State Bancorp, Inc. Reports Second Quarter 2010 Results
Further complicating the regional economic picture is the banking legislation just adopted by the US Congress. It is likely to have a significant and long lasting impact on the banking industry and risks a particularly negative impact on New York given its status as a financial services capital. The employment and tax revenue generated by this industry is critically important to the financial success of the region. The legislation, which is only waiting to be signed into law by the President, may adversely affect the New York economy and once enacted, could potentially both increase the cost and reduce the availability of consumer and commercial credit. My personal opinion is that this legislation, unfortunately, does little to address the multitude of factors which contributed to this economic calamity while creating expansive new bureaucracies, costs and regulatory complexity.
We are still evaluating the potential impact of the legislation on the Company. While we do not expect the legislation to have an immediate negative impact on the Company, the legislation is likely to, at a minimum, result in increased regulatory and compliance costs over time."
- Net Interest Margin: Net interest margin was 4.16% in the second quarter of 2010 versus 3.88% in the second quarter of 2009 and 4.50% (4.34% after giving effect to receipt of a non-recurring fee) in the first quarter of 2010;
- Capital Strength: The Company's Tier I leverage capital ratio was 8.93% at June 30, 2010 versus 8.98% at June 30, 2009 and 9.05% at March 31, 2010. The Company's tangible common equity ratio (non-GAAP financial measure) was 7.17% at June 30, 2010 versus 6.75% at June 30, 2009 and 7.10% at March 31, 2010;
- Loan Loss Provision: The provision for loan losses increased by $2.0 million in the second quarter of 2010 versus the second quarter of 2009 and increased by $3.2 million versus the first quarter of 2010;
- Asset Quality: Non-accrual loans totaled $7 million or 0.7% of loans outstanding at June 30, 2010 versus $6 million or 0.5% of loans outstanding at March 31, 2010 and $35 million or 3.1% of loans outstanding at June 30, 2009. Net loan recoveries of $279 thousand were recorded in the second quarter of 2010 versus net charge-offs of $5 million in the first quarter of 2010 and net charge-offs of $1 million in the second quarter of 2009. The allowance for loan losses totaled $31 million at June 30, 2010, $26 million at March 31, 2010 and $28 million at June 30, 2009. The foregoing allowance balances represented 2.8%, 2.3%, and 2.5% of total loans, respectively, at such dates. The allowance for loan losses as a percentage of non-accrual loans, excluding non-accrual loans categorized as held for sale, was 444%, 473%, and 122% at June 30, 2010, March 31, 2010 and June 30, 2009, respectively. The Company held no other real estate owned during any of these reporting periods;
- Operating Efficiency: Total operating expenses for the second quarter of 2010 decreased by 3.1% to $11.2 million from the $11.5 million reported in the second quarter of 2009 and increased by 1.7% versus the first quarter of 2010. The Company's operating efficiency ratio improved to 66.5% in 2010 from 70.9% in the comparable 2009 period. The Company's efficiency ratio was 61.1 % in the first quarter of 2010;
- Loans: Loans outstanding decreased by 1% to $1.1 billion versus the second quarter of 2009 and were unchanged from the first quarter of 2010;
- Core Deposits: Core deposits totaled $948 million at June 30, 2010 versus $958 million at June 30, 2009 and $930 million at March 31, 2010. Core deposits represented 68% of total deposits in the quarter ended June 2010, 67% of total deposits for the quarter ended June 2009 and 67% for the quarter ended March 2010. Demand deposits increased by 12% to $381 million at June 30, 2010 versus $342 million at June 30, 2009 and grew by 1% from $379 million at March 31, 2010. Demand deposits represented 27% of total deposits at June 30, 2010, 24% at June 30, 2009 and 27% at March 31, 2010;
- Performance Ratios: Return on average assets and return on average common stockholders' equity were 0.40% and 3.96%, respectively, in the second quarter of 2010 and 0.26% and 2.00%, respectively, in the comparable 2009 period.
Earnings Summary for the Quarter Ended June 30, 2010The Company recorded net income of $1.7 million during the second quarter of 2010 versus net income of $1.1 million in the comparable 2009 period. Net interest income increased by $869 thousand or 5.8% to $15.9 million in the second quarter of 2010 versus 2009. This increase resulted from a 28 basis point expansion of the Company's net interest margin to 4.16% in 2010. The improved margin resulted from a 35 basis point reduction in funding costs during the second quarter of 2010 versus 2009, due principally to lower rates paid on savings and time deposits.
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