**SECURITIES
AND EXCHANGE COMMISSION**


**WASHINGTON,
D.C. 20549**





**FORM
10-K**





x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
fiscal year ended **December
31, 2004**


Commission
File No. 0-14874





oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF


THE
SECURITIES EXCHANGE ACT OF 1934





**STATE
BANCORP, INC.**


(Exact
name of registrant as specified in its charter)





New
      York
    11-2846511(State
      or other jurisdiction of
    (I.R.S.
      Employerincorporation
      or organization)
    Identification
      No.)699
      Hillside AvenueNew
      Hyde Park, N.Y.
    11040(Address
      of principal
    (Zip
      Code)executive
      offices)


Registrant's
telephone number including area code: (516)
437-1000


Securities
registered pursuant to Section 12(b) of the Act: NONE


Securities
registered pursuant to Section 12(g) of the Act:


Common
Stock ($5.00 par value)


(Title of
Class)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days.





Yesx
    No
      o








Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).


Yesx
    No
      o








As of
June 30, 2004, there were 8,994,398 shares of common stock outstanding and the
aggregate market value of common stock of State Bancorp, Inc. held by
nonaffiliates was approximately $219,733,000 as computed using the closing
market price of the stock of $24.43 reported by the American Stock Exchange on
June 30, 2004.





As of
March 4, 2005, there were 9,123,566 outstanding shares of State Bancorp, Inc.
common stock.





Table of Contents





**STATE BANCORP, INC.**


**Form
10-K**


**INDEX**





******PART I**
    
    **Page**Item 1.
    Business
    3General
    3Statistical Information
    7Item 2.
    Properties
    8Item 3.
    Legal Proceedings
    9Item 4.
    Submission of Matters to a Vote of
      Stockholders
    10**PART II**
    
    11Item 5.
    Market for Registrant's Common Stock and Related Stockholder
      Matters
    11Item 6.
    Selected Consolidated Financial Data
    11Item 7.
    Management's Discussion and Analysis of Financial Condition
      and Results of Operations
    12Item 7A.
    Quantitative and Qualitative Disclosure About Market
      Risk
    12Item 8.
    Consolidated Financial Statements and Supplementary
      Data
    12Item 9.
    Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
    12Item 9A.
    Controls and Procedures
    12**PART III**
    
    15Item 10.
    Directors and Executive Officers of the
      Registrant
    15Item 11.
    Executive Compensation
    15Item 12.
    Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
    15Item 13.
    Certain Relationships and Related
      Transactions
    15Item 14.
    Principal Accounting Fees and Services
    15**PART IV**
    
    16Item 15.
    Exhibits, Financial Statement Schedules and Reports on Form
      8-K
    16**SIGNATURES**
    
    18





2
 Table of Contents





**DOCUMENTS
INCORPORATED BY REFERENCE**





Listed
hereunder are the documents incorporated by reference and the parts of the Form
10-K into which such documents are incorporated:





The
Annual Report to Stockholders for the year ended December 31, 2004 (the “2004
Annual Report”). Referenced in Parts I, II and IV of the December 31, 2004
Annual Report on Form 10-K, Items 1, 5, 6, 7, 7A, 8 and 15.





The 2005
Proxy Statement to be filed on or about March 31, 2005 (the “2005 Proxy”).
Referenced in Part III of the December 31, 2004 Annual Report on Form 10-K,
Items 10, 11, 12, 13 and 14.








**PART I**





**ITEM 1.**
    **BUSINESS**





**General**





State
Bancorp, Inc. (the "Company") is a $1.4 billion one bank holding company
headquartered in New Hyde Park, New York. The Company was formed in 1985 for the
purpose of acquiring State Bank of Long Island (the "Bank") in a one-for-one
stock exchange. The Bank is the Company’s sole operating subsidiary and
principal asset. The Bank is a New York state chartered commercial bank
conducting a general banking business focused on the small to mid-sized
business, municipal and consumer markets in Long Island and Queens, New York.
The Bank was formed in 1966 and, through a strategy of measured, orderly growth
emphasizing high-quality personal service, has grown to be the largest
independent commercial bank headquartered in Nassau County. In October 2002, the
Company formed the State Bancorp Capital Trust I (“Trust I”) to accommodate the
private placement of $10 million in capital securities and in 2003 the Company
formed the State Bancorp Capital Trust II (“Trust II”) in connection with the
private placement of an additional $10 million in capital securities, both of
which are more fully described in Note 7 of the Company’s 2004 Annual Report
incorporated herein by reference. Trust I and Trust II are the Company’s only
other direct subsidiaries.





At
December 31, 2004, the Company, on a consolidated basis, had total assets of
approximately $1.4 billion, total deposits of approximately $1.3 billion, and
stockholders' equity of approximately $101.0 million. Unless the context
otherwise requires, references herein to the Company include the Company and its
subsidiaries on a consolidated basis.





The Bank
provides a full range of banking services to customers located primarily in
Nassau, Suffolk and Queens Counties. The Bank serves its customer base through
fifteen full-service branches in those counties and a lending center in Jericho,
NY. The Bank’s deposit products include checking, savings, time, money market
and IRA accounts. The Bank offers secured and unsecured commercial and consumer
loans. Additional **** credit
services offered include commercial mortgage loans, construction mortgage loans,
letters of credit, equipment leasing, other commercial installment loans and
lines of credit, home equity lines of credit, residential mortgage loans and
auto and other personal loans. In addition, the Bank provides safe deposit
services, merchant credit card services, access to annuity products and mutual
funds and a consumer debit card with membership in a national ATM network.
Through an alliance with U.S. Trust Company, the Bank also offers its customers
access to financial planning and wealth management services. Thirteen of the
Bank’s branches have ATMs. The Bank also offers its customers on-line banking,
bill payment and cash management services. The Bank’s strategy of establishing
and maintaining long-term customer relationships has contributed to the Bank’s
relatively stable core deposit base.





