Sound Federal Bancorp, Inc. Announces Third Fiscal Quarter Earnings
WHITE PLAINS, N.Y., Jan. 26 /PRNewswire-FirstCall/ -- Sound Federal
Bancorp, Inc. (NASDAQ:SFFS) (the "Company"), the holding company
for Sound Federal Savings (the "Bank"), announced net income of
$1.4 million or diluted earnings per share of $0.12 for the quarter
ended December 31, 2004, as compared to $1.8 million or diluted
earnings per share of $0.14 for the quarter ended December 31,
2003, a decrease of 20.6% in net income. The decrease in net income
for the quarter ended December 31, 2004 is primarily attributable
to a $664,000 increase in non-interest expense, partially offset by
a $177,000 decrease in income tax expense. For the nine months
ended December 31, 2004, net income amounted to $4.4 million or
diluted earnings per share of $0.36, as compared to $5.2 million or
diluted earnings per share of $0.41 for the same period in 2003, a
decrease of 15.7% in net income. The decrease in net income for the
nine months ended December 31, 2004 reflects an increase of $1.9
million in non-interest expense, partially offset by an increase of
$417,000 in net interest income and a decrease of $446,000 in
income tax expense. Bruno J. Gioffre, Chairman of the Board,
commented, "The flattening yield curve continues to impact our net
interest rate spread and net interest margin. Our net interest rate
spread decreased 8 basis points to 2.63% from the September 30,
2004 quarter and our net interest margin decreased 9 basis points
to 2.85% during the same period. Despite these decreases, net
interest income remained substantially unchanged from the prior
linked quarter. We achieved this with steady growth in our loan
portfolio and the growth of deposit accounts. The growth in deposit
accounts is due primarily to our de- novo branch strategy which we
believe will grow the value of the franchise. Asset quality remains
very strong with non-performing loans amounting to $734,000 or
0.13% of total loans at December 31, 2004. As we begin the fourth
quarter of our 2005 fiscal year, we look forward to fiscal 2006 and
the opportunity to continue to grow the Sound Federal franchise. We
believe that this course of action will increase stockholder
value." The Company's total assets amounted to $984.4 million at
December 31, 2004 as compared to $890.5 million at March 31, 2004.
The $93.9 million increase in assets primarily consisted of a $63.5
million increase in net loans to $542.0 million and a $27.2 million
increase in securities to $364.9 million. Our asset growth was
funded principally by a $94.7 million increase in deposits to
$803.0 million. The increase in securities consisted of a $69.4
million increase in securities classified as held to maturity and a
$42.2 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 $6.0 million to $131.1 million at December 31,
2004 as compared to $137.1 million at March 31, 2004. The decrease
reflects treasury stock purchases at a cost of $8.3 million,
dividends paid of $2.2 million and a decrease of $2.0 million
attributable to the change in accumulated other comprehensive
income or loss, partially offset by net income of $4.4 million. The
accumulated other comprehensive loss of $1.3 million at December
31, 2004 represents the after-tax net unrealized loss on securities
available for sale ($2.1 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 December 31, 2004 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 December
31, 2004. Net interest income for the quarter ended December 31,
2004 remained relatively unchanged at $6.7 million as compared to
the same quarter in the prior year. Our net interest rate spread
was 2.63% and 2.92% for the quarters ended December 31, 2004 and
2003, respectively. Our net interest margin for those respective
periods was 2.85% and 3.17%. For the nine months ended December 31,
2004, net interest income amounted to $19.8 million as compared to
$19.4 million for the same period last year. Our net interest rate
spread was 2.71% and 2.93% and our net interest margin was 2.93%
and 3.22% for the respective 2004 and 2003 nine month periods. 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 125
basis points to 2.25%. 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
$382,000 and $252,000 for the quarters ended December 31, 2004 and
2003, respectively. For the nine months ended December 31, 2004,
non-interest income amounted to $1.0 million as compared to
$765,000 for the nine months ended December 31, 2003. The increases
in non-interest income were primarily due to increases in the cash
surrender value of bank- owned life insurance which was purchased
in December 2003. Non-interest expense totaled $4.6 million for the
quarter ended December 31, 2004 as compared to $3.9 million for the
quarter ended December 31, 2003. This increase is due to increases
of $431,000 in compensation and benefits, $120,000 in occupancy and
equipment expense, and $161,000 in other non- interest expense,
partially offset by a $42,000 decrease in advertising and promotion
expense. The increase in compensation and benefits expense is due
primarily to a $260,000 increase in expense related to stock awards
made pursuant to the Company's 2004 Stock Incentive Plan and a
$116,000 increase in compensation costs due primarily to additional
staff to support the growth in the Company's lending operations and
the addition of the Brookfield branch, which opened in June 2004.
