basis points principally as the result of higher asset yields in the Company’s investment portfolio.

The provision for loan and lease losses decreased by $136 thousand or 17.2% during the third quarter of 2007 versus 2006.

Non-interest income decreased by $105 thousand or 7.4% in the third quarter of 2007 compared to the 2006 period. The reduction was due to a 20.4% decrease in service charges on deposits, primarily attributable to

reductions in deposit-related fees and overdraft charges resulting from a lower level of overdrafts in the third quarter of 2007.

Total operating expenses decreased by $1.6 million or 13.2% to $10.8 million during the third quarter of 2007 when compared to last year. The primary reasons for this decrease were reductions in legal expenses and salaries and other employee benefits of $850 thousand and $663 thousand, respectively. The reduction in legal expenses is primarily related to the settlement of the Island Mortgage Network (“IMN”) litigation in January 2007. The financial impact of the settlement was recorded by the Company during the fourth quarter of 2006. No IMN-related legal expenses were recorded in the third quarter of 2007. Expenses associated with an appeal of the January 2006 IMN trial verdict are included in the results for 2006 and account for the decrease in legal expenses in the third quarter year-to-year comparison. As reported in the Company’s Form 8-K filing with the SEC on July 24, 2007, the Company is a nominal defendant in a purported shareholder derivative lawsuit brought against certain directors and current and former executive officers. Third quarter 2007 legal expenses include $500 thousand in outside counsel fees relating to this matter. Salaries and other employee benefits decreased by 9.5% in the 2007 third quarter compared to the comparable 2006 period, reflecting in part expense reductions attributable to the previously announced Voluntary Exit Window program, which was completed in the second quarter of 2007. The reduction in salaries and other employee benefits was also impacted by a reserve reduction of $500 thousand in accrued 2007 executive incentive compensation expense, reflecting an anticipated reduction in awards for the 2007 calendar year. Occupancy expenses increased by 12.8% due to higher rental, utility, maintenance and building depreciation costs. Marketing and advertising expenses decreased by 15.8% primarily resulting from a reduction in TV/radio advertising. Credit and collection costs increased by 61.6% due to higher costs associated with loan collection efforts and increased credit report expenses. Other operating expenses increased by 1.9% to $1.5 million during the third quarter of 2007, due in part to the recording in 2006 of a real estate tax refund resulting from a successful certiorari proceeding.

Income tax expense increased by $646 thousand in the third quarter of 2007 versus the comparable period a year ago. The Company’s effective tax rate was 35.1% in the third quarter of 2007 and 30.0% in 2006.

Earnings Summary for the Nine months Ended September 30, 2007

Net income for the first nine months of 2007 was $5.8 million versus $8.1 million in 2006. A 4.1% reduction in net interest income, lower non-interest income and increases in the provision for loan and lease losses and total operating expenses were the primary factors causing the decline in 2007 year-to-date net income.

The $1.9 million reduction in net interest income was due to a 29 basis point decline in the Company’s net interest margin to 3.80% in 2007. The provision for loan and lease losses increased by $659 thousand in 2007 versus the comparable 2006 period as the result of higher net charge-offs and an increase in non-performing assets in 2007. Non-interest income decreased by 5.2% to $4.1 million, principally due to reductions in deposit service charges and other operating income. Total operating expenses grew by $382 thousand in the first nine months of 2007 compared with 2006. The growth was mainly due to increases in salaries and other employee benefits expenses of $3.7 million, other operating expenses of $439 thousand and occupancy expenses of $340 thousand. The increase in salaries and other employee benefits expenses is primarily attributable to the $3.1 million second quarter charge for the 2007 Voluntary Exit Window program. Substantially offsetting these increases was a reduction of $4.2 million in legal expenses, principally in connection with the IMN litigation. The Company’s effective tax rate was 33.0% and 31.1% in 2007 and 2006, respectively.

Allowance for Loan and Lease Losses

As of September 30, 2007, the Company’s allowance for loan and lease losses amounted to $15 million or 1.45% of period-end loans and leases outstanding. The allowance as a percentage of loans and leases outstanding was 1.66% at June 30, 2007, 1.67% at December 31, 2006 and 1.78% at September 30, 2006. The reduction in the allowance as a percentage of the total loan and lease portfolio at September 30, 2007 compared with prior periods is primarily due to charge-offs of classified watch list loans and loans that were transferred to loans held for sale in the third quarter of 2007. The allowance as a percentage of non-accrual loans and leases amounted to 191% at September 30, 2007 versus 192% at June 30, 2007 and 754% at December 31, 2006 and 549% at September 30, 2006. The decline in the reserve coverage ratio at September 30, 2007 from September 30, 2006 and December 31, 2006 is due to an increase in non-performing assets resulting primarily from the addition of one commercial loan relationship to non-accrual status in the first quarter of 2007.