3
 Table of Contents





The Bank
considers its business to be highly competitive in its market areas. The Bank
vies with local, regional and national depository financial institutions and
other businesses with respect to its lending services and/or in attracting
deposits, including commercial banks, savings banks, insurance companies, credit
unions, money market funds and affiliates of consumer goods manufacturers.
Although the Bank is considerably smaller in size than many of these
institutions operating in its market areas, it has demonstrated the ability to
compete profitably with them.





The
Bank’s leasing activity has been primarily conducted by its wholly owned
subsidiaries, New Hyde Park Leasing Corporation ("NHPL"), formed in 1979 to
lease commercial equipment, and Studebaker-Worthington Leasing Corp., acquired
in 2001 with a thirty year history of nationwide equipment leasing specializing
in small-ticket leases for computers and office equipment.





The Bank
has organized various operating subsidiaries that engage in activities that the
Bank could engage in directly. NHPL owns 51% of P.W.B. Realty, L.L.C., which was
formed in 2002 to own the Bank’s branch premises located in Port Washington, New
York. The Bank owns 100% of SB ORE Corp., formed in 1994 to hold foreclosed
property. In 1998, the Bank established two wholly owned Delaware based
subsidiaries, SB Portfolio Management Corp. (“SB Portfolio”) and SB Financial
Services Corp. (“SB Financial”). SB Portfolio holds and manages a portfolio of
fixed income investments while SB Financial provides balance sheet management
services such as interest rate risk modeling and asset/liability management
reporting along with general advisory services to the Company and its
subsidiaries.





In 2004
the Bank entered into a joint venture with an established title agent and formed
a title abstract agency, State Title Agency, LLC. This agency, majority owned by
the Bank, provides an opportunity for the Bank to offer title insurance for
commercial transactions. The agency is not significant in terms of either assets
or contributions to the Company’s results of operations for the 2004 fiscal
year.





Neither
the Company nor any of its direct or indirect subsidiaries is dependent upon a
single customer or very few customers. No material amount of deposits is
obtained from a single depositor. Additional information about deposits can be
found on pages 64 - 65 of the 2004 Annual Report, which is incorporated herein
by reference.





The Bank
does not rely on foreign sources of funds or income and the Bank does not have
any foreign commitments, with the exception of letters of credit issued on
behalf of several of its customers. The Bank's nature and conduct of business
have remained substantially unchanged since year-end 2003.





The
Company expects that compliance with provisions regulating environmental
controls will have no effect upon the capital, expenditures, earnings or
competitive position of the Company. The Company operates in the banking
industry and management considers the Company to be aggregated in one reportable
operating segment. The Bank has not experienced any material seasonal
fluctuations in its business. The Company has not had material expenditures for
research and development. The Company employed 345 full-time and part-time
officers and employees as of December 31, 2004.





Additional
information on the business of the Company is contained in the 2004 Annual
Report on page 46 and in Management's Discussion and Analysis of Financial
Condition and Results of Operations beginning on page 24, which is incorporated
herein by reference.





4
 Table of Contents




The
Company’s Internet address is www.statebankofli.com . The
Company makes available on its Internet website its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
thereto as soon as reasonably practicable after the Company files such material
with, or furnishes such material to, the Securities and Exchange Commission, as
applicable.





**Supervision
and Regulation**





The
Company is registered as a bank holding company under the Bank Holding Company
Act of 1956 (the “BHCA”), and is therefore subject to supervision and regulation
by the Federal Reserve Board ("FRB"). The Bank is chartered by the State of New
York and its deposits are insured by the Federal Deposit Insurance Corporation
(“FDIC”). Accordingly, the Bank is subject to the regulation and supervision of
the New York Banking Department (the "Banking Department") and the
FDIC.





The
following summary discussion sets forth certain of the material elements of the
legal and regulatory framework applicable to banks and bank holding companies
and their subsidiaries. The regulation of banks and bank holding companies is
extremely complex and this summary is qualified in its entirety by reference to
the applicable statutes, regulations and regulatory guidance. Management
believes the Company is in compliance in all material respects with these laws
and regulations. A change in applicable statutes and regulations or regulatory
policy may have a material effect on the business of the Company and/or the
Bank. Additional information is set forth in various portions of the 2004 Annual
Report, including “Capital Resources” (pages 36 - 37) and Note 15 to the 2004
consolidated financial statements, all of which portions are incorporated herein
by reference.





Bank
holding companies and banks are prohibited by law from engaging in unsafe and
unsound banking practices. Federal and New York State banking laws, regulations
and policies extensively regulate the Company and the Bank including prescribing
standards relating to capital, earnings, dividends, the repurchase or redemption
of shares, loans or extension of credit to affiliates and insiders, internal
controls, information systems, internal audit systems, loan documentation,
credit underwriting, asset growth, impaired assets and loan to value ratios.
Such laws and regulations are intended primarily for the protection of
depositors, other customers and the federal deposit insurance funds and not for
the protection of security holders. Bank regulatory agencies have broad
examination and enforcement power over bank holding companies and banks,
including the power to impose substantial fines, limit dividends and restrict
operations and acquisitions.





