State Bancorp, Inc. Reports Fourth Quarter and Full Year Earnings and Declares Cash Dividend of $0.15


JERICHO, N.Y., Jan. 30, 2008 (PRIME NEWSWIRE) -- State Bancorp, Inc. (Nasdaq:STBC), parent company of State Bank of Long Island, today reported earnings for the fourth quarter and year ended December 31, 2007. Net income for the fourth quarter of 2007 was $470 thousand versus earnings of $3.4 million a year ago. Diluted earnings per common share of $0.03 were recorded in the fourth quarter of 2007 and $0.29 in the comparable 2006 period. The decrease in fourth quarter net income was primarily attributable to a non-cash goodwill impairment accounting charge of $2.4 million, $1.4 million in additional legal expenses related to the previously disclosed purported shareholder derivative lawsuit and a $1.3 million increase in the provision for loan and lease losses, as well as the impact of a $12.1 million reversal of previously accrued legal expenses in the fourth quarter of 2006. Total operating expenses, excluding the goodwill impairment charge, the additional 2007 legal expenses and the 2006 reversal of legal expenses, decreased by $2.0 million in the fourth quarter of 2007 versus 2006. Fourth quarter 2007 results were also negatively impacted by a reduction in net interest income resulting from a lower level of average interest earning assets, primarily available for sale investment securities and short-term money market investments. Somewhat mitigating these factors was a reduction in the provision for income taxes of $12.5 million in the fourth quarter of 2007 and an increase in net interest margin to 3.87% from 3.78% a year ago. The substantial reduction in income tax expense in the fourth quarter of 2007 resulted primarily from the previously disclosed establishment of a $10 million reserve for a potential tax liability for New York State income taxes during the fourth quarter of 2006. Full year 2007 net income was $6.2 million, or $0.45 per diluted share, compared to $11.5 million or $1.00 per diluted share in 2006.

Performance Highlights



 * Increased Loans & Leases: Average loans and leases outstanding
   increased by 5% to $1.0 billion versus the fourth quarter of 2006;
 * Increased Core Deposits: Average core deposits totaled $973 million
   or 69% of total deposits in the fourth quarter of 2007 versus $971
   million or 61% of total deposits in the fourth quarter of 2006, and
   $885 million or 67% of total deposits in the third quarter of 2007.
   Average demand deposits were $324 million in the fourth quarter of
   2007 versus $323 million a year ago and $317 million in the third
   quarter of 2007;
 * Improved Net Interest Margin: Net interest margin increased to
   3.87% in the fourth quarter of 2007 from 3.78% in the fourth
   quarter of 2006 and declined nominally from 3.89% in the third
   quarter of 2007;
 * Decision to Exit Leasing Business:  A non-cash goodwill impairment
   accounting charge of $2.4 million related to a decision to sell
   substantially all the assets of the Company's leasing subsidiary
   was recorded in the fourth quarter of 2007;
 * Improved Operating Efficiency:  Total operating expenses for the
   fourth quarter of 2007 were $14.7 million compared to $796 thousand
   in the fourth quarter of 2006.  Total operating expenses for the
   fourth quarter of 2007 includes the $2.4 million non-cash goodwill
   impairment accounting charge and $1.4 million in additional legal
   fees related to the previously disclosed purported shareholder
   derivative lawsuit. Excluding those two amounts, the resulting run
   rate of approximately $10.9 million in fourth quarter 2007
   operating expenses compares favorably to total operating expenses
   of approximately $12.9 million in the fourth quarter of 2006, which
   excludes the impact of a $12.1 million legal expense credit
   realized at that time.
 * Increased Loan Loss Provision: Provision for loan and lease losses
   increased by $1.3 million in the fourth quarter of 2007 versus the
   fourth quarter of 2006 and by $1.0 million versus the third quarter
   of 2007;
 * Settlement of New York State Tax Audit:  In December 2007, the
   Company executed a closing agreement with the New York State Tax
   Department which constitutes a final and conclusive settlement of
   the previously reported audit covering the 1999 - 2001 period and
   all subsequent years through 2006.  The final settlement was for an
   amount less than the reserve previously accrued in the fourth
   quarter of 2006 and resulted in a reduction of the Company's fourth
   quarter 2007 provision for income taxes of approximately $450,000.
 * Asset Quality: Non-accrual loans and leases totaled $6 million or
   0.6% of loans and leases outstanding at December 31, 2007 versus $8
   million or 0.8% of loans and leases outstanding at September 30,
   2007 and $2 million or 0.2% of loans and leases outstanding at
   December 31, 2006;
 * Capital Strength: Tier I leverage capital ratio increased to 7.03%
   at December 31, 2007 versus 6.30% at December 31, 2006;
 * Performance Ratios: Returns on average assets and stockholders'
   equity were 0.11% and 1.64%, in the fourth quarter of 2007 and
   0.75% and 18.69% in the comparable 2006 period, respectively.

