Sound Federal Bancorp, Inc. Announces Fourth Fiscal Quarter and
Year End Earnings WHITE PLAINS, N.Y., April 29
/PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (NASDAQ:SFFS)
(the "Company"), the holding company for Sound Federal Savings (the
"Bank"), announced net income of $1.1 million or diluted earnings
per share of $0.10 for the quarter ended March 31, 2005, as
compared to $1.5 million or diluted earnings per share of $0.12 for
the quarter ended March 31, 2004, a decrease of 23.4% in net
income. The decrease in net income for the quarter ended March 31,
2005 is primarily attributable to a $537,000 increase in
non-interest expense and a $186,000 decrease in net interest
income, partially offset by a $255,000 decrease in income tax
expense. For the fiscal year ended March 31, 2005, net income
amounted to $5.5 million or diluted earnings per share of $0.46, as
compared to $6.6 million or diluted earnings per share of $0.52 for
fiscal 2004, a decrease of 17.4% in net income. The decrease in net
income for the fiscal year ended March 31, 2005 reflects an
increase of $2.5 million in non-interest expense, partially offset
by an increase of $231,000 in net interest income and a decrease of
$701,000 in income tax expense. Bruno J. Gioffre, Chairman of the
Board, commented, "We are very pleased to announce that the
Company's assets have passed the $1.0 billion mark. This is a
milestone that we are proud of and reflects the 114 years of
diligence and commitment that many people have devoted to Sound
Federal. This quarter we continued to grow the franchise by opening
the Carmel, New York branch and the Bethel, Connecticut branch. In
total we have opened three branches this fiscal year bringing the
total number of branches to 14 in Westchester, Putnam and Rockland
Counties in New York and Fairfield County in Connecticut. We
believe that growing our franchise in these vibrant and growing
communities will add value to the franchise. While we are pleased
with the growth of Sound Federal, we are cognizant of the start-up
costs associated with a de-novo strategy. We strive to balance the
Company's growth with these start-up costs and the longer-term
opportunities of a banking franchise in our market area." Mr.
Gioffre continued, "The yield curve has certainly proved
challenging to us this quarter. Net income decreased to $1.1
million from $1.4 million in the linked quarter. Net income has
been impacted by the new branches opened this quarter, as well as
rising short-term interest rates and the continued flattening of
the yield curve. Loan origination volume of $45.1 million this
quarter has met our expectations, however the interest rates on new
loans have changed very little over the past nine months. In that
same time period, the Federal Reserve has raised the Federal funds
rate by 175 basis points which has impacted the cost of our
deposits. The average cost of our interest- bearing liabilities
increased 12 basis points to 1.93% during fiscal 2005 while the
average yield earned on interest-earning assets for fiscal 2005
decreased 17 basis points to 4.62%. Our deposit growth continues to
be strong, with increases of $28.8 million this quarter and $123.4
million during fiscal 2005. As we look forward to fiscal 2006, we
know that the yield curve and competitive pressures will continue
to challenge us. As we have for the past 114 years, our goal is to
position the Company for these challenges." The Company's total
assets amounted to $1.0 billion at March 31, 2005, as compared to
$890.5 million at March 31, 2004. The $116.4 million increase in
assets primarily consisted of an $82.3 million increase in net
loans to $560.8 million and a $17.9 million increase in securities
to $355.6 million. Our asset growth was funded principally by a
$123.4 million increase in deposits to $831.8 million. The increase
in securities consisted of a $79.5 million increase in securities
classified as held to maturity and a $61.6 million decrease in
securities available for sale. In June 2004, the Company began to
classify substantially all securities purchases as held to
maturity. This decision was based on the size of the portfolio
classified as available for sale relative to interest-earning
assets and stockholders' equity, the Company's liquidity position
(which allows the Company to hold securities until maturity) and an
increase in market interest rates. As these factors change in the
future, the Company will evaluate the classification of future
securities purchases. Total stockholders' equity decreased $9.9
million to $127.2 million at March 31, 2005 as compared to $137.1
million at March 31, 2004. The decrease reflects treasury stock
purchases at a cost of $12.1 million, dividends paid of $2.9
million and a decrease of $3.4 million attributable to the change
in accumulated other comprehensive income or loss, partially offset
by net income of $5.5 million and proceeds of $1.1 million from the
issuance of treasury shares for stock options exercised. The
accumulated other comprehensive loss of $2.7 million at March 31,
2005 represents the after-tax net unrealized loss on securities
available for sale ($4.5 million pre-tax). The Company invests
primarily in mortgage-backed securities guaranteed by Ginnie Mae,
Fannie Mae and Freddie Mac, as well as U.S. Government and Agency
securities. The unrealized losses at March 31, 2005 were caused by
increases in market yields subsequent to purchase. There were no
debt securities past due or securities for which the Company
currently believes it is not probable that it will collect all
amounts due according to the contractual terms of the security.