As a bank
holding company, the Company may not acquire direct or indirect ownership or
control of more than 5% of the voting shares of any company, including a bank,
without the prior approval of the FRB, except as specifically authorized under
the BHCA. Under the BHCA, the Company, subject to the approval of or notice to
the FRB, may acquire shares of non-banking corporations the activities of which
are deemed by the FRB to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. A bank holding company is
required to serve as a source of financial strength to its subsidiary depository
institutions and to commit all available resources to support such institutions
in circumstances where it might not do so absent such policy. Consistent with
this “source of strength” policy, the FRB takes the position that a bank holding
company generally should not maintain a rate of cash dividends unless its net
income available to common shareholders is sufficient to fully fund the
dividends and the prospective rate of earnings retention appears to be
consistent with the company’s capital needs, asset quality and overall financial
condition.





5


The
Change in Bank Control Act prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the FRB has been notified and has not
objected to the transaction. Under a rebuttable presumption established by the
FRB, the acquisition of 10% or more of a class of voting stock of a bank holding
company with a class of securities registered under Section 12 of the Exchange
Act, would, under the circumstances set forth in the presumption, constitute
acquisition of control of the Company. In addition, any entity is required to
obtain the approval of the FRB under the BHCA before acquiring 25% (5% in the
case of an acquirer that is a bank holding company) or more of the Company's
outstanding common stock, or otherwise obtaining control or a "controlling
influence" over the Company. The New York Banking Law (the “Banking Law”)
similarly regulates a change in control affecting the Bank and requires the
approval of the New York State Banking Board or Superintendent of
Banks.





The
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended
(the “Interstate Banking Act”) generally permits bank holding companies to
acquire banks in any state, and preempts all state laws restricting the
ownership by a bank holding company of banks in more than one state. The
Interstate Banking Act also permits a bank to merge with an out-of-state bank
and convert any offices into branches of the resulting bank if both states have
not opted out of interstate branching; permits a bank to acquire branches from
an out-of-state bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to establish and
operate de novo interstate branches whenever the host state opts-in to de novo
branching. Bank holding companies and banks seeking to engage in transactions
authorized by the Interstate Banking Act must be adequately capitalized and
managed. The Banking Law authorizes interstate branching by merger or
acquisition on a reciprocal basis, and permits the acquisition of a single
branch without restriction, but does not provide for de novo  interstate
branching.





Bank
holding companies and their subsidiary banks are also subject to the provisions
of the Community Reinvestment Act (“CRA”). Under the terms of the CRA, the FDIC
(or other appropriate bank regulatory agency) is required, in connection with
its examination of a bank, to assess such bank’s record in meeting the credit
needs of the communities served by that bank, including low- and moderate-income
neighborhoods. Furthermore, such assessment is also required of any bank that
has applied, among other things, to merge or consolidate with or acquire the
assets or assume the liabilities of a federally regulated financial institution
or to open or relocate a branch office. In the case of a bank holding company
applying for approval to acquire a bank or bank holding company, the FRB will
assess the record of each subsidiary bank of the applicant bank holding company
in considering the application. The Banking Law contains provisions similar to
the CRA which are applicable to New York state chartered banks. Bank holding
companies and their affiliates are prohibited from tying the provision of
certain services, such as extensions of credit, to other services offered by a
holding company or its affiliates.





The
Company’s primary source of income is dividends from the Bank. Federal and New
York State law impose limitations on the payment of dividends by the Bank.
Further information about the amount available for dividends can be found on
page 59 of the 2004 Annual Report, which is incorporated herein by reference.
The federal banking regulators have adopted risk-based capital and leverage
guidelines that require the Company’s capital-to-assets ratios meet certain
minimum standards.  The
risk-based capital ratio is determined by allocating assets and specified
off-balance sheet financial instruments into four weighted categories, with
higher levels of capital being required for the categories perceived as
representing greater risk. For a further discussion, see Note 15 of the 2004
Annual Report, which is incorporated herein by reference.





6
 Table of Contents




**Government
Monetary Policies and Economic Control**





The
earnings of the Company and the Bank are affected by the policies of regulatory
authorities including the Board of Governors of the Federal Reserve System and
the FDIC. An important function of the Federal Reserve System is to regulate the
money supply and interest rates. Among the instruments used to implement these
objectives are open market operations in U.S. Government securities, changes in
reserve requirements against member bank deposits and changes in the federal
discount rate. These instruments are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits and
their use may also affect interest rates charged on loans or paid for deposits.
Changes in government monetary policies and economic controls could have a
material effect on the business of the Bank.





**Statistical Information**





Statistical
information is furnished pursuant to the requirements of Guide 3 (Statistical
Disclosure by Bank Holding Companies) promulgated under the Securities Act of
1933. Incorporated by reference is the Company's 2004 Annual Report. The
Company's statistical information may be found on pages 61 - 65.