The Company recently concluded a comprehensive review of its wholly owned subsidiary Studebaker-Worthington Leasing Corp. After carefully assessing its available alternatives, the Company has made the strategic decision to exit the leasing business, and is in active discussions to sell Studebaker-Worthington to an out-of-state firm whose main focus is the equipment leasing business. The Company chose this course of action in order to significantly reduce its consolidated operating expenses, improve its operating efficiency ratio and to more effectively allocate capital resources to its core commercial lending and branch banking operations. As a result, the Company recorded a goodwill impairment charge of $2.4 million in the fourth quarter of 2007 in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142. This represents a non-cash accounting charge which has no impact on the Bank's regulatory capital ratios.

Commenting on the fourth quarter and full year 2007 results, President and CEO, Thomas M. O'Brien stated, "During the past year, we have made a series of significant improvements across the organization to comprehensively address the challenges that curtailed the Bank's strategic growth and profitability in recent years. We have added a number of highly skilled professionals in key management positions throughout the Bank to further strengthen our leadership team and significantly bolster our business expansion capabilities. Although much of 2007 centered on restructuring critical areas of the Bank, we believe these efforts have positioned us to successfully compete and will yield increasing market share and financial returns in 2008 and the years beyond. We have a highly entrepreneurial and energized workforce and a clear strategy to build on our past successes and to capitalize on the attractive opportunities ahead for us in our chosen markets.

"While our concerted efforts to make substantial improvements in our Company's operating effectiveness and marketing capabilities during the past twelve months have required financial investments and the realignment of resources, we believe we now have a solid foundation upon which we can effectively execute our strategic plans for growth. The economic forecast for 2008 remains very uncertain both nationally and in our region. While the risks of a downturn increased throughout the second half of 2007 and into 2008, each of the strategic actions that we have taken in 2007 should serve the Company well in the period ahead.

"As we pursue market opportunities to profitably build our core businesses, we will remain vigilant to identify and mitigate risks in the process. We have built a successful banking franchise without resorting to participation in high risk segments such as sub-prime lending or imprudently investing our balance sheet in volatile structured securities. The current economic climate has had a negative impact on the financial services sector and, despite the fact that State Bank has no exposure to the sub-prime lending business, the Company, like many others, has been affected by the overall weakened market conditions. It is difficult to predict when a more favorable market will return bank valuations to more traditional trading multiples. Notwithstanding the volatility in the equity markets, we remain diligent in upholding our prudent credit underwriting standards and will continue to dynamically build our franchise with an unwavering focus on developing and enhancing quality financial relationships within our core target markets.

"Our decision to divest the Studebaker-Worthington leasing subsidiary represents the final phase of our corporate restructuring and sets the stage for the Bank to redeploy the capital resources formerly committed to the leasing operation towards our core business competencies. This divestiture, expected to be completed late in the first quarter of 2008, will result in an annual cost savings to the Bank of approximately $3.0 million in cash operating expense. The resultant goodwill write-down of $2.4 million from the strategic decision to exit the leasing business and sell Studebaker-Worthington, while not a cash charge, was fully recognized in the fourth quarter of 2007 as prescribed by SFAS No. 142. This non-cash accounting charge has no impact on the Bank's capital ratios.

"The already disclosed purported shareholder derivative lawsuit surrounding the previously settled Island Mortgage litigation continues to represent a financial burden on our shareholders and required a commitment of additional legal expenses by the Bank in the fourth quarter of this year. The lawsuit is proceeding through the internal investigatory stage and while the Bank cannot offer any assurances on the anticipated time of its resolution, we are satisfied with the significant progress being made.

"We have aggressively realigned our organizational structure to more effectively pursue our business growth opportunities. Compared with the fourth quarter of 2006, our total full-time equivalent head count, including the impact of the proposed sale of Studebaker-Worthington, is projected to be down by 47 or 14%. We are more focused and more nimble to react to emerging opportunities in our market areas. We have also strengthened our Corporate Governance through the appointment of a new General Counsel, Chief Auditor, Comptroller, BSA Officer and Security Director. We have bolstered our Marketing and Planning functions with the appointment of a new Chief Marketing and Corporate Planning Officer. We have added seasoned commercial bankers to support our business expansion in the middle market and commercial real estate areas and to capture market share in the attractive Manhattan market. In the fourth quarter of this year we completed an exhaustive assessment of our technology and operational infrastructure and have appointed a new Chief Information Officer to introduce state of the art systems enhancements to support our expansion plans. I am very encouraged by the considerable organizational progress we made throughout 2007 and look forward to accelerating our strategic business initiatives in 2008 to improve both profitability and shareholder value. I greatly appreciate the patience and support of our shareholders and employees during this time."