At December 31, 2004, we had 124 full-time equivalent employees as
compared to 119 at December 31, 2003. For the nine months ended
December 31, 2004, non-interest expense increased $1.9 million to
$13.5 million as compared to $11.6 million for the nine months
ended December 31, 2003. This increase is due primarily to
increases of $1.3 million in compensation and benefits, $268,000 in
occupancy and equipment expense, $127,000 in data processing
service fees, and $326,000 in other non-interest expense, partially
offset by a decrease of $103,000 in advertising and promotion
expense. The increase in compensation and benefits expense for the
nine month period is due primarily to a $779,000 increase in
expense related to stock awards and a $431,000 increase in
compensation costs. The increase in occupancy and equipment expense
is primarily due to the addition of the Stamford and Brookfield
branches, which opened in September 2003 and June 2004,
respectively. The decrease in advertising and promotion expense is
primarily due to the timing of the marketing campaigns for the new
branch locations. Other non-interest expense for the three and nine
months ended December 31, 2004 includes $135,000 and $270,000,
respectively, 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 periods a year ago. 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. 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) December
31, March 31, 2004 2004 Assets Cash and due from banks $ 10,493 $
10,455 Federal funds sold and other overnight deposits 21,150
20,756 Securities: Available for sale, at fair value 295,497
337,730 Held to maturity, at amortized cost 69,430 - Total
securities 364,927 337,730 Loans, net: Mortgage loans 542,135
477,771 Consumer loans 2,757 3,396 Allowance for loan losses
(2,937) (2,712) Total loans, net 541,955 478,455 Accrued interest
receivable 3,857 3,623 Federal Home Loan Bank stock 5,738 5,303
Premises and equipment, net 5,969 5,630 Goodwill 13,970 13,970
Bank-owned life insurance 10,373 10,085 Prepaid pension costs 2,954
2,547 Deferred income taxes 1,091 - Other assets 1,895 1,987 Total
assets $ 984,372 $ 890,541 Liabilities and Stockholders' Equity
Liabilities: Deposits $ 802,990 $ 708,330 Borrowings 38,000 35,000
Mortgagors' escrow funds 6,012 4,522 Due to brokers for securities
purchased 3,916 4,000 Accrued expenses and other liabilities 2,320
1,630 Total liabilities 853,238 753,482 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 103,372 102,637 Treasury stock, at cost
(1,028,329 and 459,297 shares at December 31, 2004 and March 31,
2004, respectively) (14,644) (7,150) Common stock held by Employee
Stock Ownership Plan (6,178) (6,556) Unearned stock awards (4,731)
(5,618) Retained earnings 54,448 52,908 Accumulated other
comprehensive (loss) income, net of taxes (1,269) 702 Total
stockholders' equity 131,134 137,059 Total liabilities and
stockholders' equity $ 984,372 $ 890,541 Sound Federal Bancorp,
Inc. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data) For the Three For the Nine
Months Ended Months Ended December 31, December 31, 2004 2003 2004
2003 Interest and Dividend Income Loans $ 7,482 $ 6,641 $ 21,733 $
19,900 Mortgage-backed and other securities 3,101 3,186 8,917 8,693
Federal funds sold and other overnight deposits 113 46 245 220
Other earning assets 32 - 87 123 Total interest and dividend income
10,728 9,873 30,982 28,936 Interest Expense Deposits 3,677 2,798