7
 Table of Contents




**ITEM 2.**
    **PROPERTIES**
 The
following table sets forth certain information relating to properties owned or
used in the Company's banking activities at December 31, 2004:
   **Location**
    **Owned
      or Leased**
    **Lease
      Expiration Date**
    **Renewal
      Terms****Main
      Office:**699
      Hillside Avenue
    Building
      owned, land leased
    3/27/2009
    One
      ten-year renewal optionNew
      Hyde Park, NY**Lending
      Facility:**Two
      Jericho Plaza
    Leased
    3/31/2012
    NoneJericho,
      NY**Nassau
      County Branch Offices:**222
      Old Country Road
    Leased
    4/30/2010
    One
      ten-year renewal optionMineola,
      NY
    
    
    and
      two five-year renewal options339
      Nassau Boulevard
    Owned
    N/A
    N/AGarden
      City South, NY501
      North Broadway
    Leased
    10/31/2011
    Two
      twelve-year renewal optionsJericho,
      NY135
      South Street
    Owned
    N/A
    N/AOyster
      Bay, NY2
      Lincoln Avenue
    Leased
    5/31/2005
    One
      five-year renewal optionRockville
      Centre, NY960
      Port Washington Boulevard
    Leased
    1/24/2007
    Five
      five-year renewal optionsPort
      Washington, NY**Suffolk
      County Branch Offices:**27
      Smith Street
    Leased
    10/31/2007
    Two
      five-year renewal optionsFarmingdale,
      NY740
      Veterans Memorial Highway
    Leased
    6/30/2005
    Two
      ten-year renewal optionsHauppauge,
      NY580
      East Jericho Turnpike
    Leased
    12/31/2008
    NoneHuntington
      Station, NY4250
      Veterans Memorial Highway
    Leased
    12/31/2008
    One
      five-year renewal optionHolbrook,
      NY234
      Route 25A
    Leased
    5/31/2005
    Two
      five-year renewal optionsEast
      Setauket, NY**Queens
      County Branch Offices:**49-01
      Grand Avenue
    Leased
    4/30/2006
    Two
      five-year renewal optionsMaspeth,
      NY75-20
      Astoria Boulevard
    Leased
    5/30/2006
    Two
      five-year renewal optionsJackson
      Heights, NY21-31
      46th Avenue
    Leased
    1/31/2006
    One
      five-year renewal optionLong
      Island City, NY**Subsidiary
      and Other Facilities:**1403
      Foulk Road
    Leased
    6/30/2005
    One-year
      renewal optionsWilmington,
      DE100
      Jericho Quadrangle
    Leased
    9/30/2005
    NoneJericho,
      NY716
      N. Bethlehem Pike
    Leased
    8/31/2005
    Month-to-month
      renewal optionsLower
      Gwynedd, PA300
      Park Avenue
    Leased
    10/1/2005
    One
      one-year renewal optionNew
      York, NY


The
fixtures and equipment contained in these operating facilities are owned or
leased by the Bank. The Company considers that all of its premises, fixtures and
equipment are adequate for the conduct of its business.





8
 Table of Contents


**ITEM 3.**
    **LEGAL
      PROCEEDINGS**





The
largest component of the Company’s legal expenses relates to ongoing litigation
arising out of the Bank’s deposit relationship with Island Mortgage Network,
Inc. (“Island Mortgage” or “IMN”) and its affiliates, as previously disclosed in
the Company’s Form 10-Q and 10-K filings with the Securities and Exchange
Commission. These expenses totaled $2.3 million, $3.8 million and $3.3 million
in 2004, 2003 and 2002, respectively. The Company expects to incur additional
costs related to this litigation during 2005; however, these costs are not
specifically quantifiable at this point in time.





Island
Mortgage established and maintained dozens of deposit accounts at State Bank of
Long Island (“State Bank” or the “Bank”) commencing in mid-February 1999 and
continuing through early July 2000. Island Mortgage was principally engaged in
offering and providing mortgages to consumers. Island Mortgage apparently
financed its operations in significant part through the use of loans and/or
revolving lines of credit provided by lenders not related to the Bank. State
Bank never had a lending relationship with Island Mortgage.





On
June 30, 2000, the Banking Department of the State of New York suspended Island
Mortgage’s mortgage banker license. On July 19, 2000, Island Mortgage and its
publicly held parent company, AppOnline.com, Inc., filed a petition under
Chapter 11 of the Bankruptcy Code in the Eastern District of New York.
Subsequently, certain of Island Mortgage’s lenders filed an involuntary
bankruptcy petition against Action Abstract, Inc., an entity to which they
apparently had regularly wired funds in connection with their dealings with
Island Mortgage. At the request of the Trustee in the Island Mortgage bankruptcy
case, various bankruptcy cases involving Island Mortgage entities were later
substantively consolidated.





In
the course of those bankruptcy cases, it has been alleged that Island Mortgage
engaged in a widespread pattern of fraud directed at lenders, title agents,
closing companies and others with whom Island Mortgage regularly dealt. A number
of Island Mortgage’s creditors have since asserted that the Bank participated in
Island Mortgage’s alleged fraudulent scheme. Currently, there are three Island
Mortgage-related litigations pending in which claims have been asserted against
State Bank (and, in one case, State Bank’s parent corporation State Bancorp,
Inc.) Those litigations are:





-- *Broward
Title Co. v. Alan Jacobs, et al.* ,
Adv. Proc. No. 01-8181, Bankruptcy Court for the Eastern District of New York.
On or about July 9, 2002, Broward’s motion to sever its claims against the Bank
(and certain other defendants) was granted, allowing Broward to conduct a
nonjury trial of its claims against the remaining defendants in the bankruptcy
court. Broward’s claims against State Bank and those other, severed defendants
were referred to the United States District Court for the Eastern District of
New York on or about August 6, 2002. Since that time, Broward has not made any
affirmative attempts to prosecute its case against State Bank in the district
court, although it may attempt to do so at a later date.