Earnings Summary for the Quarter Ended December 31, 2007

Net income totaled $470 thousand during the fourth quarter of 2007 versus $3.4 million in the comparable 2006 period. Net interest income decreased by $144 thousand or 0.9% to $15.6 million in the fourth quarter of 2007 versus 2006 primarily as a result of a 3% reduction in interest-earning assets. The average investment portfolio decreased by 13% in 2007, principally due to an anticipated runoff of Government agency securities. Average money market investments also declined by 28%. Partially offsetting these reductions was growth in the average loan portfolio of 5% to $1.0 billion during the fourth quarter of 2007 versus 2006. Average total deposits decreased by $181 million or 11% during the fourth quarter of 2007, due to a $183 million or 30% reduction in time deposits resulting from the Company's strategic decision to permit the runoff of higher cost maturing retail CDs. Average core deposit balances (demand, savings, money fund and super NOW deposits), which have an average cost of 1.88%, increased by $2 million during the fourth quarter of 2007 to $973 million. The reduction in average total deposits was offset by increases in other temporary borrowings and stockholders equity of $138 million and $42 million, respectively. Other temporary borrowings consisted primarily of Federal Home Loan Bank overnight and short-term advances which are fully secured by marketable collateral.

The Company's net interest margin increased to 3.87% in the fourth quarter of 2007 from 3.78% a year ago. This increase resulted from a 12 basis point decrease in the Company's cost of funds. This reduction in cost of funds was offset somewhat by a 3 basis point decrease in the Company's earning asset yield to a weighted average rate of 6.90% in the fourth quarter of 2007. The lower asset yield resulted principally from a 41 basis point reduction in the yield on loans and leases offset in part by a 33 basis point increase in the yield on the securities portfolio.

The provision for loan and lease losses increased by $1.3 million in the fourth quarter of 2007 versus 2006 to $1.6 million. The increase in the provision is a result of higher net charge-offs and an increase in non- performing and classified assets in 2007 compared with 2006.

Non-interest income decreased by $89 thousand or 6.5% in the fourth quarter of 2007 compared to the 2006 period. The reduction was due to $169 thousand in net security losses recorded in 2007 versus $27 thousand in net gains recorded in 2006, combined with an 11.9% 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 fourth quarter of 2007. These reductions were partially offset by a 30% increase in other operating income resulting from growth in several categories most notably sweep account fees, financial products sales fees and merchant servicing fees.

Fourth quarter 2007 total operating expenses amounted to $14.7 million, including the previously mentioned $2.4 million goodwill impairment accounting charge and $1.4 million in legal expenses related to a purported shareholder derivative lawsuit brought against certain directors and former executive officers of the Company. As reported in a Form 8-K filing with the SEC on July 24, 2007, the Company is a nominal defendant in this action. Fourth quarter 2006 total operating expenses were $796 thousand, net of the impact of a $12.1 million reversal of previously accrued legal expenses in connection with the final settlement of the Island Mortgage Network ("IMN") litigation which occurred in January 2007. No IMN-related legal expenses were recorded in the fourth quarter of 2007. Somewhat offsetting the year over year increase in legal fees were reductions in marketing and advertising expenses and salaries and other employee benefits of $655 thousand and $425 thousand, respectively. Marketing and advertising expenses decreased by 93.2%, primarily the result of reductions in TV/ radio advertising and other corporate marketing programs. Salaries and other employee benefits decreased by 6.1% in the 2007 fourth quarter versus 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, as well as other net staff reductions. Occupancy expenses increased by 6.9% due to higher rental, utility, maintenance and building depreciation costs. Credit and collection expenses decreased by 50.9% due to lower costs associated with home equity closing fees. Equipment expenses increased by 28.5% due to higher depreciation costs.

Income tax expense decreased by $12.5 million in the fourth quarter of 2007 versus the comparable period a year ago. The substantial decrease in income tax expense in 2007 resulted from the previously disclosed establishment of a $10 million reserve during the fourth quarter of 2006 for a potential tax liability for New York State income taxes. In December 2007, the Company executed a closing agreement with the New York State Tax Department which constitutes a final and conclusive settlement of the previously reported audit covering the 1999-2001 period and all subsequent years through 2006. The final settlement was for an amount less than the reserve previously accrued and resulted in a reduction of the Company's fourth quarter 2007 provision for income taxes of approximately $450,000. The Company's effective tax rate was 18.1% in the fourth quarter of 2007 and 78.9% in the fourth quarter of 2006. The 2007 rate is substantially impacted by the non-deductible $2.4 million goodwill impairment accounting charge and the settlement with the New York State Tax Department. Excluding these items, the Company's effective tax rate was 21.0% in the fourth quarter of 2007.

