JERICHO, N.Y., April 13, 2011 (GLOBE NEWSWIRE) -- State Bancorp, Inc. (the "Company") (Nasdaq:STBC), parent company of State Bank of Long Island (the "Bank"), today reported first quarter 2011 net income of $3.0 million, or $0.15 per diluted common share, similar to the net income and earnings per share reported for the same quarter last year.
Several positive trends were evident this reporting period compared to the same quarter last year, most notably a $1.0 million year over year decline in operating expenses and a $350 thousand reduction in the 2011 provision for loan losses. Partially offsetting these improvements was a $1.4 million reduction in net interest income in 2011 versus 2010; however, the 2010 period included a loan fee of $600 thousand which was not repeated in 2011.
Commenting on the first quarter 2011 results, President and CEO Thomas M. O'Brien stated, "Our solid operating results this quarter represent a continuation of the tangible benefits from our timely strategic restructuring actions taken in 2008 and 2009 to enhance our balance sheet, reduce expenses and strengthen our earnings capacity. Consequently, our asset quality measures improved and recurring profitability has been attained.
"Although quality commercial loan demand remains tepid, we are experiencing an improving flow of loan originations within our middle market commercial loan portfolio. In fact, as of the end of this quarter, the outstandings in our commercial middle market loan portfolio now exceed the loan balances in our commercial real estate ("CRE") book, representing the successful efforts of the past few years to diversify away from an earlier heavier reliance on CRE.
"Core deposit funding continues to reflect our focus on commercial business relationships and now comprises 73% of our total deposit portfolio. Together with our disciplined approach to overall funding cost management, our increased core deposit base has contributed to the Company's enviable quarterly net interest margin of 4.17%. The Company's net loans to deposits ratio is now 84%.
"While some signs of modest economic recovery have emerged in recent quarters, the sustainability of any improvement remains uncertain as unemployment levels and the housing sector continue to exhibit weakness. Consequently, the management of credit quality and operating expenses remain areas of ongoing and diligent focus across the Company.
"As I have discussed in previous reports, I believe that we have aggressively identified and confronted a substantial proportion of the higher risks that existed in our credit portfolio. Non-accrual loans at the end of the first quarter were $12 million. The allowance for loan losses stands at 2.4% of the total loan portfolio and represents 231% of non-performing loans. The still suspect pace of economic recovery and the heightened risks inherent in lending in this environment remain causes for continued caution. Global issues are also affecting our domestic economy and resulting in elevated volatility in the financial markets. The aftermath of the devastation in Japan and the growing political unrest in the Middle East threaten international trade flows and are sending commodity prices skyward resulting in elevated costs for both U.S. consumers and businesses.
"We believe that our successful execution of vitally important strategic restructuring of the Company over the past few years is continuing to yield the positive results we had expected. Our strong capital position, solid core earnings and diligent cost management, combined with a highly energized and entrepreneurial team of bankers, provide us with a sound foundation from which to further capitalize on what we view as increasingly attractive opportunities for quality and profitable growth."
- Net Interest Margin: Net interest margin was 4.17% in the first quarter of 2011 versus 4.50% in the first quarter of 2010 and 4.04% in the fourth quarter of 2010.
- Capital: The Company's Tier I leverage capital ratio was 10.09% at March 31, 2011 versus 9.05% at March 31, 2010 and 9.53% at December 31, 2010. The Company's tangible common equity ratio (non-GAAP financial measure) was 7.60% at March 31, 2011 versus 7.10% at March 31, 2010 and 7.39% at December 31, 2010.
- Loan Loss Provision: The first quarter 2011 provision for loan losses decreased by $350 thousand to $1.9 million versus the first quarter of 2010 and decreased by $800 thousand versus the fourth quarter of 2010.