-- *Household
Commercial Financial Services, Inc., et al. v. Action Abstract, Inc., et
al.* ,
Adv. Proc. No. 02-8167, Bankruptcy Court for the Eastern District of New York.
On or about June 4, 2002, plaintiffs commenced this adversary proceeding with
respect to State Bank. The Complaint alleges that plaintiffs extended lines of
credit to, and entered into mortgage purchase agreements with, defendant Island
Mortgage. According to the Complaint, millions of dollars of funds that
plaintiffs deposited into State Bank accounts maintained by Island Mortgage and
its related entities to fund mortgages were misappropriated as the result of
Island Mortgage’s alleged scheme to defraud plaintiffs and unjustly enrich
defendants. Plaintiffs claim the following with respect to State Bank: 1) the
Bank aided and abetted the allegedly fraudulent scheme perpetrated by Island
Mortgage; 2) the Bank aided and abetted in a breach of the fiduciary duties an
Island Mortgage affiliate allegedly owed to plaintiffs; and, 3) the Bank was
negligent in failing to recognize and act on signs that Island Mortgage was
allegedly misappropriating the funds plaintiffs advanced to Island Mortgage.
Plaintiffs claim they are entitled to not less than $52 million, plus interest
and punitive damages.





9
 Table of Contents





On
January 31, 2005, the bankruptcy court ruled on State Bank’s motion for summary
judgment. The plaintiffs’ claims for negligence and aiding and abetting a breach
of fiduciary duty were dismissed. The claim for aiding and abetting fraud was
not dismissed, although the court ruled that one of the plaintiffs (Matrix)
could not seek damages for the period after June 6, 2000. It is unknown at this
time whether any of the plaintiffs will seek reconsideration of the summary
judgment decision by the bankruptcy court or will seek to appeal the summary
judgment decision to the district court.





-- *Moritz,
et al. v. National Settlement Services Corp., et al.,* Civil Action No. 3:00 CV 426 MU, Western District of North Carolina. State Bank
and the plaintiffs have entered into a binding agreement to settle the case for
$20 thousand, the money has been paid, and the releases have been exchanged and
are fully operative. The case is expected to be formally dismissed
shortly.





A
separate Island Mortgage-related litigation, *Alan
M. Jacobs, as Chapter 11 Trustee v. State Bank of Long Island* ,
Adv. Proc. No. 02-8157, Bankruptcy Court for the Eastern District of New York,
was settled in mid-2004. Pursuant to the settlement agreement, approved by the
court on June 8, 2004, the Bank paid the Island Mortgage estates $223 thousand,
while at the same time the Bank was authorized to, and did, exercise its right
to set-off $123 thousand from accounts that Island Mortgage maintained at the
Bank. The parties have exchanged general releases, and all of Island Mortgage’s
accounts at the Bank have been closed.





The
Bank is defending these lawsuits vigorously, and management believes that the
Bank has substantial defenses to the claims that have been asserted. However,
the ultimate outcome of these lawsuits cannot be predicted with certainty. It
also remains possible that other parties may pursue additional claims against
the Bank related to the Bank’s dealings with IMN and its affiliates. The Bank’s
legal fees and expenses will continue to be significant, and those costs, in
addition to any costs associated with settling the IMN-related litigations or
satisfying any adverse judgments, could have a material adverse effect on the
Bank’s results of operations or financial position.





In
addition to the litigations noted above, the Company and the Bank are subject to
other 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.





**ITEM 4.**
    **SUBMISSION
      OF MATTERS TO A VOTE OF
STOCKHOLDERS**





There
were no matters submitted to a vote of stockholders during the quarter ended
December 31, 2004.





10


**PART II**





**ITEM5.**
    **MARKET
      FOR REGISTRANT'S COMMON STOCK AND RELATED****STOCKHOLDER
      MATTERS**





Incorporated
herein by reference is the Company's 2004 Annual Report. The Company's common
stock market data for the past three years may be found on page 66 thereof.





At
December 31, 2004, the approximate number of equity stockholders was as
follows:


Title
of Class: Common
Stock


Number
of Record Holders: 1,471





Annual
cash dividends paid per common share, restated to give retroactive effect to
stock dividends, were 56 cents, 52 cents and 49 cents in 2004, 2003 and 2002,
respectively. The Company also paid 5% stock dividends in 2004, 2003 and 2002.
It is the Company's expectation that dividends will continue to be paid in the
future.





The
following table discloses the Company’s repurchases of its common stock made
during the quarter.





Period
    Total
      number of shares purchased
    Average
      price paid per share ($)
    Total
      number of shares purchased as part of publicly announced plans or
      programs
    Maximum
      number of shares that may yet be purchased under the plans or
      programsOctober
      1 - 31, 2004
    -
    -
    -
    577,991November
      1 - 30, 2004
    3,550
    23.13
    3,550
    574,441December
      1 - 31, 2004
    436
    25.86
    436
    574,005Total
    3,986
    23.43
    3,986
    574,005





On
February 24, 1998, the Company’s Board of Directors (the “Board”) authorized a
stock repurchase program enabling the Company to buy back up to 50,000 shares of
its common stock. Subsequently, on November 24, 1998, February 29, 2000, June
26, 2001 and April 27, 2004, the Board authorized increases in the Company’s
stock repurchase program under which the Company was then able to buy back up to
a cumulative total of 200,000, 500,000, 1,000,000 and 1,500,000 shares of its
common stock, respectively. The repurchases may be made from time to time as
market conditions permit, at prevailing prices on the open market or in
privately negotiated transactions. The program may be discontinued at any time.





**ITEM 6.**
    **SELECTED
      CONSOLIDATED FINANCIAL DATA**





Incorporated
herein by reference is the Company's 2004 Annual Report. The Company's selected
financial data for the last five years may be found on page 2. Additional years
are not considered necessary to keep the above referenced summary from being
misleading.