Net charge-offs for the third quarter of 2007 and 2006 were $2.4 million and $275 thousand, respectively. As a percentage of average total loans and leases outstanding, these charge-off totals represented 0.96% and 0.11% in 2007 and 2006, respectively. Net charge-offs for the third quarter of 2007 include write-downs of classified watch list loans and loans that were transferred to loans held for sale. Based upon historical trends, inherent risk in the loan and lease portfolio, and the downward pressures the local economy is currently experiencing, the Company expects to record loan and lease charge-offs in future periods, which management believes has been adequately reserved for in the allowance for loan and lease losses reported at September 30, 2007.

Non-performing Assets

Non-performing assets are defined by the Company as non-accrual loans and leases and other real estate owned (“OREO”). Non-accrual loans and leases totaled $8 million (0.8% of loans and leases outstanding) at September 30, 2007, versus $2 million (0.2% of loans and leases outstanding) at December 31, 2006 and $3 million (0.3% of loans and leases outstanding) at September 30, 2006. The increase in non-accrual loans and leases at September 30, 2007 versus year–end 2006 and September 30, 2006 resulted from the addition of one commercial loan relationship to non-accrual status during the first quarter of 2007. While this long-term relationship had been on the Bank’s internal watch list for deteriorating credit conditions, the borrower abruptly ceased operations at the end of the first quarter of 2007 and subsequently filed for bankruptcy. The Bank is pursuing its secured claims through the bankruptcy court and expects to recover all remaining balance sheet receivables. The Company held no OREO at September 30, 2007, December 31, 2006 or September 30, 2006.

Capital

Total stockholders’ equity was $113 million at September 30, 2007 and $65 million at September 30, 2006. The increase in stockholders’ equity is primarily due to the Company’s sale of 2.25 million shares of its common stock in December 2006, which increased capital by $36 million. The Company currently has outstanding $20 million in trust preferred securities that qualify as Tier I capital. During the first nine months of 2007, the weighted average rate on the Company’s trust preferred securities was 8.53% versus 8.13% a year ago. The Company also has $10 million of 8.25% subordinated notes outstanding which qualify as Tier II capital.

The Company’s capital ratios exceed all regulatory requirements at September 30, 2007. State Bank of Long Island’s Tier I leverage, Tier I risk-weighted and total risk-weighted capital ratios were 7.88%, 10.83% and 12.06%, respectively, at September 30, 2007. Each of these ratios is in excess of the regulatory guidelines for a “well capitalized” institution, the highest regulatory capital category.

During the first three quarters of 2007, the Company declared two cash dividends on its common stock of $0.15 per share. The Company also announced in June a change to its cash dividend schedule to a quarterly declaration during the first month of each calendar quarter. Since the Company recorded a net loss in 2005 following the issuance of the IMN jury verdict, the quarterly cash dividend had been on an irregular schedule due to advance approvals required from the New York State Banking Department, the Bank’s primary regulator, for the Bank to pay cash dividends to the Company. Based on the new dividend schedule, the Board

of Directors of the Company declared a cash dividend of $0.15 per share at its October 23, 2007 meeting. The cash dividend will be paid on December 10, 2007 to stockholders of record on November 16, 2007.

The Company did not repurchase any of its common stock during the first nine months of 2007. Under the Board of Directors’ existing authorization, an additional 512,348 shares may be repurchased from time to time as conditions warrant. The Company does not presently anticipate repurchasing any of its shares in the immediate future.

Corporate Information

State Bancorp, Inc. (NASDAQ: STBC), is the holding company for State Bank of Long Island, the largest independent commercial bank headquartered on Long Island. In addition to its sixteen branch locations throughout Nassau, Suffolk and Queens Counties, the Bank owns Jericho, N.Y.-based Studebaker-Worthington Leasing Corp., a nationwide provider of business equipment leasing. The Bank also maintains a lending facility in Jericho. State Bank has built a reputation for providing high-quality personal service to meet the needs of commercial, small business, municipal and consumer markets throughout Long Island and Queens. The Company maintains a web site at www.statebankofli.com with corporate, investor and branch banking information.