- Asset Quality: Total non-accrual loans increased to $12 million or 1.0% of loans outstanding at March 31, 2011 versus $6 million or 0.5% of loans outstanding at March 31, 2010 and declined by $3 million from $15 million or 1.3% of loans outstanding at December 31, 2010. Included in the non-accrual balances is one $5 million loan relationship which is involved in a bankruptcy, but which is current with respect to its payments. Total accruing loans delinquent 30 days or more declined to 2.30% of loans outstanding at March 31, 2011 versus 3.01% of loans outstanding at March 31, 2010 and virtually unchanged from 2.28% at December 31, 2010. Net loan charge-offs of $7.4 million were recorded in the first quarter of 2011 versus $5.4 million in the first quarter of 2010 and $2.1 million in the fourth quarter of 2010. During the first quarter of 2011, the Company sold or otherwise disposed of approximately $8 million in lower quality non-accrual loans while adding one new $4 million secured loan to non-accrual status. The Company held no other real estate owned during any of these reporting periods.
- Allowance for Loan Losses: The allowance for loan losses totaled $28 million at March 31, 2011, $26 million at March 31, 2010 and $33 million at December 31, 2010, representing 2.4%, 2.3%, and 2.9% of total loans, respectively, at such dates. The allowance for loan losses as a percentage of non-accrual loans was 231%, 473%, and 223% at March 31, 2011, March 31, 2010 and December 31, 2010, respectively.
- Operating Efficiency: Total operating expenses for the first quarter of 2011 decreased by 9.2% to $10.0 million from the $11.0 million reported in the first quarter of 2010 and increased by 7.5% versus the fourth quarter of 2010. The Company's first quarter operating efficiency ratio improved to 59.7% in 2011 from 61.1% in the comparable 2010 period. The Company's efficiency ratio was 52.0% in the fourth quarter of 2010.
- Loans: Loans outstanding at March 31, 2011 increased by 5% to $1.1 billion versus March 31, 2010 and were also up 1% versus December 31, 2010.
- Core Deposits: Core deposits totaled $977 million at March 31, 2011 versus $930 million at March 31, 2010 and $976 million at December 31, 2010. Core deposits represented 73%, 67% and 72% of total deposits at March 31, 2011, March 31, 2010 and December 31, 2010, respectively. Demand deposits were $376 million at March 31, 2011 versus $379 million at March 31, 2010 and $343 million at December 31, 2010, and represented 28%, 27% and 25% of total deposits at those respective dates.
- Performance Ratios: Return on average assets and return on average common stockholders' equity were 0.77% and 8.48%, respectively, in the first quarter of 2011 and 0.76% and 8.88%, respectively, in the comparable 2010 period. For the fourth quarter of 2010, return on average assets and return on average common stockholders' equity were 0.86% and 10.12%, respectively.
Earnings Summary for the Quarter Ended March 31, 2011
The Company recorded net income of $3.0 million during the first quarter of 2011, relatively unchanged from the comparable period last year. Compared to first quarter 2010, operating expenses declined $1.0 million and the provision for loan losses declined $350 thousand. Net interest income for the first quarter of 2011, however, decreased $1.4 million from the first quarter of 2010.
The lower level of net interest income in 2011 compared to 2010 resulted from a $13 million reduction in average interest-earning assets and a 33 basis point narrowing of the net interest margin in 2011 to 4.17%. The lower margin resulted principally from a 52 basis point reduction in the Company's earning asset yield due largely to a 114 basis point year over year reduction in the securities portfolio average yield. Somewhat offsetting the lower securities portfolio yield was a 20 basis point reduction in the average cost of total deposits, our primary funding source, in 2011.
The Company's first quarter 2011 average interest-earning asset yield was 4.79% versus 5.31% in the comparable 2010 period. The average yield on loans in the first quarter of 2011 was 5.37%, a decrease of 39 basis points from 5.76% a year ago. The $600 thousand loan fee received in 2010 contributed 23 basis points to the average loan yield in 2010. The reduction in the average yield on the Company's securities portfolio was principally due to continued paydowns of mortgage-backed securities with higher yields than those of the securities subsequently purchased, a reflection of the current low interest rate environment. The securities portfolio had an unrealized positive pre-tax mark to fair value of $4 million at March 31, 2011 and an estimated weighted average life of 3.9 years. The securities portfolio decreased by $73 million to $332 million at March 31, 2011 versus the comparable 2010 date and also decreased by $51 million from December 31, 2010.