11
 Table of Contents





**ITEM7.**
    **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL****CONDITION
      AND RESULTS OF OPERATIONS**





Incorporated
herein by reference is the Company's 2004 Annual Report. Management's Discussion
and Analysis of Financial Condition and Results of Operations may be found on
pages 24 - 40. There are no known trends or any known demands, commitments,
events or uncertainties which will result in, or which are reasonably likely to
result in, the Company's liquidity increasing, or decreasing, in any material
way. As of December 31, 2004, the Company had no material commitments for
capital expenditures.





**ITEM 7A.**
    **QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK**





Incorporated
herein by reference is the Company’s 2004 Annual Report. The Company’s
Asset/Liability Management and Market Risk and Interest Rate Risk discussions
may be found on pages 38 - 40.





**ITEM 8.**
    **CONSOLIDATED
      FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA**





Incorporated
herein by reference is the Company's 2004 Annual Report. The Company's audited
Consolidated Balance Sheets as of the close of the last two years may be found
on page 42. The Company's audited Consolidated Statements of Income, Cash Flows
and Stockholders' Equity and Comprehensive Income (Loss) for each of the three
years in the period ended December 31, 2004 may be found on pages 43 -
45.





**ITEM 9.**
    **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON**A**CCOUNTING
      AND FINANCIAL DISCLOSURE**-
      Not applicable





**ITEM
      9A.**
    **CONTROLS
      AND PROCEDURES**





**Disclosure
Controls and Procedures**





The
Company’s management evaluated, with the participation of the Company's Chief
Executive Officer and Principal Financial Officer, the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this report. Based on such evaluation, the Company’s Chief Executive
Officer and Principal Financial Officer have concluded that these disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and regulations and are operating in an effective manner. No change in the
Company’s internal control over financial reporting (as defined in Rules
13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934) occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




12


****


**Management’s
Report on Internal Control Over Financial Reporting**





March 8,
2005





To the
Board of Directors of


State
Bancorp, Inc.





The
management of State Bancorp, Inc. (the “Company’) is responsible for
establishing and maintaining effective internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934 . The
Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in the United States of America.





The
internal control over financial reporting includes those policies and procedures
that:





·
    Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company.





·
    Provide
      reasonable assurance that the transactions are recorded as necessary to
      permit preparation of financial statements in accordance with the
      generally accepted accounting principles in the United States of America,
      and that our receipts and expenditures are being made only in accordance
      with authorizations of the Company’s management and directors;
      and


·
    Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.





Management
assessed the effectiveness of the Company’s internal control over financial
reporting for financial presentations as of December 31, 2004. In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission as described in  *Internal
Control - Integrated Framework* . Because
management’s assessment was also conducted to meet the reporting requirements of
Section 112 of the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), management’s assessment of the Company’s internal control over
financial reporting also included controls over the preparation of the schedules
equivalent to the basic financial statements in accordance with the instructions
for Consolidated Reports of Condition and Income for Schedules RC, RI,
RI-A.  Based on
this assessment, management believes that the Company maintained effective
internal control over financial reporting presented in conformity with generally
accepted accounting principles in the United States of America as of December
31, 2004.





The
Company’s independent registered public accounting firm has audited and issued
their report on management’s assessment of the Company’s internal control over
financial reporting, which appears in the following pages.





13
 Table of Contents


**Report
of Independent Registered Public Accounting Firm**





Board of Directors and Stockholders of


State
Bancorp, Inc.


New Hyde
Park, New York





We have
audited management’s assessment, included in the accompanying **** "Management's Report
on Internal Control Over Financial Reporting" , that
State Bancorp, Inc. and subsidiaries (the “Company”) maintained effective
internal control over financial reporting as of December 31, 2004, based on
criteria established in *Internal
Control—Integrated Framework* issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Because
management’s assessment and our audit were conducted to meet the reporting
requirements of Section 112 of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA), management’s assessment and our audit of the Company’s
internal control over financial reporting included controls over the preparation
of the schedules equivalent to the basic financial statements in accordance with
the instructions for Consolidated Reports of Condition and Income for Schedules
RC, RI, RI-A. The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express an opinion on management’s assessment and an opinion on the
effectiveness of the Company’s internal control over financial reporting based
on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.





A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





In our
opinion, management’s assessment that the Company maintained effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in
all material respects, based on the criteria established in *Internal
Control—Integrated Framework* issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Also,
in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004, based on the
criteria established in *Internal
Control—Integrated Framework* issued
by the Committee of Sponsoring Organizations of the Treadway Commission.





We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company
as of December 31, 2004 and 2003, and the related consolidated statements of
income, cash flows, and stockholders’ equity and comprehensive income (loss) for
each of the three years in the period ended December 31, 2004, and our report
dated March 11, 2005, expressed an unqualified opinion on those financial
statements.





Deloitte
& Touche LLP


Philadelphia,
PA


March 11,
2005





14
 Table of Contents





**PART III**





**ITEM
      10.**
    **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE
REGISTRANT**





Incorporated
herein by reference is the Company's 2005 Proxy. The identification of the
directors of the Company may be found under “Election of Directors.” The
identification of the executive officers of the Company may be found under
"Principal Officers." There exists no family relationship between any director
and executive officer. Disclosure of the Audit Committee financial expert may be
found under “Corporate Governance.” Compliance with section 16(a) of the
Exchange Act may be found under “Section 16(a) Beneficial Ownership Reporting
Compliance.” The Company has a Code of Business Conduct and Ethics that applies
to all employees, officers and directors of the Company and its direct and
indirect subsidiaries, as well as a Code of Ethics for the Chief Executive and
Senior Financial Officers, the text of both of which is posted on the Company's
Internet website at www.statebankofli.com .





