WHITE PLAINS, N.Y., April 28 /PRNewswire-FirstCall/ -- Sound
Federal Bancorp, Inc. (NASDAQ:SFFS) (the "Company"), the holding
company for Sound Federal Savings (the "Bank"), announced net
income of $635,000 or diluted earnings per share of $0.05 for the
quarter ended March 31, 2006 as compared to $1.12 million or
diluted earnings per share of $0.10 for the quarter ended March 31,
2005. Net income for the quarter ended March 31, 2006 included
$480,000 of merger costs related to the Company's announced merger
with Hudson City Bancorp, Inc. A substantial majority of these
costs are not tax deductible. Excluding merger costs, net income
amounted to $1.09 million for the fourth fiscal quarter. The
$480,000 decrease in net income for the quarter ended March 31,
2006 as compared to the same quarter in 2005 was primarily due to
an $885,000 increase in non-interest expense, including the
merger-related costs, partially offset by a $446,000 increase in
net interest income. For the year ended March 31, 2006, net income
amounted to $4.16 million or diluted earnings per share of $0.35,
as compared to $5.47 million or diluted earnings per share of $0.46
for fiscal 2005, a decrease of $1.31 million or 23.9% in net
income. Excluding merger costs totaling $541,000 incurred during
fiscal year 2006, net income amounted to $4.66 million. The
decrease in net income for the year ended March 31, 2006 is
primarily attributable to a $2.6 million increase in non-interest
expense, including the merger-related costs, partially offset by
increases of $408,000 in non- interest income and $398,000 in net
interest income, and a $530,000 decrease in income tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "Net income for
the quarter, excluding merger costs of $480,000, was $1.09 million.
The flat yield curve continues to affect our earnings. Our net
interest margin decreased 34 basis points to 2.57% for fiscal year
2006. However, our ability to originate loans and increase deposits
enabled us to increase net interest income by 1.5% despite the
reduction in net interest margin. During fiscal 2006, we increased
the size of our loan portfolio by 32.2% and our deposit balances by
20.7%." Mr. Gioffre continued, "As we previously announced, the
Company entered into a merger agreement with Hudson City Bancorp,
Inc. This transaction provides our stockholders $20.75 in cash for
each share of Sound Federal Bancorp, Inc. common stock they own.
For those stockholders who bought their shares in our initial
public offering in 1998, this represents a 474% return on their
investment excluding dividends paid on these shares. In addition,
we believe that our customers will be very pleased with Hudson
City's product offerings and their commitment to providing the same
level of personal service that our customers have come to expect of
Sound Federal. The Board of Directors and I are very proud of the
dedication and loyalty of the Sound Federal staff. Their hard work
helped to build and enhance the Sound Federal franchise by
constantly focusing on providing superior customer service. This
merger with Hudson City will enable us to continue this tradition
of service to customers and the community." The Company's total
assets amounted to $1.2 billion at March 31, 2006, as compared to
$1.0 billion at March 31, 2005. The $162.6 million increase in
assets primarily consisted of a $180.8 million increase in net
loans to $741.6 million, partially offset by a decrease in total
securities of $28.9 million. Our asset growth was funded
principally by a $171.9 million increase in deposits to $1.0
billion. Total stockholders' equity increased $1.5 million to
$128.7 million at March 31, 2006 as compared to $127.2 million at
March 31, 2005. The increase reflects net income of $4.2 million
and total increases of $3.2 million related to stock options, stock
awards and ESOP shares, partially offset by common stock
repurchases at a cost of $1.4 million, dividends paid of $3.3
million and an increase of $1.2 million in the accumulated other
comprehensive loss. The accumulated other comprehensive loss of
$3.9 million at March 31, 2006 represents the after-tax net
unrealized loss on securities available for sale ($6.5 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, 2006 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 and intent 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, 2006. Net interest
income for the quarter ended March 31, 2006 increased $446,000 to
$7.0 million as compared to $6.6 million for the quarter ended
March 31, 2005. Our net interest rate spread was 2.30% and 2.62%
for the quarters ended March 31, 2006 and 2005, respectively. Our
net interest margin for those respective periods was 2.60% and
2.85%. For the fiscal year ended March 31, 2006, net interest
income amounted to $26.8 million as compared to $26.4 million for
the prior year. Our interest rate spread was 2.29% and 2.69% and