Because the Company has the ability to hold securities with
unrealized losses until a market price recovery (which, for debt
securities may be until maturity), the Company did not consider
these securities to be other-than-temporarily impaired at March 31,
2005. Net interest income for the quarter ended March 31, 2005
decreased $186,000 to $6.6 million as compared to $6.8 million for
the same quarter in the prior year. Our net interest rate spread
was 2.62% and 2.98% for the quarters ended March 31, 2005 and 2004,
respectively. Our net interest margin for those respective periods
was 2.85% and 3.20%. For fiscal 2005, net interest income amounted
to $26.4 million as compared to $26.2 million for fiscal 2004. Our
net interest rate spread was 2.69% and 2.98% and our net interest
margin was 2.91% and 3.24% for the respective fiscal years. The
decreases in net interest rate spread and net interest margin are
primarily the result of the effect of mortgage refinancings, lower
rates on new loans originated and lower returns on our investment
portfolio, as interest rates remained near 40-year lows. Since July
2004, the Federal Reserve has raised the Federal funds rate by 175
basis points to 2.75%. However, long-term rates have remained
substantially unchanged, resulting in a flattening yield curve. As
short-term interest rates rise, the cost of our interest-bearing
liabilities will increase faster than the yield on our
interest-earning assets which are affected by longer-term interest
rates. As a result, our net interest rate spread and net interest
margin may continue to decrease. Non-interest income totaled
$403,000 and $276,000 for the quarters ended March 31, 2005 and
2004, respectively. For the year ended March 31, 2005, non-interest
income amounted to $1.4 million as compared to $1.0 million for the
year ended March 31, 2004. The increases in non-interest income
were primarily due to an increase of $293,000 in income on
bank-owned life insurance which was purchased in December 2003 and
a $93,000 gain on the sale of land. The land sold was contiguous to
an existing branch site. Management determined that this parcel was
not going to be used in connection with the operation of the
branch. Non-interest expense totaled $5.1 million for the quarter
ended March 31, 2005 as compared to $4.5 million for the quarter
ended March 31, 2004. This increase is due to increases of $158,000
in occupancy and equipment expense, $66,000 in data processing
service fees, $202,000 in advertising and promotion expense and
$206,000 in other non-interest expense. The increases include costs
attributable to the three new branches opened during fiscal 2005.