10,002 8,342 Borrowings 371 381 1,126 1,130 Other interest-bearing
liabilities 5 7 15 42 Total interest expense 4,053 3,186 11,143
9,514 Net interest income 6,675 6,687 19,839 19,422 Provision for
loan losses 75 75 225 200 Net interest income after provision for
loan losses 6,600 6,612 19,614 19,222 Non-Interest Income Service
charges and fees 244 252 740 765 Increase in cash surrender value
of bank-owned life insurance 121 - 287 - Gains on sales of mortgage
loans 17 - 17 - Total non-interest income 382 252 1,044 765
Non-Interest Expense Compensation and benefits 2,538 2,107 7,412
6,105 Occupancy and equipment 673 553 1,967 1,699 Data processing
service fees 314 320 878 751 Advertising and promotion 189 231 679
782 Other 886 725 2,557 2,231 Total non-interest expense 4,600
3,936 13,493 11,568 Income before income tax expense 2,382 2,928
7,165 8,419 Income tax expense 956 1,133 2,811 3,257 Net income $
1,426 $ 1,795 $ 4,354 $ 5,162 Earnings per share: Basic earnings
per share $ 0.12 $ 0.15 $ 0.37 $ 0.42 Diluted earnings per share $
0.12 $ 0.14 $ 0.36 $ 0.41 Sound Federal Bancorp, Inc. and
Subsidiary Other Financial Data (Unaudited) (Dollars in thousands,
except per share data) At or for the Quarter Ended Dec. 31, Sept.
30, June 30, March 31, Dec. 31, 2004 2004 2004 2004 2003 Net
interest income $ 6,675 $ 6,706 $ 6,458 $ 6,770 $ 6,687 Provision
for loan losses 75 75 75 75 75 Non-interest income 382 310 352 276
252 Non-interest expense: Compensation and benefits 2,538 2,462
2,412 2,628 2,107 Occupancy and equipment 673 661 633 592 553 Other
non-interest expense 1,389 1,478 1,247 1,318 1,276 Total
non-interest expense 4,600 4,601 4,292 4,538 3,936 Income before
income tax expense 2,382 2,340 2,443 2,433 2,928 Income tax expense
956 909 946 977 1,133 Net income $ 1,426 $ 1,431 $ 1,497 $ 1,456 $
1,795 Total assets $ 984,372 $ 965,388 $ 914,610 $ 890,541 $
881,637 Loans, net 541,955 529,638 501,239 478,455 461,453
Mortgage-backed securities Available for sale 216,133 231,986
246,850 255,853 269,604 Held to maturity 54,717 30,691 7,157 - -
Other securities Available for sale 79,364 84,986 85,427 81,877
86,656 Held to maturity 14,713 10,640 2,796 - - Deposits 802,990
789,794 746,160 708,330 698,416 Borrowings 38,000 38,000 38,000
35,000 35,000 Stockholders' equity 131,134 129,439 125,016 137,059
132,091 Performance Data: Return on average assets(1) 0.58% 0.60%
0.66% 0.67% 0.82% Return on average equity(1) 4.38% 4.56% 4.49%
4.49% 5.26% Net interest rate spread(1) 2.63% 2.71% 2.80% 2.98%
2.92% Net interest margin(1) 2.85% 2.94% 3.02% 3.20% 3.17%
Efficiency ratio(2) 65.18% 65.58% 63.02% 64.41% 56.72% Per Common
Share Data: Basic earnings per common share $ 0.12 $ 0.12 $ 0.13 $
0.12 $ 0.15 Diluted earnings per common share $ 0.12 $ 0.12 $ 0.12
$ 0.12 $ 0.14 Book value per share(3) $ 10.40 $ 10.29 $ 9.96 $
10.40 $ 10.32 Tangible book value per share(3) $ 9.29 $ 9.18 $ 8.85
$ 9.34 $ 9.23 Dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06 $
0.06 Capital Ratios: Equity to total assets (consolidated) 13.32%
13.41% 13.67% 15.39% 14.98% Tier 1 leverage capital (Bank) 10.37%
10.40% 10.71% 10.92% 10.74% Asset Quality Data: Total
non-performing loans $ 734 $ 963 $ 1,728 $ 1,981 $ 1,290 Total
non-performing assets $ 734 $ 963 $ 1,728 $ 1,981 $ 1,290 (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, +1-914-761-3636 Web site:
http://www.soundfed.com/
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