WHITE PLAINS, N.Y., Oct. 28 /PRNewswire-FirstCall/ -- Sound Federal
Bancorp, Inc. (NASDAQ:SFFS) (the "Company"), the holding company
for Sound Federal Savings (the "Bank"), announced net income of
$1.36 million or diluted earnings per share of $0.12 for the
quarter ended September 30, 2005 as compared to $1.43 million or
diluted earnings per share of $0.12 for the quarter ended September
30, 2004. Net income decreased $72,000 for the quarter ended
September 30, 2005 which is attributable to a $433,000 increase in
non-interest expense and a $158,000 decrease in net interest
income, partially offset by a $468,000 increase in non-interest
income and a $51,000 decrease in income tax expense. For the six
months ended September 30, 2005, net income amounted to $2.5
million or diluted earnings per share of $0.21, as compared to $2.9
million or diluted earnings per share of $0.25 for the same period
in 2004, a decrease of 15.2% in net income. The decrease in net
income for the six months ended September 30, 2005 is primarily
attributable to a $1.1 million increase in non-interest expense,
partially offset by a $485,000 increase in non-interest income and
a $277,000 decrease in income tax expense. Bruno J. Gioffre,
Chairman of the Board, commented, "The yield curve continues to
affect our net interest rate spread and net interest margin, which
decreased 14 basis points and 11 basis points respectively from the
linked quarter. However, the average balance of net
interest-earning assets increased $10.5 million to $114.2 million
during the current quarter as compared to $103.7 million during the
linked quarter. A significant component of this growth was an 8.9%
or $54.6 million increase in total loans during the quarter. Total
deposits grew 2.6% or $23.5 million during the same period. Loan
production continues to be strong with originations of $91.7
million in the second quarter of fiscal 2006. This record loan
production has helped Sound Federal to mitigate increasing funding
costs that are driven by short-term rates. While the yield curve
continues to challenge us, we remain focused on the growth of the
Sound Federal franchise. We will continue to strive to grow our
customer base -- both deposit and loan products. One of the
Company's strengths is the relative affluence and economic
diversity of our market area. This provides us with opportunities
to increase the Company's income and franchise value as evidenced
by our ability to continue to originate loans and increase our
deposit base. The yield curve will eventually change -- market
forces will dictate how and when. We believe that our continued
ability to develop customer relationships in the New York counties
of Westchester, Putnam and Rockland and in Fairfield County,
Connecticut, is an investment that, if cultivated and nurtured,
will return future earnings and increase franchise value. As
always, we value and thank you for your continued support of our
Company." The Company's total assets amounted to $1.1 billion at
September 30, 2005, as compared to $1.0 billion at March 31, 2005.
The $76.1 million increase in assets primarily consisted of a
$107.3 million increase in net loans to $668.0 million, partially
offset by a decrease in total securities of $18.2 million. Our
asset growth was funded principally by an $81.9 million increase in
deposits to $913.7 million. Total stockholders' equity increased
$1.0 million to $128.2 million at September 30, 2005 as compared to
$127.2 million at March 31, 2005. The increase reflects net income
of $2.5 million and an increase in additional paid-in capital of
$530,000, partially offset by treasury stock purchases at a cost of
$1.3 million and dividends paid of $1.6 million. The accumulated
other comprehensive loss of $2.7 million at September 30, 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 September 30, 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 September
30, 2005. Net interest income for the quarter ended September 30,
2005 decreased $158,000 to $6.5 million as compared to $6.7 million
for the quarter ended September 30, 2004. Our net interest rate
spread was 2.27% and 2.71% for the quarters ended September 30,
2005 and 2004, respectively. Our net interest margin for those
respective periods was 2.55% and 2.94%. For the six months ended
September 30, 2005, net interest income amounted to $13.1 million
as compared to $13.2 million for the prior year. Our interest rate
spread was 2.33% and 2.76% and our net interest margin was 2.61%
and 2.98% for the respective six month periods. 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. The Federal Reserve began raising the
Federal funds rate in July 2004. Since that time and through
September 30, 2005, the Federal Reserve has raised the Federal
funds rate by 250 basis points to 3.50%. However, long term rates
have only begun to rise, resulting in a flattening yield curve.