Forward-Looking Statements and Risk Factors

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “is confident that,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements involve risk and uncertainty and a variety of factors that could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in: market interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, the quality and composition of the loan and lease or investment portfolios, demand for loan and lease products, demand for financial services in the Company’s primary trade area, litigation, tax and other regulatory matters, accounting principles and guidelines, other

STATE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)


	Three Months						Nine Months
	2007			2006			2007			2006
INTEREST INCOME:
Interest and fees on loans and leases	$	20,783,726		$	20,012,282		$	61,922,130		$	57,112,083
Federal funds sold and securities
purchased under agreements to resell		37,670			267,946			2,105,379			2,223,215
Securities held to maturity:
Taxable		-			95,439			80,541			320,752
Securities available for sale:
Taxable		6,258,452			5,758,882			18,125,460			17,360,912
Tax-exempt		130,937			92,069			394,089			384,011
Dividends		29,750			26,611			89,250			64,861
Dividends on Federal Home Loan Bank
and other restricted stock		231,510			18,673			328,164			86,937
Total interest income		27,472,045			26,271,902			83,045,013			77,552,771

INTEREST EXPENSE:
Deposits		9,719,597			10,137,429			32,494,896			28,832,113
Temporary borrowings		2,121,502			172,046			3,911,312			620,538
Subordinated notes		231,185			229,570			691,264			285,552
Junior subordinated debentures		467,192			463,987			1,381,565			1,321,207
Total interest expense		12,539,476			11,003,032			38,479,037			31,059,410

Net interest income		14,932,569			15,268,870			44,565,976			46,493,361
Provision for loan and lease losses		652,500			788,334			2,853,500			2,194,998
Net interest income after provision
for loan and lease losses		14,280,069			14,480,536			41,712,476			44,298,363

NON-INTEREST INCOME:
Service charges on deposit accounts		447,983			563,079			1,586,588			1,817,554
Net security losses		(15,442	)		(37,676	)		(49,891	)		(96,969	)
Income from bank owned life insurance		263,606			263,919			823,611			746,544
Other operating income		608,380			619,916			1,731,453			1,850,678
Total non-interest income		1,304,527			1,409,238			4,091,761			4,317,807
Income before operating expenses		15,584,596			15,889,774			45,804,237			48,616,170

OPERATING EXPENSES:
Salaries and other employee benefits		6,294,265			6,957,074			23,881,597			20,147,042
Occupancy		1,404,088			1,244,809			4,045,607			3,705,558
Equipment		282,876			300,171			935,831			907,299
Legal		525,645			1,375,225			1,006,436			5,233,316
Marketing and advertising		290,809			345,275			1,208,706			1,039,861
Credit and collection		250,699			155,168			755,659			528,714
Audit and assessment		279,125			626,897			855,967			1,185,410
Other operating expenses		1,504,253			1,475,990			4,522,923			4,083,581
Total operating expenses		10,831,760			12,480,609			37,212,726			36,830,781

INCOME BEFORE INCOME TAXES		4,752,836			3,409,165			8,591,511			11,785,389
PROVISION FOR INCOME TAXES		1,669,634			1,024,053			2,831,796			3,670,798

NET INCOME	$	3,083,202		$	2,385,112		$	5,759,715		$	8,114,591

STATE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2007 and 2006 (unaudited)


	2007			2006
ASSETS:
Cash and due from banks	$	53,109,741		$	41,645,560
Securities held to maturity (estimated fair value -
$6,363,562 in 2006)		-			6,365,934
Securities available for sale - at estimated fair value		528,634,049			527,243,575
Total securities		528,634,049			533,609,509
Federal Home Loan Bank and other restricted stock		11,788,643			3,283,343
Loans and leases (net of allowance for loan and lease losses
of $14,658,906 in 2007 and $16,916,598 in 2006)		994,418,163			935,799,797
Bank premises and equipment - net		5,929,457			6,131,788
Bank owned life insurance		28,714,627			27,626,479
Net deferred income taxes		23,034,276			38,505,501
Receivable - securities sales		-			5,016,850
Other assets		29,077,959			21,455,502
TOTAL ASSETS	$	1,674,706,915		$	1,613,074,329

LIABILITIES:
Deposits:
Demand	$	328,668,992		$	307,021,461
Savings		534,571,206			573,024,614
Time		408,390,353			470,493,701
Total deposits		1,271,630,551			1,350,539,776
Federal funds purchased		9,000,000			6,500,000
Other temporary borrowings		222,038,069			35,566,640
Subordinated notes		10,000,000			10,000,000
Junior subordinated debentures		20,620,000			20,620,000
Payable - securities purchases		-			10,001,152
Accrued legal expenses		1,500,000			78,019,886
Overnight sweep accounts payable, net		-			26,347,800
Other accrued expenses and liabilities		27,287,048			10,784,647
Total Liabilities		1,562,075,668			1,548,379,901