our net interest margin was 2.57% and 2.91% for fiscal years 2006
and 2005, respectively. The decreases in interest rate spread and
net interest margin are primarily the result of a decrease in the
spread between short and long-term market interest rates. At March
31, 2006, the spread between the 1-month and 10-year Treasury yield
rates was 21 basis points as compared to 187 basis points at March
31, 2005. As a result, the Company's average cost of
interest-bearing liabilities has increased faster than the yield on
interest-earning assets which are principally affected by
longer-term interest rates. The provision for loan losses was
$75,000 for the quarters ended March 31, 2006 and 2005 and $300,000
for fiscal years 2006 and 2005. Non-performing loans amounted to
$2.9 million or 0.39% of total loans at March 31, 2006, as compared
to $580,000 or 0.10% of total loans at March 31, 2005. The
allowance for loan losses amounted to $3.3 million and $3.0 million
at March 31, 2006 and March 31, 2005, respectively. Charge-offs
amounted to $2,000 during fiscal 2006 and $1,000 during fiscal
2005. The increase in the allowance for loan losses primarily
reflects an increase in the origination of adjustable rate mortgage
loans, commercial mortgage loans and commercial loans (not secured
by real estate), as well as overall portfolio growth. Non-interest
income totaled $362,000 and $403,000 for the quarters ended March
31, 2006 and 2005, respectively. For the fiscal year ended March
31, 2006, non-interest income amounted to $1.9 million as compared
to $1.4 million for the prior year. The increase in non-interest
income for the year was primarily due to a $325,000 gain on the
sale of real estate which was completed in September 2005. The
property was contiguous to an existing branch site. Management
determined that this property was not going to be used in
connection with the operation of the branch. Non-interest expense
totaled $6.0 million for the quarter ended March 31, 2006 as
compared to $5.1 million for the quarter ended March 31, 2005. This
increase is due to increases of $527,000 in compensation and
benefits expense and $480,000 in merger costs as previously
discussed. For the fiscal year ended March 31, 2006, non-interest
expense increased $2.6 million to $21.2 million as compared to
$18.6 million for the fiscal year ended March 31, 2005. This
increase is due primarily to increases of $1.8 million in
compensation and benefits, $301,000 in occupancy and equipment
expense, $96,000 in advertising and promotion expense and $541,000
in merger costs. Income tax expense amounted to $722,000 for the
quarters ended March 31, 2006 and 2005. The effective tax rates for
those same periods were 53.2% and 39.3%, respectively. Income tax
expense amounted to $3.0 million and $3.5 million for fiscal years
2006 and 2005, respectively. The effective tax rates for those
respective fiscal years were 41.9% and 39.2%. The increases in the
effective tax rates are due primarily to merger costs that are not
deductible for tax purposes. 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, Cortlandt and Carmel in
Westchester County and New City in Rockland County, and in
Connecticut in Greenwich, Stamford, Brookfield and Bethel. 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. Balance
sheets, statements of income and other financial data are attached.
Sound Federal Bancorp, Inc. and Subsidiary CONSOLIDATED BALANCE
SHEETS (Unaudited) (Dollars in thousands, except per share data)
March 31, March 31, 2006 2005 Assets Cash and due from banks
$12,194 $11,512 Federal funds sold and other overnight deposits
42,092 31,095 Securities: Available for sale, at fair value 215,455
276,154 Held to maturity, at amortized cost 111,246 79,489 Total
securities 326,701 355,643 Loans, net: Mortgage loans 737,274
558,662 Other loans 7,624 5,100 Allowance for loan losses (3,309)
(3,011) Total loans, net 741,589 560,751 Accrued interest
receivable 5,319 4,277 Federal Home Loan Bank stock 2,842 5,738
Premises and equipment, net 5,546 6,214 Goodwill 13,970 13,970
Bank-owned life insurance 10,845 10,464 Prepaid pension costs 4,177
3,057 Deferred income taxes 2,645 2,236 Other assets 1,671 1,993
Total assets $1,169,591 $1,006,950 Liabilities and Stockholders'
Equity Liabilities: Deposits $1,003,691 $831,768 Borrowings 28,000
38,000 Mortgagors' escrow funds 6,160 5,264 Due to brokers for
securities purchased - 2,513 Accrued expenses and other liabilities
3,054 2,245 Total liabilities 1,040,905 879,790 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;
12,336,040 and 12,377,206 shares outstanding at March 31, 2006 and
March 31, 2005, respectively) 136 136 Additional paid-in capital
105,092 103,728 Treasury stock, at cost (1,300,130 and 1,258,964
shares at March 31, 2006 and March 31, 2005, respectively) (18,813)
(18,131) Common stock held by Employee Stock Ownership Plan (5,549)
(6,053) Unearned stock awards (3,252) (4,435) Retained earnings
