SFFS Sound Federal Bancorp (MM)

Sound Federal Bancorp, Inc. Announces Second Fiscal Quarter Earnings WHITE PLAINS, N.Y., Oct. 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 September 30, 2004, as compared to $1.7 million or diluted earnings per share of $0.13 for the quarter ended September 30, 2003, a decrease of 13.3% in net income. The decrease in net income for the quarter ended September 30, 2004 is primarily attributable to a $953,000 increase in non-interest expense, partially offset by a $501,000 increase in net interest income and a $151,000 decrease in income tax expense. For the six months ended September 30, 2004, net income amounted to $2.9 million or diluted earnings per share of $0.25, as compared to $3.4 million or diluted earnings per share of $0.26 for the same period in 2003, a decrease of 13.0% in net income. The decrease in net income for the six months ended September 30, 2004 reflects an increase of $1.3 million in non-interest expense, partially offset by an increase of $429,000 in net interest income and a decrease of $269,000 in income tax expense. Bruno J. Gioffre, Chairman of the Board, commented, "The Company's results reflect the growth of the Bank in an interest rate environment that features a flattening yield curve. While the Company's interest rate spread and net interest margin have decreased since reaching record levels in fiscal 2003, net interest income has remained substantially unchanged. This is due to the growth of our interest-earning assets, most notably our loan portfolio, and the growth of our deposit accounts. As of September 30, 2004, our loan portfolio and deposit accounts have both grown 21% since September 30, 2003." Mr. Gioffre continued, "I am pleased to report that our new branches in Carmel, New York and Bethel, Connecticut will be opening in January 2005. As always, the evaluation of new branch sites is centered upon the growth of franchise value. We believe that moving to the northern suburbs of the greater New York metropolitan area provides great opportunities to develop new customer relationships. The addition of these branch locations increases our branch network to 11 locations in New York in the counties of Westchester, Putnam and Rockland and 3 locations in Fairfield County, Connecticut." The Company's total assets amounted to $965.4 million at September 30, 2004 as compared to $890.5 million at March 31, 2004. The $74.9 million increase in assets primarily consisted of a $51.2 million increase in net loans to $529.6 million and a $20.6 million increase in securities to $358.3 million. Our asset growth was funded principally by an $81.5 million increase in deposits to $789.8 million. Total stockholders' equity decreased $7.7 million to $129.4 million at September 30, 2004 as compared to $137.1 million at March 31, 2004. The decrease reflects the purchase of shares of our common stock at a cost of $8.3 million, dividends paid of $1.5 million and a decrease of $2.1 million attributable to the change in accumulated other comprehensive income or loss, partially offset by net income of $2.9 million. The accumulated other comprehensive loss of $1.4 million at September 30, 2004 represents the after-tax net unrealized loss on securities available for sale ($2.4 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, 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 September 30, 2004. Net interest income for the quarter ended September 30, 2004 amounted to $6.7 million, a $501,000 increase from the same quarter in the prior year. Our interest rate spread was 2.71% and 2.85% for the quarters ended September 30, 2004 and 2003, respectively. Our net interest margin for those respective periods was 2.94% and 3.14%. For the six months ended September 30, 2004, net interest income amounted to $13.2 million as compared to $12.7 million for the prior year. Our interest rate spread was 2.76% and 2.94% and our net interest margin was 2.98% and 3.25% for the respective 2004 and 2003 six month periods. The decreases in 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. As interest rates rise, the cost of our interest-bearing liabilities will increase faster than the rates on our interest-earning assets resulting in a further decrease in our net interest rate spread and net interest margin. Non-interest income totaled $310,000 and $228,000 for the quarters ended September 30, 