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized
250,000 shares; 0 shares issued		-			-
Common stock, $5.00 par value, authorized
20,000,000 shares; issued 14,931,152 shares in 2007
and 12,222,536 shares in 2006; outstanding 13,943,500
shares in 2007 and 11,234,884 shares in 2006		74,655,760			61,112,680
Surplus		85,964,828			58,147,644
Retained deficit		(30,537,167	)		(33,835,264	)
Treasury stock (987,652 shares in 2007 and 2006)		(16,646,426	)		(16,646,426	)
Accumulated other comprehensive loss
(net of taxes of ($530,613) in 2007 and ($2,256,547) in 2006)		(805,748	)		(4,084,206	)
Total Stockholders' Equity		112,631,247			64,694,428
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,674,706,915		$	1,613,074,329

STATE BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For the Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)
(dollars in thousands, except share and per share data)


	Three Months						Nine Months
	2007			2006			2007			2006
SELECTED AVERAGE BALANCES (1):
Total assets	$	1,643,146		$	1,629,840		$	1,691,598		$	1,644,368
Loans and leases - net of unearned income	$	1,003,747		$	951,922		$	999,929		$	926,351
Investment securities	$	516,884		$	529,816		$	518,053		$	535,254
Deposits	$	1,325,628		$	1,433,255		$	1,431,590		$	1,458,141
Stockholders' equity	$	109,079		$	62,173		$	107,717		$	59,746

FINANCIAL PERFORMANCE RATIOS:
Return on average assets		0.74	%		0.58	%		0.46	%		0.66	%
Return on average stockholders' equity		11.21	%		15.22	%		7.15	%		18.16	%
Net interest margin		3.89	%		4.05	%		3.80	%		4.09	%
Operating efficiency ratio		65.66	%		73.71	%		75.32	%		71.44	%

CAPITAL RATIOS:
Tier I leverage ratio		7.51	%		4.48	%		7.51	%		4.48	%
Tier I risk-based capital ratio		10.31	%		6.47	%		10.31	%		6.47	%
Total risk-based capital ratio		12.38	%		8.61	%		12.38	%		8.61	%

ASSET QUALITY SUMMARY:
Non-accrual loans and leases	$	7,673		$	3,079		$	7,673		$	3,079
Other real estate owned		-			-			-			-
Total non-performing assets	$	7,673		$	3,079		$	7,673		$	3,079
Non-accrual loans and leases/total loans
and leases		0.76	%		0.32	%		0.76	%		0.32	%
Allowance for loan and lease losses/non-
accrual loans and leases		191.05	%		549.42	%		191.05	%		549.42	%
Allowance for loan and lease losses/total
loans and leases		1.45	%		1.78	%		1.45	%		1.78	%
Net charge-offs	$	2,430		$	275		$	4,607		$	995
Net charge-offs (annualized)/average
loans and leases		0.96	%		0.11	%		0.62	%		0.14	%

COMMON SHARE DATA:
Average common shares outstanding (2)		13,820,383			11,190,828			13,688,170			11,133,770
Period-end common shares outstanding		13,943,500			11,234,884			13,943,500			11,234,884
Basic earnings per common share	$	0.22		$	0.21		$	0.42		$	0.73
Diluted earnings per common share	$	0.22		$	0.20		$	0.41		$	0.71
Book value per share	$	8.08		$	5.76		$	8.08		$	5.76
Cash dividends per share	$	0.15		$	0.15		$	0.30		$	0.30


(1) Weighted daily average balance for period noted.
(2) Amount used for earnings per common share computation.

STATE BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
For the Three Months Ended September 30, 2007 and 2006 (unaudited)
(dollars in thousands)


	2007								2006
	Average					Average			Average					Average
	Balance (1)		Interest			Yield/Cost			Balance (1)		Interest			Yield/Cost
ASSETS:
Interest-earning assets:
Securities (2)	$	516,884	$	6,455			4.95	%		529,816	$	6,003			4.50	%
Federal Home Loan Bank and other restricted stock		8,494		231			10.79			1,794		19			4.20
Federal funds sold		2		-			-			18,891		248			5.21
Securities purchased under agreements
to resell		2,989		37			4.91			1,522		20			5.21
Interest-bearing deposits		1,370		17			4.92			1,318		16			4.82
Loans and leases (3)		1,003,747		20,816			8.23			951,922		20,046			8.35
Total interest-earning assets		1,533,486	$	27,556			7.13	%		1,505,263	$	26,352			6.95	%
Non-interest-earning assets		109,660								124,577
Total Assets	$	1,643,146							$	1,629,840