**ITEM11.**
    **EXECUTIVE
      COMPENSATION**





Incorporated
herein by reference is the Company's 2005 Proxy. Executive compensation may be
found under “Management Remuneration.”





**ITEM12.**
    **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND****MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS**





Incorporated
herein by reference is the Company's 2005 Proxy. Security ownership of certain
beneficial owners and management may be found under “Security Ownership of
Management.”






Additionally,
information about the Company’s equity compensation plans may be found
below:





Plan
      Category
    Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
      (a)
    Weighted-average
      exercise price of outstanding options, warrants and rights
($)
      (b)
    Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
      (c)Equity
      compensation plans approved by security holders
    840,938
    15.09
    456,224Equity
      compensation plans not approved by security holders (1)
    9,925
    N/A
    133,725Total
    850,863
    15.09
    589,949





(1) The
amount in column (a) represents Deferred Stock Credits pursuant to the
Directors’ Stock Plan as of December 31, 2004. Incorporated by reference is the
Company's 2004 Annual Report. A description of the Company's Directors’ Stock
Plan may be found on pages 55 - 56. The amount in column (c) is available under
the Directors’ Stock Plan. The Directors’ Stock Plan provides that in the event
of any merger, reorganization, consolidation, recapitalization, stock split,
stock dividend or other change in corporate structure affecting the Company
stock, the aggregate number of share credits which may be awarded under the
Directors’ Stock Plan and the number of share credits subject to the awards
already granted shall be increased or decreased proportionately, as the case may
be.





**ITEM 13.**
    **CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS**





Incorporated
herein by reference is the Company's 2005 Proxy. Certain relationships and
related transactions may be found under “Certain Transactions” and “Election of
Directors.”





**ITEM14.**
    **PRINCIPAL
      ACCOUNTING FEES AND SERVICES**





Incorporated
herein by reference is the Company's 2005 Proxy. Audit fees, audited related
fees, tax fees and all other fees may be found under “Independent Registered
Public Accounting Firm.” Pre-approval policies and procedures may be found under
“Corporate Governance.”





15
 Table of Contents




**PART IV**





**ITEM15.**
    **EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES AND REPORTS ON****FORM
      8-K**


Incorporated
herein by reference is the Company’s 2004 Annual Report. The Report of
Independent Registered Public Accounting Firm and the following Consolidated
Financial Statements and Notes to Consolidated Financial Statements may be found
on pages 41 - 60. As to any schedules omitted, they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.





**Consolidated
Financial Statements:**


·
    Consolidated
      Balance Sheets as of December 31, 2004 and
2003


·
    Consolidated
      Statements of Income for the years ended December 31, 2004, 2003 and
      2002


·
    Consolidated
      Statements of Cash Flows for the years ended December 31, 2004, 2003 and
      2002


·
    Consolidated
      Statements of Stockholders' Equity and Comprehensive Income (Loss) for the
      years ended December 31, 2004, 2003 and
2002




****


**Notes
to Consolidated Financial Statements:**


·
    Note
      1. Summary of Significant Accounting and Reporting
  Policies


·
    Note
      2. Securities Held to Maturity and Securities Available for
      Sale


·
    Note
      3. Loans - Net


·
    Note
      4. Bank Premises and Equipment - Net


·
    Note
      5. Other Assets


·
    Note
      6. Lines of Credit and Borrowed Funds


·
    Note
      7. Junior Subordinated Debentures


·
    Note
      8. Income Taxes


·
    Note
      9. Incentive Stock Option Plans


·
    Note
      10. Employee Benefit Plans


·
    Note
      11. Commitments and Contingent Liabilities


·
    Note
      12. State Bancorp, Inc. (Parent Company
Only)


·
    Note
      13. Financial Instruments with Off-Balance Sheet
Risk


·
    Note
      14. Disclosures About Fair Value of Financial
  Instruments


·
    Note
      15. Regulatory Matters




**Reports
on Form 8-K:**


·
    At
      a meeting held on September 27, 2004, the Company’s Board of Directors
      unanimously voted to increase the number of directors from ten members to
      thirteen members and unanimously elected the following persons to serve
      until the next annual meeting of shareholders: K. Thomas Liaw, Gerard J.
      McKeon and Andrew J. Simons. The Board did not immediately name the new
      directors to serve on any committees, but has subsequently named Mr.
      McKeon to the Audit Committee and Mr. Simons to the Compensation
      Committee.





·
    On
      October 22, 2004, the Company issued the earnings release for the period
      ended September 30, 2004.