Earnings Summary for the Year Ended December 31, 2007

Net income for 2007 was $6.2 million versus $11.5 million in 2006. The reduction in net income in 2007 compared with 2006 results from several factors, most notably a reduction in net interest income of $2.1 million (3.3%) to $60.2 million in 2007, combined with lower non-interest income and increases in the provision for loan and lease losses and total operating expenses, including the goodwill impairment charge. Partially offsetting these negative factors was a reduction in the provision for income taxes in 2007.

The reduction in net interest income was due to a 19 basis point decline in the Company's net interest margin to 3.82% in 2007.

Non-interest income decreased by 5.5% to $5.4 million, principally due to reductions in deposit service charges and an increase in net security losses, offset in part by increased earnings from bank owned life insurance.

The provision for loan and lease losses increased by $2.0 million in 2007 versus the comparable 2006 period as the result of higher net charge-offs and an increase in non-performing and classified assets in 2007.

Full year 2007 total operating expenses amounted to $51.9 million, including the goodwill impairment accounting charge of $2.4 million, $1.9 million in legal fees related to the purported shareholder derivative lawsuit and a $3.1 million charge attributable to the second quarter 2007 Voluntary Exit Window program. Full year 2006 total operating expenses were $37.6 million, including a $12.1 million reversal of previously accrued legal expenses related to the IMN litigation settlement.

Salaries and other employee benefits expenses increased by $3.3 million in 2007 versus 2006, largely due to the cost of the Voluntary Exit Window program. Occupancy expenses rose by 8.6% due to increases in rental, utility and building depreciation costs. Marketing expenses decreased by 27.9% resulting from a reduction in advertising and corporate marketing programs. Audit and assessment expenses declined by 19.6% as the result of a one-time FDIC deposit insurance assessment credit in 2007. Other operating expenses increased by 8.3% due to a real estate tax refund recorded in 2006 resulting from a successful certiorari proceeding. The Company's effective tax rate was 32.0% in 2007 and 58.7% in 2006.

The reduction in the effective tax rate in 2007 versus 2006 is substantially due to the impact of the $10 million reserve recorded in 2006 for the potential New York State income tax liability. The 2007 rate is also impacted by the non-deductible $2.4 million goodwill impairment accounting charge and the subsequent settlement with New York State. Excluding these items, the Company's effective tax rate was 29.9% in 2007.

Allowance for Loan and Lease Losses

As of December 31, 2007, the Company's allowance for loan and lease losses amounted to $15 million or 1.41% of period-end loans and leases outstanding. The allowance as a percentage of loans and leases outstanding was 1.45% at September 30, 2007 and 1.67% at December 31, 2006. The reduction in the allowance as a percentage of the total loan and lease portfolio at December 31, 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 254% at December 31, 2007 versus 191% at September 30, 2007 and 754% at December 31, 2006.

The decline in the reserve coverage ratio at December 31, 2007 from 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. The increase in the reserve coverage ratio at December 31, 2007 from September 30, 2007 is due to a reduction in non-performing assets resulting from the partial charge-off of the aforementioned commercial loan relationship and an increase in the provision for loan and lease losses recorded in the fourth quarter of 2007.

The Company recorded net loan and lease charge-offs in the fourth quarter of 2007 and 2006 of $1.6 million and $800 thousand, respectively. As a percentage of average total loans and leases outstanding, these charge-off totals represented 0.61% and 0.33% in 2007 and 2006, respectively. Net charge-offs for the fourth quarter of 2007 include write-downs of classified watch list loans that were non-performing. Based upon historical trends, inherent risk in the loan 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 have been adequately reserved for in the allowance for loan and lease losses reported at December 31, 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 $6 million or 0.6% of loans and leases outstanding at December 31, 2007, versus $8 million or 0.8% of loans and leases outstanding at September 30, 2007 and $2 million or 0.2% of loans and leases outstanding at December 31, 2006. The increase in non-accrual loans and leases at December 31, 2007 versus December 31, 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. In the fourth quarter of 2007, the Bank recorded a partial charge-off of this relationship. The Bank is pursuing its remaining secured claims through the bankruptcy court and expects to recover all remaining balance sheet receivables. The Company held no OREO at December 31, 2007, September 30, 2007 or December 31, 2006.

