SFFS Sound Federal Bancorp (MM)

Sound Federal Bancorp, Inc. Announces Fourth Fiscal Quarter and Year End Earnings WHITE PLAINS, N.Y., April 29 /PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (the "Company"), the holding company for Sound Federal Savings (the "Bank"), announced net income of $1.5 million or diluted earnings per share of $0.12 for the quarter ended March 31, 2004, as compared to $2.3 million or diluted earnings per share of $0.18 for the quarter ended March 31, 2003, a decrease of 36.9% in net income. The decrease in net income for the quarter ended March 31, 2004 as compared to the same quarter in the prior year is primarily attributable to a $1.2 million increase in non-interest expense partially offset by a $443,000 decrease in income tax expense. For the fiscal year ended March 31, 2004, net income amounted to $6.6 million or diluted earnings per share of $0.52 as compared to $8.5 million or diluted earnings per share of $0.65 for the prior fiscal year. The decrease in net income for the year ended March 31, 2004 reflects an increase of $3.4 million in non-interest expense partially offset by an increase of $353,000 in net interest income and a decrease of $1.0 million in income tax expense. Bruno J. Gioffre, Chairman of the Board, commented, "The Company's net income reflects increased expenses related to the growth of the Bank's franchise as well as increased expenses related to stock compensation plans. The interest rate environment has hampered revenue growth despite the growth of the Bank's franchise. However, we recognize the opportunities and threats of the current interest rate environment and that of increasing interest rates. We believe that expanding the Bank's franchise while interest rates are low provides an opportunity to attract new customers with relatively low interest rates on deposits. As such, I am pleased to announce that we will be opening our 12th full service branch in Brookfield, Connecticut in May 2004 and our 13th full service branch in Carmel, New York in October 2004. These locations expand our presence into contiguous communities and will provide additional opportunities to the existing branches. We appreciate the support of our stockholders and customers as we continue to grow the Company. We look forward to the 2005 fiscal year with great enthusiasm for the opportunities and challenges that lie ahead." The Company's total assets amounted to $890.5 million at March 31, 2004 as compared to $796.1 million at March 31, 2003. The $94.4 million increase in total assets is primarily due to a $42.7 million increase in securities available for sale to $337.7 million, a $50.8 million increase in net loans to $478.5 million, and the purchase of bank-owned life insurance with a cash surrender value of $10.1 million. These increases were partially offset by a decrease in federal funds sold of $15.4 million. Our asset growth was funded principally by a $104.1 million increase in deposits to $708.3 million. Total stockholders' equity decreased $1.2 million to $137.1 million at March 31, 2004 as compared to $138.3 million at March 31, 2003. The decrease reflects the purchase of treasury shares at a cost of $8.4 million and dividends paid of $2.6 million partially offset by net income of $6.6 million, an increase of $686,000 attributable to accumulated other comprehensive income and proceeds of $268,000 on the reissuance of treasury shares for stock options exercised. The change in accumulated other comprehensive income reflects a decrease of $3.5 million ($2.1 million after taxes) in the minimum pension liability partially offset by a decrease of $2.4 million ($1.4 million after taxes) in the net unrealized gain on securities available for sale. Net interest income for the quarter ended March 31, 2004 amounted to $6.8 million, a $118,000 decrease from the same period in the prior year. The interest rate spread was 2.98% and 3.41% for the quarters ended March 31, 2004 and 2003, respectively. Our net interest margin for those respective periods was 3.20% and 3.79%. For the year ended March 31, 2004, net interest income amounted to $26.2 million as compared to $25.8 million for the prior year. Our interest rate spread was 2.98% and 3.71% and our net interest margin was 3.24% and 3.93% for the respective 2004 and 2003 fiscal years. The decreases in interest rate spread and net interest margin are primarily the result of mortgage refinancings, lower rates on new loans originated and lower returns on our investment portfolio, as interest rates remain at 40-year lows. If interest rates begin to increase, the cost of our interest-bearing liabilities will increase faster than the rates on our interest-earning assets resulting in a decrease in our net interest rate spread and net interest margin. Non-interest income totaled $276,000 and $267,000 for the quarters ended March 31, 2004 and 2003, respectively. For the year ended March 31, 2004, non-interest income amounted to $1.0 million as compared to $890,000 for the 2003 fiscal year. The increase in non-interest income was primarily due to higher levels of income from service charges on deposit accounts, late charges on loans and various other service fees. Non-interest expense totaled $4.5 million for the quarter ended March 31, 2004 as compared to $3.3 million for the quarter ended March 31, 2003. This increase is due to increases of $789,000 in compensation and benefits, $170,000 in occupancy and equipment expense, $39,000 in data processing service fees, $108,000 in advertising and promotion expense, and $105,000 in other non-interest expense. For fiscal 2004, non-interest expense increased $3.4 million to $16.1 million as compared to $12.7 million for the prior fiscal year. This increase is due primarily to increases of $2.2 million in compensation and benefits, $545,000 in occupancy and equipment expense, and $457,000 in other non-interest expense. The increase in compensation and benefits expense is due primarily to additional staff to support the growth in the Company's lending operations and the Stamford branch, which opened in September 2003, additional ESOP expense and additional expense related to stock awards pursuant to the Company's 2004 Stock Incentive Plan. The increase in ESOP expense reflects the increase in shares committed to be released for allocation as a result of the second-step conversion and the increase in the market value of those shares. The increase in occupancy and equipment expense is primarily due to two new branch locations (Somers, New York and Stamford, Connecticut) and the Company's new corporate office which opened in April 2003. 