Consequently, as short-term interest rates increased, the cost of
our interest-bearing liabilities increased faster than the yield on
interest-earning assets which are affected by longer-term interest
rates. The provision for loan losses was $75,000 for the quarters
ended September 30, 2005 and 2004 and $150,000 for the six months
ended September 30, 2005 and 2004. Non-performing loans amounted to
$1.3 million or 0.19% of total loans at September 30, 2005, as
compared to $963,000 or 0.18% of total loans at September 30, 2004.
At March 31, 2005, non-performing loans amounted to $580,000 or
0.10% of total loans. The allowance for loan losses amounted to
$3.2 million and $3.0 million at September 30, 2005 and March 31,
2005, respectively. There were no charge-offs or recoveries during
the quarters ended September 30, 2005 and 2004. 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 $778,000 and
$310,000 for the quarters ended September 30, 2005 and 2004,
respectively. For the six months ended September 30, 2005,
non-interest income amounted to $1.1 million as compared to
$662,000 for the six months ended September 30, 2004. The increases
in non-interest income were 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 $5.0 million for the quarter ended September 30, 2005 as
compared to $4.6 million for the quarter ended September 30, 2004.
This increase is primarily due to increases of $379,000 in
compensation and benefits expense, $90,000 in occupancy and
equipment expense and $90,000 in data processing servicing fees.
For the six months ended September 30, 2005, non-interest expense
increased $1.1 million to $10.0 million as compared to $8.9 million
for the six months ended September 30, 2004. This increase is due
primarily to increases of $794,000 in compensation and benefits,
$194,000 in occupancy and equipment expense, and $82,000 in data
processing servicing fees. The increases include costs attributable
to the three new branches opened during fiscal 2005. 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) September 30, March 31, 2005 2005 Assets
Cash and due from banks $10,850 $11,512 Federal funds sold and
other overnight deposits 18,037 31,095 Securities: Available for
sale, at fair value 242,657 276,154 Held to maturity, at amortized
cost 94,741 79,489 Total securities 337,398 355,643 Loans, net:
Mortgage loans 664,447 558,662 Other loans 6,733 5,100 Allowance
for loan losses (3,161) (3,011) Total loans, net 668,019 560,751
Accrued interest receivable 4,741 4,277 Federal Home Loan Bank
stock 6,385 5,738 Premises and equipment, net 5,902 6,214 Goodwill
13,970 13,970 Bank-owned life insurance 10,652 10,464 Prepaid
pension costs 3,078 3,057 Deferred income taxes 2,431 2,236 Other
assets 1,602 1,993 Total assets $1,083,065 $1,006,950 Liabilities
and Stockholders' Equity Liabilities: Deposits $913,722 $831,768
Borrowings 35,000 38,000 Mortgagors' escrow funds 3,368 5,264 Due
to brokers for securities purchased - 2,513 Accrued expenses and
other liabilities 2,796 2,245 Total liabilities 954,886 879,790
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; 12,310,206 and 12,377,206 shares outstanding at September
30, 2005 and March 31, 2005, respectively) 136 136 Additional
paid-in capital 104,258 103,728 Treasury stock, at cost (1,325,964
and 1,258,964 shares at September 30, 2005 and March 31, 2005,
respectively) (19,186) (18,131) Common stock held by Employee Stock
Ownership Plan (5,801) (6,053) Unearned stock awards (3,844)
(4,435) Retained earnings 55,325 54,638 Accumulated other
comprehensive loss, net of taxes (2,709) (2,723) Total
stockholders'equity 128,179 127,160 Total liabilities and
stockholders' equity $1,083,065 $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 Six