Other non-interest expense for the quarter ended March 31, 2005
included $97,000 of costs related to the Company's implementation
of the internal controls and procedures provisions of the
Sarbanes-Oxley Act of 2002. There were no comparable costs in the
same period a year ago. For the year ended March 31, 2005,
non-interest expense increased $2.5 million to $18.6 million as
compared to $16.1 million for the year ended March 31, 2004. This
increase is due primarily to increases of $1.2 million in
compensation and benefits, $426,000 in occupancy and equipment
expense, $193,000 in data processing service fees, $99,000 in
advertising and promotion expense and $532,000 in other
non-interest expense. The increase in compensation and benefits
expense is due primarily to a $787,000 increase in expense related
to stock awards made pursuant to the Company's 2004 Stock Incentive
Plan and a $586,000 increase in compensation costs due primarily to
additional staff to support the growth in the Company's lending
operations and the new branches. At March 31, 2005, we had 138
full- time equivalent employees as compared to 119 at March 31,
2004. Other non-interest expense for the year ended March 31, 2005
included $367,000 of costs related to the Company's implementation
of the internal controls and procedures provisions of the
Sarbanes-Oxley Act of 2002. There were no comparable costs in
fiscal 2004. The Bank is a federally-chartered savings bank
offering traditional financial services and products through its
New York branches in Mamaroneck, Harrison, Rye Brook, New Rochelle,
Peekskill, Yorktown, Somers and Cortlandt in Westchester County and
New City in Rockland County, and in Connecticut in Greenwich,
Stamford and Brookfield. This press release contains certain
forward-looking statements consisting of estimates with respect to
the financial condition, results of operations and business of the
Company and the Bank. These estimates are subject to various
factors that could cause actual results to differ materially from
these estimates. Such factors include (i) the effect that an
adverse movement in interest rates could have on net interest
income, (ii) customer preferences, (iii) national and local
economic and market conditions, (iv) higher than anticipated
operating expenses and (v) a lower level of or higher cost for
deposits than anticipated. The Company disclaims any obligation to
publicly announce future events or developments that may affect the
forward- looking statements herein. Sound Federal Bancorp, Inc. and
Subsidiary CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in
thousands, except per share data) March 31, March 31, 2005 2004
Assets Cash and due from banks $11,512 $10,455 Federal funds sold
and other overnight deposits 31,095 20,756 Securities: Available
for sale, at fair value 276,154 337,730 Held to maturity, at
amortized cost 79,489 - Total securities 355,643 337,730 Loans,
net: Mortgage loans 558,662 477,771 Other loans 5,100 3,396
Allowance for loan losses (3,011) (2,712) Total loans, net 560,751
478,455 Accrued interest receivable 4,277 3,623 Federal Home Loan
Bank stock 5,738 5,303 Premises and equipment, net 6,214 5,630
Goodwill 13,970 13,970 Bank-owned life insurance 10,464 10,085
Prepaid pension costs 3,057 2,547 Deferred income taxes 2,236 -
Other assets 1,993 1,987 Total assets $1,006,950 $890,541
Liabilities and Stockholders' Equity Liabilities: Deposits $831,768
$708,330 Borrowings 38,000 35,000 Mortgagors' escrow funds 5,264
4,522 Due to brokers for securities purchased 2,513 4,000 Accrued
expenses and other liabilities 2,245 1,630 Total liabilities
879,790 753,482 Stockholders' equity: Preferred stock ($0.01 par
value; 1,000,000 shares authorized; none issued and outstanding) -
- Common stock ($0.01 par value; 24,000,000 shares authorized;
13,636,170 shares issued) 136 136 Additional paid-in capital
103,728 102,637 Treasury stock, at cost (1,258,964 and 459,297
shares at March 31, 2005 and March 31, 2004, respectively) (18,131)
(7,150) Common stock held by Employee Stock Ownership Plan (6,053)
(6,556) Unearned stock awards (4,435) (5,618) Retained earnings
54,638 52,908 Accumulated other comprehensive (loss) income, net of
taxes (2,723) 702 Total stockholders' equity 127,160 137,059 Total