Capital

Total stockholders' equity was $114 million at December 31, 2007 compared to $104 million at December 31, 2006. The increase from 2006 is primarily due to net income earned in 2007 less dividends declared during the year. Also contributing to the growth in stockholders' equity in 2007 versus 2006 was an increase in accumulated other comprehensive income, net of deferred income taxes, related to an increase in the market value of the Company's investment securities portfolio in 2007. The Company currently has $20 million in outstanding trust preferred securities that qualify as Tier I capital. During 2007, the weighted average rate on the Company's trust preferred securities was 8.46% versus 8.24% 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 exceeded all regulatory requirements at December 31, 2007. State Bank of Long Island's Tier I leverage, Tier I risk-weighted and total risk-weighted capital ratios were 7.43%, 10.62% and 11.85%, respectively, at December 31, 2007. Each of these ratios is in excess of the regulatory guidelines for a "well capitalized" institution, the highest regulatory capital category.

During 2007, the Company declared three cash dividends on its common stock of $0.15 per share. In June 2007, the Company announced a change to its cash dividend schedule to a quarterly declaration during the first month of each calendar quarter. Based on the new dividend schedule, the Board of Directors of the Company declared a cash dividend of $0.15 per share at its January 29, 2008 meeting. The cash dividend will be paid on March 17, 2008 to stockholders of record on February 22, 2008.

The Company did not repurchase any of its common stock in 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 also maintains a lending operation 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 economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing and services and those risks detailed in the Company's periodic reports filed with the SEC. Investors are encouraged to access the Company's periodic reports filed with the SEC for financial and business information regarding the Company at www.statebankofli.com. The Company undertakes no obligation to publish revised events or circumstances after the date hereof.

Financial Highlights Follow



                   STATE BANCORP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME
   For the Three and Twelve Months Ended December 31, 2007 and 2006
                             (unaudited)


                         Three Months              Twelve Months
                   ---------------------------------------------------
                       2007         2006         2007         2006
 ---------------------------------------------------------------------
 INTEREST INCOME:
 Interest and fees
  on loans and
  leases           $ 20,567,279 $ 20,625,089 $ 82,489,409 $ 77,737,172
 Federal funds
  sold and
  securities
  purchased under
  agreements to
  resell              1,283,374    2,096,557    3,388,753    4,319,772
 Securities held to
  maturity:
  Taxable                    --       91,985       80,541      412,737
 Securities
  available for
  sale:
  Taxable             5,690,664    5,953,641   23,816,124   23,314,553
  Tax-exempt            104,872      116,606      498,961      500,617
  Dividends              29,750       31,000      119,000       95,861
  Dividends on
   Federal Home
   Loan Bank and
   other restricted
   stock                159,426       21,688      487,590      108,625
 ---------------------------------------------------------------------
 Total interest
  income             27,835,365   28,936,566  110,880,378  106,489,337
 ---------------------------------------------------------------------

 INTEREST EXPENSE:
 Deposits             9,759,612   12,398,063   42,254,508   41,230,176
 Temporary
  borrowings          1,805,049       99,182    5,716,361      719,720
 Subordinated
  notes                 231,185      230,212      922,449      515,764
 Junior
  subordinated
  debentures            440,114      465,958    1,821,679    1,787,165
 ---------------------------------------------------------------------
 Total interest
  expense            12,235,960   13,193,415   50,714,997   44,252,825
 ---------------------------------------------------------------------

 Net interest
  income             15,599,405   15,743,151   60,165,381   62,236,512
 Provision for loan
  and lease losses    1,610,000      295,000    4,463,500    2,489,998
 ---------------------------------------------------------------------
 Net interest income
  after provision
  for loan and
  lease losses       13,989,405   15,448,151   55,701,881   59,746,514
 ---------------------------------------------------------------------

 NON-INTEREST
  INCOME:
 Service charges on
  deposit accounts      512,109      581,438    2,098,697    2,398,992
 Net security
  (losses) gains       (168,716)      27,494     (218,607)     (69,475)
 Income from bank
  owned life
  insurance             291,992      264,537    1,115,603    1,011,081
 Other operating
  income                648,854      499,490    2,380,307    2,350,168
 ---------------------------------------------------------------------
 Total non-interest
  income              1,284,239    1,372,959    5,376,000    5,690,766
 ---------------------------------------------------------------------
 Income before
  operating
  expenses           15,273,644   16,821,110   61,077,881   65,437,280
 ---------------------------------------------------------------------