Months Ended Months Ended September 30, September 30, 2005 2004
2005 2004 Interest and Dividend Income Loans $8,874 $7,354 $17,138
$14,251 Mortgage-backed and other securities 3,184 3,024 6,226
5,816 Federal funds sold and other overnight deposits 195 73 376
132 Other earning assets 85 34 152 55 Total interest and dividend
income 12,338 10,485 23,892 20,254 Interest Expense Deposits 5,423
3,384 10,091 6,325 Borrowings 361 390 722 755 Other
interest-bearing liabilities 6 5 11 10 Total interest expense 5,790
3,779 10,824 7,090 Net interest income 6,548 6,706 13,068 13,164
Provision for loan losses 75 75 150 150 Net interest income after
provision for loan losses 6,473 6,631 12,918 13,014 Non-Interest
Income Service charges and fees 359 220 634 496 Income on
bank-owned life insurance 94 90 188 166 Gain on sale of assets 325
- 325 - Total non-interest income 778 310 1,147 662 Non-Interest
Expense Compensation and benefits 2,841 2,462 5,668 4,874 Occupancy
and equipment 751 661 1,488 1,294 Data processing service fees 354
264 646 564 Advertising and promotion 187 239 525 490 Other 901 975
1,677 1,671 Total non-interest expense 5,034 4,601 10,004 8,893
Income before income tax expense 2,217 2,340 4,061 4,783 Income tax
expense 858 909 1,578 1,855 Net income $1,359 $1,431 $2,483 $2,928
Earnings per share: Basic earnings per share $0.12 $0.12 $0.22
$0.25 Diluted earnings per share $0.12 $0.12 $0.21 $0.25 Sound
Federal Bancorp, Inc. and Subsidiary Other Financial Data
(Unaudited) (Dollars in thousands, except per share data) At or for
the Quarter Ended Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2005 2005 2005 2004 2004 Net interest income $6,548 $6,520 $6,584
$6,675 $6,706 Provision for loan losses 75 75 75 75 75 Non-interest
income 778 369 403 382 310 Non-interest expense: Compensation and
benefits 2,841 2,827 2,533 2,538 2,462 Occupancy and equipment 751
737 750 673 661 Other non-interest expense 1,442 1,406 1,792 1,389
1,478 Total non-interest expense 5,034 4,970 5,075 4,600 4,601
Income before income tax expense 2,217 1,844 1,837 2,382 2,340
Income tax expense 858 720 722 956 909 Net income $1,359 $1,124
$1,115 $1,426 $1,431 Total assets $1,083,065 $1,060,811 $1,006,950
$984,372 $965,388 Loans, net 668,019 613,481 560,751 541,955
529,638 Mortgage-backed securities Available for sale 165,474
184,491 199,746 216,133 231,986 Held to maturity 60,530 60,314
59,777 54,717 30,691 Other securities Available for sale 77,183
76,988 76,408 79,364 84,986 Held to maturity 34,211 23,713 19,712
14,713 10,640 Deposits 913,722 890,191 831,768 802,990 789,794
Borrowings 35,000 35,000 38,000 38,000 38,000 Stockholders' equity
128,179 128,084 127,160 131,134 129,439 Performance Data: Return on
average assets(1) 0.51% 0.44% 0.46% 0.58% 0.60% Return on average
equity(1) 4.14% 3.57% 3.51% 4.38% 4.56% Net interest rate spread(1)
2.27% 2.41% 2.62% 2.63% 2.71% Net interest margin(1) 2.55% 2.66%
2.85% 2.85% 2.94% Efficiency ratio(2) 71.90% 72.14% 73.61% 65.18%
65.58% Per Common Share Data: Basic earnings per common share $0.12
$0.10 $0.10 $0.12 $0.12 Diluted earnings per common share $0.12
$0.10 $0.10 $0.12 $0.12 Book value per share(3) $10.41 $10.41
$10.27 $10.40 $10.29 Tangible book value per share(3) $9.28 $9.28
$9.15 $9.29 $9.18 Dividends per share $0.070 $0.065 $0.06 $0.06
$0.06 Capital Ratios: Equity to total assets (consolidated) 11.83%
12.07% 12.63% 13.32% 13.41% Tier 1 leverage capital (Bank) 9.80%
9.85% 10.24% 10.37% 10.40% Asset Quality Data: Total non-performing
loans $1,285 $2,183 $580 $734 $963 Total non-performing assets
$1,285 $2,183 $580 $734 $963 (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, +1-914-761-3636 Web site: http://www.soundfed.com/
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