16
 Table of Contents





**Exhibits:**





**No.**
    
    **Item**
    **Method
      of Filing**(3)
    Articles
      of incorporation and By-Laws
    Incorporated
      by reference from exhibit B to the Company's Registration Statement on
      Form S-4, file No. 33-2958, Filed February 3, 1986.a)
    Articles
      of incorporationb)
    By-Laws,
      as amended
    Incorporated
      by reference from Exhibit 3b to the Company's June 30, 2003 Form 10-Q.(4)
    Instruments
      defining the rights of security holders
    Pages
      22-28 of the above referenced Registration Statement.(10)
    Material
      contractsa)
    Deferred Compensation Arrangements
    Filed
      herein.a)
    (i) Form of April 2004 Agreement Relating to Deferred
      Compensation Agreements
    Filed
      herein.a)
    (ii) Form of Supplemental Employee Retirement
      Agreement
    Filed
      herein.a)
    (iii) Form of Deferred Compensation
      Agreement
    Filed
      herein.a)
    (iv) Form of Deferred Compensation
      Agreement
    Filed
      herein.b)
    (i)
      Directors' Incentive Retirement Plan
    Incorporated
      by reference from exhibit 10c to the Company's December 31, 1986
      Form 10-K.b)
    (ii)
      Agreements of participants surrendering their rights under the directors'
      incentive retirement plan.
    Incorporated
      by reference from exhibit 10b (ii) to the Company's December 31, 1992 Form
      10-K.b)
    (iii)
      Agreements of participants modifying agreements described in item b)
      (ii)
    Incorporated
      by reference from exhibit 10b (iii) to the Company’s December 31, 1995
      Form 10-K.c)
    1987
      Incentive Stock Option Plan, as amended
    Incorporated
      by reference from exhibit 10c to the Company's December 31, 1991
      Form 10-K.d)
    1994
      Incentive Stock Option Plan
    Incorporated
      by reference from exhibit 10d to the Company's December 31, 1993 Form
      10-K.e)
    (i)
      Change of control agreement no. 1
    Incorporated
      by reference from exhibit 10e to the Company's December 31, 1997 Form
      10-K.e)
    (ii)
      Change of control agreement no. 2
    Incorporated
      by reference from exhibit 10e to the Company's December 31, 1997 Form
      10-K.e)
    (iii)
      Change of control agreement no. 3
    Incorporated
      by reference from exhibit 10e to the Company's December 31, 1997 Form
      10-K.e)
    (iv)
      Change of control agreement no. 4
    Incorporated
      by reference from exhibit 10e to the Company's December 31, 1997 Form
      10-K.e)
    (v)
      Change of control agreement no. 5
    Incorporated
      by reference from exhibit 10e to the Company's December 31, 1997 Form
      10-K.f)
    State
      Bank of Long Island 401(k)
      Retirement
      Plan and Trust
    Incorporated
      by reference from exhibit 10g to the Company's December 31, 1987
      Form 10-K.g)
    State
      Bancorp, Inc. Employee Stock Ownership Plan
    Incorporated
      by reference from exhibit 10g to the Company's December 31, 1987
      Form 10-K.h)
    Deferred
      Compensation Agreement
    See
      Exhibit (10) a).i)
    1999
      Incentive Stock Option Plan
    Incorporated
      by reference from exhibit 10i to the Company’s December 31, 1998 Form
      10-K.j)
    (i)
      1998 Directors’ Stock Plan
    Incorporated
      by reference from exhibit 10j to the Company’s December 31, 1999Form
      10-K.j)
    (ii)
      1998 Directors’ Stock Plan Amendment No. 1
    Incorporated
      by reference from exhibit 10j to the Company’s December 31, 2000Form
      10-K.j)
    (iii)
      1998 Directors’ Stock Plan Amendment No. 2
    Incorporated
      by reference from exhibit 10j (iii) to the Company’s June 30, 2003 Form
      10-Q.k)
    Stock
      Option Plan (2002)
    Incorporated
      by reference from exhibit 10k to the Company’s December 31, 2002 Form
      10-K.(*l*)
    Incentive
      Award Plan
    Incorporated
      by reference from exhibit 10(*l*)
      to the Company’s February 18, 2005 Form 8-K.(13)
    Annual Report to Stockholders
    Filed
      herein.(14)
    a)
    Code
      of Ethics for Chief Executive and Senior Financial
Officers
    Incorporated
      by reference from exhibit 14a to the Company’s December 31, 2003 Form
      10-K.b)
    Code
      of Business Conduct and Ethics
    Incorporated
      by reference from exhibit 14b to the Company’s December 31, 2003 Form
      10-K.(23)
    Consent of Deloitte & Touche LLP
    Filed
      herein.(24)
    Power of Attorney
    Filed
      herein.(31)
    Certification
      pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
      1934, as adopted pursuant toSection
      302 of the Sarbanes-Oxley Act of 2002
    Filed
      herein.(32)
    Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
    Filed
      herein.


17


Table of Contents





**SIGNATURES**





Pursuant
to the requirements of Section 13 or 15d of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned.





STATE
      BANCORP, INC.By:
    s/Thomas
      F. Goldrick, Jr., ChairmanThomas
      F. Goldrick, Jr., ChairmanDate:
    March
      16, 2005





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and on the
dates indicated.





Signature
    Title
    Dates/Thomas
      F. Goldrick, Jr.
    Chairman
      of the Board
    3/16/05Thomas
      F. Goldrick, Jr.
    (Chief
      Executive Officer)s/Daniel
      T. Rowe
    President
    3/16/05Daniel
      T. Rowes/Richard
      W. Merzbacher
    Vice
      Chairman
    3/16/05Richard
      W. Merzbachers/Brian
      K. Finneran
    Secretary/Treasurer
    3/16/05Brian
      K. Finneran
    (Principal
      Financial Officer)J.
      Robert Blumenthal*
    DirectorThomas
      E. Christman*
    DirectorArthur
      Dulik, Jr.*
    DirectorK.
      Thomas Liaw*
    DirectorGerard
      J. McKeon*
    DirectorJoseph
      F. Munson*
    DirectorJohn
      F. Picciano*
    DirectorSuzanne
      H. Rueck*
    DirectorAndrew
      J. Simons*
    DirectorJeffrey
      S. Wilks*
    Director





*By:
    s/Brian
      K. FinneranBrian
      K. FinneranAttorney-in-factMarch
      16, 2005










18