The Company's average cost of interest-bearing liabilities declined by 25 basis points to 0.89% in the first quarter of 2011 versus 1.14% in the first quarter of 2010. The lower cost of funds resulted from growth in average savings account balances in 2011 coupled with the Company's ongoing management of deposit rates during the past year. Total deposits declined by $52 million to $1.3 billion at March 31, 2011 versus March 31, 2010 and declined by $10 million when compared to December 31, 2010, primarily due to maturity of higher rate jumbo time deposits coupled with a reduction in municipal account balances. The average cost of total deposits declined by 20 basis points in the first quarter of 2011 to 0.56% from 0.76% in 2010.
The provision for loan losses was $1.9 million in the first quarter of 2011, representing a decline of $350 thousand versus the comparable 2010 period.
Total non-interest income declined by $27 thousand or 2.3% in the first quarter of 2011 versus the comparable 2010 period principally due to reductions of $174 thousand in net gains on sales of securities and $42 thousand in income from bank owned life insurance. These were partially offset by a $197 thousand increase in other operating income attributable to higher overdraft, letter of credit and loan sourcing fees in 2011.
First quarter 2011 total operating expenses decreased by $1.0 million or 9.2% to $10.0 million compared to the first quarter of 2010. This decline resulted from reductions in several expense categories, most notably salaries and other employee benefits, marketing and advertising and other operating expenses. Salaries and other employee benefits declined by $130 thousand in the first quarter of 2011 versus 2010 primarily as the result of a reduction in the Company's defined contribution plan expense and its cash and equity incentive compensation costs. Other operating expenses declined by $513 thousand largely due to a 2010 expenditure of $248 thousand in professional loan valuation and legal services related to developing bids on two failed New York area banks which were competitively sold by the Federal Deposit Insurance Corporation ("FDIC"). Also contributing to the lower level of operating expenses in the first quarter of 2011 were year over year declines of $145 thousand in marketing and advertising costs, $101 thousand in credit and collection expenses, $69 thousand in legal expenses and $72 thousand in FDIC and New York State ("NYS") assessment fees.
The Company recorded income tax expense of $1.8 million in the first quarter of 2011 versus $1.9 million in the comparable period a year ago.
Non-accrual loans totaled $12 million or 1.0% of total loans outstanding at March 31, 2011 versus $6 million or 0.5% of total loans outstanding at March 31, 2010 and $15 million or 1.3% of total loans outstanding at December 31, 2010. The $6 million net increase in non-accrual loans at March 31, 2011 compared to March 31, 2010 resulted primarily from additions to non-accrual, partially offset by several strategic commercial loan sales, settlements and charge offs. The $3 million net decrease in non-accrual loans at March 31, 2011 compared to December 31, 2010 was primarily due to the strategic sale and settlement of three commercial loans totaling $8 million during the quarter, partially offset by the addition to non-accrual of one $4 million commercial mortgage loan. The allowance for loan losses as a percentage of total non-accrual loans amounted to 231% at March 31, 2011 versus 473% at March 31, 2010 and 223% at December 31, 2010.
Total accruing loans delinquent 30 days or more amounted to $26 million or 2.30% of loans outstanding at March 31, 2011 versus $33 million or 3.01% of loans outstanding at March 31, 2010 and $26 million or 2.28% of loans outstanding at December 31, 2010.
Total watch list loans (consisting of criticized loans, classified loans and those loans requiring special attention but not warranting categorization as either criticized or classified) totaled $145 million at March 31, 2011, $130 million at March 31, 2010 and $166 million at December 31, 2010. Classified loans were $63 million at March 31, 2011, $68 million at March 31, 2010 and $69 million at December 31, 2010. The allowance for loan losses as a percentage of total classified loans was 44%, 38% and 48%, respectively, at the same dates.