 OPERATING
  EXPENSES:
 Salaries and other
  employee benefits   6,522,832    6,947,488   30,404,429   27,094,530
 Occupancy            1,349,666    1,262,525    5,395,273    4,968,083
 Equipment              410,171      319,206    1,346,002    1,226,505
 Legal                1,731,464  (10,776,919)   2,737,900   (5,543,603)
 Marketing and
  advertising            48,030      703,480    1,256,736    1,743,341
 Credit and
  collection            147,831      300,807      903,490      829,521
 Audit and
  assessment            395,728      372,283    1,251,695    1,557,693
 Goodwill
  impairment          2,390,924           --    2,390,924           --
 Other operating
  expenses            1,703,489    1,666,818    6,226,412    5,750,399
 ---------------------------------------------------------------------
 Total operating
  expenses           14,700,135      795,688   51,912,861   37,626,469
 ---------------------------------------------------------------------

 INCOME BEFORE
  INCOME TAXES          573,509   16,025,422    9,165,020   27,810,811
 PROVISION FOR
  INCOME TAXES          103,746   12,646,134    2,935,542   16,316,932
 ---------------------------------------------------------------------

 NET INCOME        $    469,763 $  3,379,288 $  6,229,478 $ 11,493,879
 =====================================================================

                       STATE BANCORP, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                       December 31, 2007 and 2006 (unaudited)


                                                  2007            2006
 ---------------------------------------------------------------------
 ASSETS:
 Cash and due from banks               $    35,380,214 $    46,210,873
 Federal funds sold                                 --      29,000,000
 Securities purchased under agreements
  to resell                                 61,000,000     131,000,000
 ---------------------------------------------------------------------
 Total cash and cash equivalents            96,380,214     206,210,873
 Securities held to maturity (estimated
  fair value - $6,361,036 in 2006)                  --       6,372,080
 Securities available for sale - at
  estimated fair value                     401,229,235     511,408,685
 ---------------------------------------------------------------------
 Total securities                          401,229,235     517,780,765
 Federal Home Loan Bank and other
  restricted stock                           8,053,643       1,708,343
 Loans and leases (net of allowance for
  loan and lease losses of $14,704,864
  in 2007 and $16,411,925 in 2006)       1,026,304,532     967,312,849
 Bank premises and equipment - net           5,777,493       6,043,450
 Bank owned life insurance                  29,006,619      27,891,017
 Net deferred income taxes                  17,494,843      36,665,263
 Receivable - current income taxes          14,034,377              --
 Receivable - securities sales              14,822,820              --
 Other assets                               14,910,638      25,109,916
 ---------------------------------------------------------------------
 TOTAL ASSETS                          $ 1,628,014,414 $ 1,788,722,476
 =====================================================================

 LIABILITIES:
 Deposits:
  Demand                               $   332,464,460 $   316,618,448
  Savings                                  566,999,841     621,969,615
  Time                                     430,474,815     627,595,416
 ---------------------------------------------------------------------
 Total deposits                          1,329,939,116   1,566,183,479
 Other temporary borrowings                139,031,328          56,400
 Subordinated notes                         10,000,000      10,000,000
 Junior subordinated debentures             20,620,000      20,620,000
 Accrued legal expenses                        700,839      66,050,208
 Other accrued expenses and liabilities     14,085,463      21,671,879
 ---------------------------------------------------------------------
 Total Liabilities                       1,514,376,746   1,684,581,966
 ---------------------------------------------------------------------

 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
  14,996,348 shares in 2007 and
  14,604,203 shares in 2006;
  outstanding 14,008,696 shares in 2007
  and 13,616,551 shares in 2006             74,981,740      73,021,015
 Surplus                                    86,654,142      83,767,505
 Retained deficit                          (32,164,263)    (32,158,439)
 Treasury stock (987,652 shares in 2007
  and 2006)                                (16,646,426)    (16,646,426)
 Accumulated other comprehensive income
  (loss) (net of taxes of $357,564 in
  2007 and ($2,118,436) in 2006)               812,475      (3,843,145)
 ---------------------------------------------------------------------
 Total Stockholders' Equity                113,637,668     104,140,510
 ---------------------------------------------------------------------
 TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY                               $ 1,628,014,414 $ 1,788,722,476
 =====================================================================

                 STATE BANCORP, INC. AND SUBSIDIARIES
                       SELECTED FINANCIAL DATA
    For the Three and Twelve Months Ended December 31, 2007 and 2006
                             (unaudited)
      (dollars in thousands, except share and per share data)

