LEGAL PROCEEDINGS

6 Months Ended

Jun. 30, 2011

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

6.  LEGAL PROCEEDINGS

A case was filed on May 6, 2011 in the Supreme Court of the State of New York, Nassau County, on behalf of a putative class of the Company’s stockholders against the Company, the Company’s directors and Valley challenging the merger of the Company into Valley (Edith K. Grossman v. State Bancorp, Inc., et al (No. 600469/2011)). The complaint alleges that the individual defendants, who are directors of the Company, breached their fiduciary duties of care, loyalty, good faith and independence owed to the stockholders of the Company, and that the Company and Valley aided and abetted the alleged fiduciary breaches. The complaint generally alleges that the individual defendants did not maximize stockholder value and agreed to transaction terms that limited their ability to pursue and accept competing offers for the Company, resulting in a “deficient sales process.” The complaint seeks, among other things, an order enjoining the defendants from proceeding with and consummating the transaction, and other equitable and monetary relief. On June 9, 2011, the defendants moved to dismiss the complaint.  That motion has not yet been decided.  On July 14, 2011, Plaintiff sought leave to amend the complaint to add allegations that the joint S-4 and proxy statement seeking approval for the merger had insufficient disclosures regarding projections and regarding Sandler O’Neill and Co.’s fairness opinion.  The court has not yet allowed the proposed amendment.  The Company, the individual defendants and Valley vigorously deny all of the claims and allegations. The Company’s Board of Directors believes that this is a typical meritless strike suit. The Company and the individual defendants intend to defend the claims vigorously.

The Company and the Bank are subject to legal proceedings and claims that arise in the ordinary course of business.  In the opinion of management, the amount of ultimate liability, if any, with respect to such matters will not materially affect future operations and will not have a material impact on the Company’s financial statements.