MOREHEAD CITY, N.C., Feb. 20 /PRNewswire-FirstCall/ -- Sound Banking Company (OTC:SNBN) (BULLETIN BOARD: SNBN) announced today that income before taxes was $1,454,000 for the year ended December 31, 2006, a 60% or $546,000 increase over 2005. The Bank also reported that net income for 2006 was $917,000 or $1.35 per diluted share compared to $908,000 or $1.31 per diluted share for 2005. The Bank began recording income tax expense in 2006, having used all of its net operating loss carryovers from the first few years of operations. Prior to 2006, the Bank did not record any income tax expense. Income tax expense for 2006 was $537,000, compared to none for 2005. Sound Bank's total assets were $101.5 million at December 31, 2006 compared to $85.7 million at December 31, 2005, an increase of $15.8 million or 18%. Loans increased $13.4 million or 20% to $80.0 million at December 31, 2006 while total deposits increased $13.1 million or 17% to $89.9 million. Earnings growth in 2006 was fueled by average earning assets increasing $19 million or 26% to $92 million for 2006 from average earning assets of $73 million for 2005. This growth in earning assets resulted in net interest income increasing 23% from $3.3 million in 2005 to $4.0 million in 2006. Non- interest income also increased 23% or $139,000 for the year, from $607,000 in 2005 to $746,000 in 2006. Non-interest expense grew by 17% from $2.6 million to $3.1 million in 2006 due to additional personnel and occupancy costs associated with opening a full service branch in Cape Carteret in June 2005 and a loan production office in New Bern during 2006. The provision for loan loss was $172,000 for 2006 compared to $252,000 for 2005. Fourth quarter 2006 net income was $257,000, or $.37 per diluted share compared with $267,000 or $.40 per diluted share for the same quarter in 2005. These quarterly results are not comparable due to income tax expense of $140,000 for the 2006 period compared to none for the 2005 period. Income before income taxes for the current quarter was $397,000, a $130,000 or 49% increase over the same period of 2005. Commenting on the Bank's 2006 results, Phil Collins, President and CEO, said, "We are extremely pleased with the Bank's performance. Few new banks maintain or grow net income during the first year of being taxable. With loans and deposits growth propelling earnings, we look forward to even better results in 2007. We have broken ground for our third branch, located in Beaufort, and expect to open by July. Our Cape Carteret office is steadily growing and our loan production office in New Bern which opened this year is exceeding expectations." Sound Banking Company is a state chartered bank and offers a full range of financial services. Sound Bank, headquartered in Morehead City, operates full service offices in Morehead City and Cape Carteret and a loan production office in New Bern, North Carolina. Information about Sound Banking Company and its products and services is available on its web site at: http://www.soundbanking.com/ The information as, of, and for the periods ended December 31, 2006 as presented is unaudited. This news release contains forward-looking statements. The actual results might differ materially from those projected in the forward-looking statements for various reasons, including our limited operating history, substantial changes in financial markets, regulatory changes, changes in interest rates, loss of deposits and loan demand to other savings and financial institutions, and changes in real estate values and the real estate market. DATASOURCE: Sound Banking Company CONTACT: Phil Collins, President & CEO, of Sound Banking Company, +1-252-727-5558, Web site: http://www.soundbanking.net/

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