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 and Stamford. 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, 2004 2003 Assets Cash and due from banks $10,455 $8,776 Federal funds sold and other overnight deposits 20,756 36,121 Securities available for sale, at fair value 337,730 295,048 Loans, net: Mortgage loans 478,470 428,575 Consumer loans 2,697 1,551 Allowance for loan losses (2,712) (2,442) Total loans, net 478,455 427,684 Accrued interest receivable 3,623 3,678 Federal Home Loan Bank stock 5,303 4,141 Premises and equipment, net 5,630 5,467 Goodwill 13,970 13,970 Bank-owned life insurance 10,085 - Prepaid pension costs 2,547 - Other assets 1,987 1,203 Total assets $890,541 $796,088 Liabilities and Stockholders' Equity Liabilities: Deposits $708,330 $604,260 Borrowings 35,000 35,000 Mortgagors' escrow funds 4,522 4,603 Due to brokers for securities purchased 4,000 10,495 Accrued expenses and other liabilities 1,630 3,409 Total liabilities 753,482 657,767 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 and 13,247,133 shares issued at March 31, 2004 and 2003, respectively) 136 132 Additional paid-in capital 102,637 95,395 Treasury stock, at cost (459,297 shares) (7,150) - Common stock held by the Employee Stock Ownership Plan (6,556) (7,059) Unearned stock awards (5,618) (100) Retained earnings 52,908 49,937 Accumulated other comprehensive income, net of taxes 702 16 Total stockholders' equity 137,059 138,321 Total liabilities and stockholders' equity $890,541 $796,088 Sound Federal Bancorp and Subsidiary CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the Quarter For the Year Ended Ended March 31, March 31, 2004 2003 2004 2003 Interest and Dividend Income Loans $6,919 $7,139 $26,819 $29,906 Mortgage-backed and other securities 2,845 2,763 11,538 8,940 Federal funds sold and other overnight deposits 20 136 240 526 Other earning assets 19 67 142 206 Total interest and dividend income 9,803 10,105 38,739 39,578 Interest Expense Deposits 2,662 2,797 11,004 12,008 Borrowings 365 394 1,495 1,630 Other interest-bearing liabilities 6 26 48 101 Total interest expense 3,033 3,217 12,547 13,739 Net interest income 6,770 6,888 26,192 25,839 Provision for loan losses 75 100 275 275 Net interest income after provision for loan losses 6,695 6,788 25,917 25,564 Non-Interest Income Service charges and fees 276 221 1,041 831 Gain on sale of real estate owned - 46 - 59 Total non-interest income 276 267 1,041 890 Non-Interest Expense Compensation and benefits 2,628 1,839 8,733 6,540 Occupancy and equipment 592 422 2,291 1,746 Data processing service fees 274 235 1,025 959 Advertising and promotion 238 130 1,020 884 Other 806 701 3,037 2,580 Total non-interest expense 4,538 3,327 16,106 12,709 Income before income tax expense 2,433 3,728 10,852 13,745 Income tax expense 977 1,420 4,234 5,219 Net income $1,456 $2,308 $6,618 $8,526 Basic earnings per share $0.12 $0.19 $0.54 $0.67 Diluted earnings per share $0.12 $0.18 $0.52 $0.65 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, 2004 2003 2003 2003 2003 Net interest income $6,770 $6,687 $6,205 $6,530 $6,888 Provision for loan losses 75 75 75 50 100 Non-interest income 276 252 228 285 267 Non-interest expense: Compensation and benefits 2,628 2,107 2,006 1,992 1,839 Occupancy and equipment 592 553 584 562 422 Other non-interest expense 1,318 1,276 1,058 1,430 1,066 Total non-interest expense 4,538 3,936 3,648 3,984 3,327 Income before income tax expense 2,433 2,928 2,710 2,781 3,728 Income tax expense 977 1,133 1,060 1,064 1,420 Net income $1,456 $1,795 $1,650 $1,717 $2,308 Total assets $890,541 $881,637 $850,988 $835,635 $796,088 Loans, net 478,455 461,453 437,205 422,461 427,684 Securities available for sale: Mortgage-backed securities 255,853 269,604 264,359 250,529 211,484 Other securities 81,877 86,656 93,532 88,752 83,564 Deposits 708,330 698,416 653,395 633,265 604,260 Borrowings 35,000 35,000 55,000 35,000 35,000 Stockholders' equity 137,059 132,091 137,780 139,822 138,321 Performance Data: Return on average assets (1) 0.67% 0.82% 0.80% 0.85% 1.17% Return on average equity (1) 4.49% 5.26% 4.76% 4.97% 7.75% Average interest rate spread (1) 2.98% 2.92% 2.85% 3.07% 3.41% Net interest margin (1) 3.20% 3.17% 3.14% 3.39% 3.79% Efficiency ratio 64.41% 56.72% 56.71% 58.46% 46.80% Per Common Share Data: Basic earnings per common share $0.12 $0.15 $0.13 $0.14 $0.19 Diluted earnings per common share $0.12 $0.14 $0.13 $0.14 $0.18 Book value per share (2) $10.40 $10.32 $10.46 $10.55 $10.44 Tangible book value per share (2) $9.34 $9.23 $9.40 $9.50 $9.39 Dividends per share $0.06 $0.06 $0.05 $0.05 $0.05 Capital Ratios: Equity to total assets (consolidated) 15.39% 14.98% 16.19% 16.73% 17.38% Tier 1 leverage capital (Bank) 10.92% 10.74% 10.82% 11.14% 11.29% Asset Quality Data: Total non-performing loans $1,981 $1,290 $1,751 $889 $477 Total non-performing assets $1,981 $1,290 $1,751 $889 $477 (1) Ratios are annualized. (2) 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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