At March 31, 2011 and December 31, 2010, the Company had $27 million in troubled debt restructurings ("TDRs"), primarily consisting of two classified, partially secured commercial and industrial ("C&I") loans each with a principal balance of $10 million and a classified $6.5 million secured land loan in Roslyn, New York. The borrowers requested and were granted interest rate or other concessions. These credits have been on the Company's watch list since 2009 and 2008, respectively, are fully advanced and performing at March 31, 2011 in accordance with their revised terms. The Company had TDRs amounting to $433 thousand at March 31, 2010.
As of March 31, 2011, the Company's allowance for loan losses amounted to $28 million or 2.4% of period-end loans outstanding. The allowance as a percentage of loans outstanding was 2.3% at March 31, 2010 and 2.9% at December 31, 2010.
The Company recorded net loan charge-offs of $7.4 million in the first quarter of 2011 versus $5.4 million in the first quarter of 2010 and $2.1 million in the fourth quarter of 2010. The charge-offs recorded during the first quarter of 2011 were primarily related to the aforementioned strategic sale and settlement of three commercial loans totaling $8 million. Each of these loans involved lengthy workouts and protracted litigation with uncertain recovery results. In addition, partial charge-offs on two commercial contractor credits totaling $2 million and twelve smaller commercial and consumer credits were taken to reduce these loans to their estimated realizable values.
The Company has held no other real estate owned during any of the reporting periods herein.
Total stockholders' equity, inclusive of the preferred stock and common stock warrant issued to the U.S. Treasury under the Capital Purchase Program, was $157 million at March 31, 2011 compared to $152 million at March 31, 2010 and $155 million at December 31, 2010. The increase in stockholders' equity versus March 31, 2010 is largely reflective of net income retained in the past twelve months.
Cash dividends of $0.05 per share, totaling $841 thousand, were paid to the Company's stockholders in the first quarter of 2011.
The Company's return on average common stockholders' equity was 8.48% in the first quarter of 2011 versus 8.88% in 2010.
The Company has $20 million in outstanding trust preferred securities that qualify as Tier I capital. During the first quarter of 2011, the weighted average cost of the Company's trust preferred securities was 3.50% versus 3.46% a year ago.
The Bank's Tier I leverage, Tier I risk-weighted and total risk-weighted capital ratios were 10.04%, 12.45% and 13.71%, respectively, at March 31, 2011. Each of these ratios exceeds the regulatory guidelines for a "well capitalized" institution, the highest regulatory capital category.
The Company's capital ratios exceeded all regulatory requirements at March 31, 2011. The Company's tangible common equity to tangible assets ratio (non-GAAP financial measure) was 7.60% at March 31, 2011 versus 7.10% at March 31, 2010 and 7.39% at December 31, 2010.
The Company did not repurchase any of its common stock during the first quarter of 2011. The Company does not presently anticipate repurchasing any of its shares in the immediate future.
State Bancorp, Inc. is the holding company for State Bank of Long Island. In addition to its seventeen branches located in Nassau, Suffolk, Queens and Manhattan, the Bank maintains its corporate headquarters in Jericho. The Bank has built a reputation for providing high-quality personal service to meet the needs of our diverse customer base which includes commercial real estate owners and developers, small to middle market businesses, professional service firms, municipalities and consumers. The Bank maintains a web site at with corporate, investor and branch banking information.
This press release includes a non-GAAP financial measure of our tangible common equity. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by generally accepted accounting principles in the United States ("GAAP"). The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company's marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP.
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 or investment portfolios, demand for loan 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 . The Company undertakes no obligation to publish revised events or circumstances after the date hereof.
Financial Highlights Follow
CONTACT: Brian K. Finneran, Chief Financial Officer 516-465-2251 email@example.com Anthony J. Morris, Chief Marketing & Corporate Planning Officer 516-495-5098 firstname.lastname@example.org