54,960 54,638 Accumulated other comprehensive loss, net of taxes
(3,888) (2,723) Total stockholders' equity 128,686 127,160 Total
liabilities and stockholders' equity $1,169,591 $1,006,950 Sound
Federal Bancorp, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) (In thousands, except per share data) For the
Three For the Months Ended Year Ended March 31, March 31, 2006 2005
2006 2005 Interest and Dividend Income Loans $10,423 $7,697 $37,395
$29,430 Mortgage-backed and other securities 3,369 3,081 12,761
11,998 Federal funds sold and other overnight deposits 306 95 972
340 Other earning assets 73 45 313 132 Total interest and dividend
income 14,171 10,918 51,441 41,900 Interest Expense Deposits 6,830
3,966 23,207 13,968 Borrowings 306 363 1,390 1,489 Other
interest-bearing liabilities 5 5 23 20 Total interest expense 7,141
4,334 24,620 15,477 Net interest income 7,030 6,584 26,821 26,423
Provision for loan losses 75 75 300 300 Net interest income after
provision for loan losses 6,955 6,509 26,521 26,123 Non-Interest
Income Service charges and fees 264 213 1,149 953 Income on
bank-owned life insurance 98 92 381 379 Gain on sale of assets - 93
325 93 Gain on sale of mortgage loans - 5 - 22 Total non-interest
income 362 403 1,855 1,447 Non-Interest Expense Compensation and
benefits 3,060 2,533 11,697 9,945 Occupancy and equipment 782 750
3,018 2,717 Data processing service fees 320 340 1,230 1,218
Advertising and promotion 387 440 1,215 1,119 Merger-related costs
480 - 541 - Other 931 1,012 3,508 3,569 Total non-interest expense
5,960 5,075 21,209 18,568 Income before income tax expense 1,357
1,837 7,167 9,002 Income tax expense 722 722 3,003 3,533 Net income
$635 $1,115 $4,164 $5,469 Earnings per share: Basic earnings per
share $0.06 $0.10 $0.36 $0.47 Diluted earnings per share $0.05
$0.10 $0.35 $0.46 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, 2006
2005 2005 Net interest income $7,030 $6,723 $6,548 Provision for
loan losses 75 75 75 Non-interest income 362 346 778 Non-interest
expense: Compensation and benefits 3,059 2,969 2,841 Occupancy and
equipment 782 748 751 Other non-interest expense 2,119 1,528 1,442
Total non-interest expense 5,960 5,245 5,034 Income before income
tax expense 1,357 1,749 2,217 Income tax expense 722 703 858 Net
income $635 $1,046 $1,359 Total assets $1,169,591 $1,149,326
$1,083,065 Loans, net 741,589 710,750 668,019 Mortgage-backed
securities Available for sale 140,053 150,758 165,474 Held to
maturity 65,303 64,988 60,530 Other securities Available for sale
75,402 76,779 77,183 Held to maturity 45,943 42,943 34,211 Deposits
1,003,691 969,702 913,722 Borrowings 28,000 35,000 35,000
Stockholders' equity 128,686 128,651 128,179 Performance Data:
Return on average assets(1) 0.23% 0.37% 0.51% Return on average
equity(1) 2.02% 3.25% 4.14% Net interest rate spread(1) 2.30% 2.20%
2.27% Net interest margin(1) 2.60% 2.50% 2.55% Efficiency ratio(2)
74.13% 74.20% 71.90% Per Common Share Data: Basic earnings per
common share $0.06 $0.09 $0.12 Diluted earnings per common share
$0.05 $0.09 $0.12 Book value per share(3) $10.43 $10.44 $10.41
Tangible book value per share(3) $9.30 $9.31 $9.28 Dividends per
share $0.075 $0.075 $0.070 Capital Ratios: Equity to total assets
(consolidated) 11.00% 11.19% 11.83% Tier 1 leverage capital (Bank)
9.34% 9.43% 9.80% Asset Quality Data: Total non-performing loans
$2,893 $2,689 $1,285 Total non-performing assets $2,893 $2,689
$1,285 At or for the Quarter Ended June 30, March 31, 2005 2005 Net
interest income $6,520 $6,584 Provision for loan losses 75 75
Non-interest income 369 403 Non-interest expense: Compensation and
benefits 2,827 2,533 Occupancy and equipment 737 750 Other
non-interest expense 1,406 1,792 Total non-interest expense 4,970
5,075 Income before income tax expense 1,844 1,837 Income tax
expense 720 722 Net income $1,124 $1,115 Total assets $1,060,811
$1,006,950 Loans, net 613,481 560,751 Mortgage-backed securities
Available for sale 184,491 199,746 Held to maturity 60,314 59,777
Other securities Available for sale 76,988 76,408 Held to maturity
23,713 19,712 Deposits 890,191 831,768 Borrowings 35,000 38,000
Stockholders' equity 128,084 127,160 Performance Data: Return on
average assets(1) 0.44% 0.46% Return on average equity(1) 3.57%
3.51% Net interest rate spread(1) 2.41% 2.62% Net interest
margin(1) 2.66% 2.85% Efficiency ratio(2) 72.14% 73.61% Per Common
Share Data: Basic earnings per common share $0.10 $0.10 Diluted
earnings per common share $0.10 $0.10 Book value per share(3)
$10.41 $10.27 Tangible book value per share(3) $9.28 $9.15
Dividends per share $0.065 $0.06 Capital Ratios: Equity to total
assets (consolidated) 12.07% 12.63% Tier 1 leverage capital (Bank)
9.85% 10.24% Asset Quality Data: Total non-performing loans $2,183
$580 Total non-performing assets $2,183 $580 (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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