LEGAL PROCEEDINGS

9 Months Ended

Sep. 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 October 24, 2011, the parties entered into an agreement in principle to settle the action.  The agreement is set forth in a Memorandum of Understanding (“MOU”).  The defendants believe that no further disclosure other than what was set forth in the previous filing of the amended proxy statement-prospectus is required under applicable laws, but to avoid the costs, distraction and disruption of further litigation, the defendants have agreed, as part of the MOU and without admitting to the validity of any allegations made in the action, to make certain additional disclosures requested by the plaintiffs in the proxy statement-prospectus.  The proposed settlement is subject to, among other things, court approval, plaintiffs conducting confirmatory discovery to confirm the fairness and adequacy of the terms of the settlement and the disclosures relating to the proposed merger and the closing of the proposed merger.  On October 26, 2011, the Honorable Timothy S. Driscoll signed a Preliminary Approval Order with regard to the lawsuit and the MOU, among other things scheduling a hearing on the approval of the settlement by the court on November 29, 2011 at 9:30 a.m. in the Supreme Court of the State of New York in Mineola, New York.

The Company, the individual defendants and Valley deny any wrongdoing in connection with the proposed merger.

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.