liabilities and stockholders' equity $1,006,950 $890,541 Sound
Federal Bancorp, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) (In thousands, except per share data) For the
For the Three Months Ended Year Ended March 31, March 31, 2005 2004
2005 2004 Interest and Dividend Income Loans $7,697 $6,919 $29,430
$26,819 Mortgage-backed and other securities 3,081 2,845 11,998
11,538 Federal funds sold and other overnight deposits 95 20 340
240 Other earning assets 45 19 132 142 Total interest and dividend
income 10,918 9,803 41,900 38,739 Interest Expense Deposits 3,966
2,662 13,968 11,004 Borrowings 363 365 1,489 1,495 Other
interest-bearing liabilities 5 6 20 48 Total interest expense 4,334
3,033 15,477 12,547 Net interest income 6,584 6,770 26,423 26,192
Provision for loan losses 75 75 300 275 Net interest income after
provision for loan losses 6,509 6,695 26,123 25,917 Non-Interest
Income Service charges and fees 213 190 953 955 Income on
bank-owned life insurance 92 86 379 86 Gain on sale of land 93 - 93
- Gain on sales of mortgage loans 5 - 22 - Total non-interest
income 403 276 1,447 1,041 Non-Interest Expense Compensation and
benefits 2,533 2,628 9,945 8,733 Occupancy and equipment 750 592
2,717 2,291 Data processing service fees 340 274 1,218 1,025
Advertising and promotion 440 238 1,119 1,020 Other 1,012 806 3,569
3,037 Total non-interest expense 5,075 4,538 18,568 16,106 Income
before income tax expense 1,837 2,433 9,002 10,852 Income tax
expense 722 977 3,533 4,234 Net income $1,115 $1,456 $5,469 $6,618
Earnings per share: Basic earnings per share $0.10 $0.12 $0.47
$0.54 Diluted earnings per share $0.10 $0.12 $0.46 $0.52 Sound
Federal Bancorp, Inc. and Subsidiary Other Financial Data
(Unaudited) (Dollars in thousands, except per share data) At or for
the Quarter Ended March 31, Dec. 31, Sept. 30, June 30, March 31,
2005 2004 2004 2004 2004 Net interest income $6,584 $6,675 $6,706
$6,458 $6,770 Provision for loan losses 75 75 75 75 75 Non-interest
income 403 382 310 352 276 Non-interest expense: Compensation and
benefits 2,533 2,538 2,462 2,412 2,628 Occupancy and equipment 750
673 661 633 592 Other non-interest expense 1,792 1,389 1,478 1,247
1,318 Total non-interest expense 5,075 4,600 4,601 4,292 4,538
Income before income tax expense 1,837 2,382 2,340 2,443 2,433
Income tax expense 722 956 909 946 977 Net income $1,115 $1,426
$1,431 $1,497 $1,456 Total assets $1,006,950 $984,372 $965,388
$914,610 $890,541 Loans, net 560,751 541,955 529,638 501,239
478,455 Mortgage-backed securities Available for sale 199,746
216,133 231,986 246,850 255,853 Held to maturity 59,777 54,717
30,691 7,157 - Other securities Available for sale 76,408 79,364
84,986 85,427 81,877 Held to maturity 19,712 14,713 10,640 2,796 -
Deposits 831,768 802,990 789,794 746,160 708,330 Borrowings 38,000
38,000 38,000 38,000 35,000 Stockholders' equity 127,160 131,134
129,439 125,016 137,059 Performance Data: Return on average assets
(1) 0.46% 0.58% 0.60% 0.66% 0.67% Return on average equity (1)
3.51% 4.38% 4.56% 4.49% 4.49% Net interest rate spread (1) 2.62%
2.63% 2.71% 2.80% 2.98% Net interest margin (1) 2.85% 2.85% 2.94%
3.02% 3.20% Efficiency ratio (2) 73.61% 65.18% 65.58% 63.02% 64.41%
Per Common Share Data: Basic earnings per common share $0.10 $0.12
$0.12 $0.13 $0.12 Diluted earnings per common share $0.10 $0.12
$0.12 $0.12 $0.12 Book value per share (3) $10.27 $10.40 $10.29
$9.96 $10.40 Tangible book value per share (3) $9.15 $9.29 $9.18
$8.85 $9.34 Dividends per share $0.06 $0.06 $0.06 $0.06 $0.06
Capital Ratios: Equity to total assets (consolidated) 12.63% 13.32%
13.41% 13.67% 15.39% Tier 1 leverage capital (Bank) 10.24% 10.37%
10.40% 10.71% 10.92% Asset Quality Data: Total non-performing loans
$580 $734 $963 $1,728 $1,981 Total non-performing assets $580 $734
$963 $1,728 $1,981 (1) Ratios are annualized. (2) Computed by
dividing non-interest expense by the sum of net interest income and
non-interest income. (3) Computed based on total common shares
issued, less treasury shares. DATASOURCE: Sound Federal Bancorp,
Inc. CONTACT: Anthony J. Fabiano, Senior Vice President, Chief
Financial Officer and Corporate Secretary of Sound Federal Bancorp,
Inc., +1-914-761-3636 Web site: http://www.soundfed.com/
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