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings deposits	$	567,816	$	4,270			2.98	%	$	613,572	$	4,175			2.70	%
Time deposits		440,431		5,450			4.91			498,208		5,962			4.75
Total savings and time deposits		1,008,247		9,720			3.82			1,111,780		10,137			3.62
Federal funds purchased		10,318		140			5.38			3,386		47			5.51
Other temporary borrowings		148,826		1,981			5.28			6,966		125			7.12
Subordinated notes		10,000		231			9.16			10,000		230			9.13
Junior subordinated debentures		20,620		467			8.99			20,620		464			8.93
Total interest-bearing liabilities		1,198,011	$	12,539			4.15	%		1,152,752	$	11,003			3.79	%
Demand deposits		317,381								321,475
Other liabilities		18,675								93,440
Total Liabilities		1,534,067								1,567,667
Stockholders' Equity		109,079								62,173
Total Liabilities and Stockholders' Equity	$	1,643,146							$	1,629,840
Net interest income/margin			$	15,017			3.89	%			$	15,349			4.05	%
Less tax-equivalent basis adjustment				(84	)							(80	)
Net interest income			$	14,933							$	15,269

(1) Weighted daily average balance for period noted.
(2) Interest on securities includes the effects of tax-equivalent basis adjustments, using a 34% tax rate. Tax-equivalent
basis adjustments were $52 and $47 in 2007 and 2006, respectively.
(3) Interest on loans and leases includes the effects of tax-equivalent basis adjustments, using a 34% tax rate. Tax-equivalent
basis adjustments were $32 and $33 in 2007 and 2006, respectively.

STATE BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
For the Nine Months Ended September 30, 2007 and 2006 (unaudited)
(dollars in thousands)


	2007								2006
	Average					Average			Average					Average
	Balance (1)		Interest			Yield/Cost			Balance (1)		Interest			Yield/Cost
ASSETS:
Interest-earning assets:
Securities (2)	$	518,053	$	18,797			4.85	%	$	535,254	$	18,251			4.56	%
Federal Home Loan Bank and other restricted stock		5,793		328			7.57			2,122		87			5.48
Federal funds sold		8,203		319			5.20			15,724		588			5.00
Securities purchased under agreements
to resell		45,110		1,786			5.29			46,778		1,635			4.67
Interest-bearing deposits		1,446		53			4.90			1,096		39			4.76
Loans and leases (3)		999,929		62,015			8.29			926,351		57,216			8.26
Total interest-earning assets		1,578,534	$	83,298			7.06	%		1,527,325	$	77,816			6.81	%
Non-interest-earning assets		113,064								117,043
Total Assets	$	1,691,598							$	1,644,368

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings deposits	$	610,143	$	13,871			3.04	%	$	659,720	$	12,925			2.62	%
Time deposits		503,215		18,624			4.95			473,294		15,907			4.49
Total savings and time deposits		1,113,358		32,495			3.90			1,133,014		28,832			3.40
Federal funds purchased		7,323		299			5.46			3,740		139			4.97
Other temporary borrowings		89,509		3,612			5.40			12,088		481			5.32
Subordinated notes		10,000		691			9.24			4,212		286			9.08
Junior subordinated debentures		20,620		1,382			8.96			20,620		1,321			8.57
Total interest-bearing liabilities		1,240,810	$	38,479			4.15	%		1,173,674	$	31,059			3.54	%
Demand deposits		318,232								325,127
Other liabilities		24,839								85,821
Total Liabilities		1,583,881								1,584,622
Stockholders' Equity		107,717								59,746
Total Liabilities and Stockholders' Equity	$	1,691,598							$	1,644,368
Net interest income/margin			$	44,819			3.80	%			$	46,757			4.09	%
Less tax-equivalent basis adjustment				(253	)							(264	)
Net interest income			$	44,566							$	46,493

(1) Weighted daily average balance for period noted.
(2) Interest on securities includes the effects of tax-equivalent basis adjustments, using a 34% tax rate. Tax-equivalent
basis adjustments were $160 in 2007 and 2006.
(3) Interest on loans and leases includes the effects of tax-equivalent basis adjustments, using a 34% tax rate. Tax-equivalent
basis adjustments were $93 and $104 in 2007 and 2006, respectively.