                           Three Months           Twelve Months
                     ----------------------- -----------------------
                            2007        2006        2007        2006
                     ----------- ----------- ----------- -----------
 SELECTED AVERAGE
  BALANCES (1):
 Total assets        $ 1,718,162 $ 1,784,830 $ 1,698,295 $ 1,682,640
 Loans and leases -
  net of unearned
  income             $ 1,014,175 $   968,674 $ 1,003,507 $   937,021
 Investment
  securities         $   465,096 $   532,626 $   504,709 $   534,593
 Deposits            $ 1,406,271 $ 1,587,292 $ 1,425,209 $ 1,490,721
 Stockholders'
  equity             $   113,743 $    71,723 $   109,238 $    62,488

 FINANCIAL PERFORMANCE
  RATIOS:
 Return on average
  assets                    0.11%       0.75%       0.37%       0.68%
 Return on average
  stockholders' equity      1.64%      18.69%       5.70%      18.39%
 Net interest margin        3.87%       3.78%       3.82%       4.01%
 Operating efficiency
  ratio                    85.10%       4.60%      77.85%      54.64%

 CAPITAL RATIOS:
 Tier I leverage ratio      7.03%       6.30%       7.03%       6.30%
 Tier I risk-based
  capital ratio            10.04%       9.48%      10.04%       9.48%
 Total risk-based
  capital ratio            12.11%      11.58%      12.11%      11.58%

 ASSET QUALITY
  SUMMARY:
 Non-accrual loans
  and leases         $     5,792 $     2,177 $     5,792 $     2,177
 Other real estate
  owned                       --          --          --          --
                     ----------- ----------- ----------- -----------
  Total non-
   performing assets $     5,792 $     2,177 $     5,792 $     2,177
                     =========== =========== =========== ===========
 Non-accrual loans and
  leases/total loans
  and leases                0.56%       0.22%       0.56%       0.22%
 Allowance for loan
  and lease losses/
  non-accrual loans
  and leases              253.88%     753.88%     253.88%     753.88%
 Allowance for loan
  and lease losses/
  total loans and
  leases                    1.41%       1.67%       1.41%       1.67%
 Net charge-offs     $     1,564 $       800 $     6,171 $     1,795
 Net charge-offs
  (annualized)/average
  loans and leases          0.61%       0.33%       0.61%       0.19%

 COMMON SHARE DATA:
 Average common
  shares
  outstanding (2)     13,886,263  11,507,876  13,738,101  11,227,278
 Period-end common
  shares outstanding  14,008,696  13,616,551  14,008,696  13,616,551
 Basic earnings per
  common share       $      0.03 $      0.29 $      0.45 $      1.02
 Diluted earnings
  per common share   $      0.03 $      0.29 $      0.45 $      1.00
 Book value per
  share              $      8.11 $      7.65 $      8.11 $      7.65
 Cash dividends per
  share              $      0.15 $      0.15 $      0.45 $      0.45

 (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 December 31, 2007 and 2006 (unaudited)
                          (dollars in thousands)

                         2007                         2006
             ---------------------------  ---------------------------
                                 Average                      Average
               Average             Yield   Average              Yield
             Balance (1)  Interest /Cost  Balance (1)  Interest /Cost
             ---------------------------  ---------------------------
 ASSETS:
 Interest-
  earning
  assets:
 Securities
  (2)        $  465,096 $    5,824  4.97% $  532,626 $    6,226  4.64%
 Federal
  Home
  Loan Bank
  and other
  restricted
  stock           8,258        160  7.69       1,925         22  4.53
 Federal funds
  sold              620          6  3.84      23,560        308  5.19
 Securities
  purchased
  under
  agreements
  to resell     112,804      1,278  4.49     134,359      1,789  5.28
 Interest-
  bearing
  deposits        4,351         49  4.47       1,201         18  5.95
 Loans and
  leases (3)  1,014,175     20,590  8.05     968,674     20,657  8.46
             ---------------------------  ---------------------------
 Total
  interest-
  earning
  assets      1,605,304 $   27,907  6.90%  1,662,345 $   29,020  6.93%
             ---------------------------  ---------------------------
 Non-interest-
  earning
  assets        112,858                      122,485
             ----------                   ----------
 Total
  Assets     $1,718,162                   $1,784,830
             ==========                   ==========

 LIABILITIES
  AND
  STOCKHOLDERS'
  EQUITY:
 Interest-
  bearing
  liabilities:
 Savings
  deposits   $  649,464 $    4,615  2.82% $  648,035 $    4,675  2.86%
 Time
  deposits      432,933      5,145  4.71     616,416      7,723  4.97
             ---------------------------  ---------------------------
 Total
  savings
  and time
  deposits    1,082,397      9,760  3.58   1,264,451     12,398  3.89
             ---------------------------  ---------------------------
 Federal
  funds
  purchased       6,817         83  4.83         792         11  5.51
 Other
  temporary
  borrowings    143,584      1,722  4.76       5,362         89  6.59
 Subordinated
  notes          10,000        231  9.16      10,000        230  9.13
 Junior
  subordinated
  debentures     20,620        440  8.47      20,620        466  8.97
             ---------------------------  ---------------------------
 Total
  interest-
  bearing
  liabil-
  ities       1,263,418     12,236  3.84   1,301,225     13,194  4.02
             ---------------------------  ---------------------------
 Demand
  deposits      323,873                      322,841
 Other
  liabil-
  ities          17,128                       89,041
             ----------                   ----------
 Total
  Liabil-
  ities       1,604,419                    1,713,107
 Stockholders'
  Equity        113,743                       71,723
             ----------                   ----------
 Total
  Liabilities
  and
  Stockholders'
  Equity     $1,718,162                   $1,784,830
             ==========                   ==========
 Net interest
  income/
  margin                    15,671  3.87%                15,826  3.78%
                                    ====                         ====
 Less tax-
  equivalent
  basis
  adjustment                   (72)                         (83)
                        ----------                   ----------
 Net interest
  income                $   15,599                   $   15,743
                        ==========                   ==========

 (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 $49 and $51 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 $23 and $32 in 2007 and 2006,
     respectively.

                    STATE BANCORP, INC. AND SUBSIDIARIES
                       NET INTEREST INCOME ANALYSIS
   For the Twelve Months Ended December 31, 2007 and 2006 (unaudited)
                         (dollars in thousands)


                        2007                         2006
             ---------------------------  ---------------------------
                                 Average                      Average
               Average             Yield   Average              Yield
             Balance (1)  Interest /Cost  Balance (1)  Interest /Cost
             ---------------------------  ---------------------------
 ASSETS:
 Interest-
  earning
  assets:
 Securities
  (2)        $  504,709 $   24,621  4.88% $  534,593 $   24,478  4.58%
 Federal
  Home
  Loan Bank
  and other
  restricted
  stock           6,414        488  7.61       2,073        109  5.26
 Federal
  funds sold      6,292        325  5.17      17,699        896  5.06
 Securities
  purchased
  under
  agreements
  to resell      62,173      3,064  4.93      68,853      3,424  4.97
 Interest-
  bearing
  deposits        2,164        102  4.71       1,123         57  5.08
 Loans and
  leases (3)  1,003,507     82,605  8.23     937,021     77,873  8.31
             ---------------------------  ---------------------------
 Total
  interest-
  earning
  assets      1,585,259 $  111,205  7.01%  1,561,362 $  106,837  6.84%
             ---------------------------  ---------------------------
 Non-interest
  -earning
  assets        113,036                      121,278
             ----------                   ----------
 Total
  Assets     $1,698,295                   $1,682,640
             ==========                   ==========

 LIABILITIES
  AND
  STOCKHOLDERS'
  EQUITY:
 Interest-
  bearing
  liabil-
  ities:
 Savings
  deposits   $  620,054 $   18,486  2.98% $  656,802 $   17,600  2.68%
 Time
  deposits      485,500     23,769  4.90     509,368     23,630  4.64
             ---------------------------  ---------------------------
 Total
  savings
  and time
  deposits    1,105,554     42,255  3.82   1,166,170     41,230  3.54
             ---------------------------  ---------------------------
 Federal
  funds
  purchased       7,196        382  5.31       2,997        150  5.01
 Other
  temporary
  borrowings    103,138      5,334  5.17      10,393        570  5.48
 Subordinated
  notes          10,000        922  9.22       5,671        516  9.10
 Junior
  subordinated
  debentures     20,620      1,822  8.84      20,620      1,787  8.67
             ---------------------------  ---------------------------
 Total
  interest-
  bearing
  liabil-
  ities       1,246,508     50,715  4.07   1,205,851     44,253  3.67
             ---------------------------  ---------------------------
 Demand
  deposits      319,655                      324,551
 Other
  liabil-
  ities          22,894                       89,750
             ----------                   ----------
 Total
  Liabil-
  ities       1,589,057                    1,620,152
 Stockholders'
  Equity        109,238                       62,488
             ----------                   ----------
 Total
  Liabilities
  and
  Stockholders'
  Equity     $1,698,295                   $1,682,640
             ==========                   ==========
 Net interest
  income/
  margin                    60,490  3.82%                62,584  4.01%
                                    ====                         ====
 Less tax-
  equivalent
  basis
  adjustment                  (325)                        (347)
                        ----------                   ----------
 Net interest
  income                $   60,165                   $   62,237
                        ==========                   ==========

 (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 $209 and $211 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 $116 and $136 in 2007 and
     2006, respectively.


            

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