2004 and 2003, respectively. For the six months ended September 30, 2004, non-interest income amounted to $662,000 as compared to $513,000 for the six months ended September 30, 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 September 30, 2004 as compared to $3.6 million for the quarter ended September 30, 2003. This increase is due to increases of $456,000 in compensation and benefits, $77,000 in occupancy and equipment expense, $75,000 in data processing service fees, $102,000 in advertising and promotion expense, and $243,000 in other non-interest expense. For the six months ended September 30, 2004, non-interest expense increased $1.3 million to $8.9 million as compared to $7.6 million for the six months ended September 30, 2003. This increase is due primarily to increases of $876,000 in compensation and benefits, $148,000 in occupancy and equipment expense, $133,000 in data processing service fees, and $165,000 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; the addition of the Stamford and Brookfield branches, which opened in September 2003 and June 2004, respectively; and additional expense related to stock awards made pursuant to the Company's 2004 Stock Incentive Plan. The increase in occupancy and equipment expense is primarily due to the new branch locations (Stamford and Brookfield, Connecticut). Other non-interest expense for the current quarter includes $135,000 of costs related to the Company's implementation of the internal controls and procedures provisions of the Sarbanes-Oxley Act of 2002. 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) September 30, March 31, 2004 2004 Assets Cash and due from banks $10,892 $10,455 Federal funds sold and other overnight deposits 21,307 20,756 Securities: Available for sale, at fair value 316,972 337,730 Held to maturity, at amortized cost 41,331 -- Total securities 358,303 337,730 Loans, net: Mortgage loans 529,974 477,771 Consumer loans 2,526 3,396 Allowance for loan losses (2,862) (2,712) Total loans, net 529,638 478,455 Accrued interest receivable 4,018 3,623 Federal Home Loan Bank stock 5,738 5,303 Premises and equipment, net 5,667 5,630 Goodwill 13,970 13,970 Bank-owned life insurance 10,252 10,085 Prepaid pension costs 2,480 2,547 Deferred income taxes 1,286 -- Other assets 1,837 1,987 Total assets $965,388 $890,541 Liabilities and Stockholders' Equity Liabilities: Deposits $789,794 $708,330 Borrowings 38,000 35,000 Mortgagors' escrow funds 2,407 4,522 Due to brokers for securities purchased 4,200 4,000 Accrued expenses and other liabilities 1,548 1,630 Total liabilities 835,949 753,482 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 103,063 102,637 Treasury stock, at cost (1,058,329 and 459,297 shares at September 30, 2004 and March 31, 2004, respectively) (15,071) (7,150) Common stock held by Employee Stock Ownership Plan (6,304) (6,556) Unearned stock awards (5,026) (5,618) Retained earnings 54,069 52,908 Accumulated other comprehensive (loss) income, net of taxes (1,428) 702 Total stockholders' equity 129,439 137,059 Total liabilities and stockholders' equity $965,388 $890,541 Sound Federal Bancorp, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the Three Months For the Six Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Interest and Dividend Income Loans $7,354 $6,490 $14,251 $13,259 Mortgage-backed and other securities 3,024 2,670 $5,816 5,507 Federal funds sold and other overnight deposits 73 46 132 174 Other earning assets 34 66 55 123 Total interest and dividend income 10,485 9,272 20,254 19,063 Interest Expense Deposits 3,384 2,665 6,325 5,544 Borrowings 390 384 755 749 Other interest-bearing liabilities 5 18 10 35 Total interest expense 3,779 3,067 7,090 6,328 Net interest income 6,706 6,205 13,164 12,735 Provision for loan losses 75 75 150 125 Net interest income after provision for loan losses 6,631 6,130 13,014 12,610 Non-Interest Income Service charges and fees 220 228 496 513 Increase in cash surrender value of bank-owned life insurance 90 -- 166 -- Total non-interest income 310 228 662 513 Non-Interest Expense Compensation and benefits 2,462 2,006 4,874 3,998 Occupancy and equipment 661 584 1,294 1,146 Data processing service fees 264 189 564 431 Advertising and promotion 239 137 490 551 Other 975 732 1,671 1,506 Total non-interest expense 4,601 3,648 8,893 7,632 Income before income tax expense 2,340 2,710 4,783 5,491 Income tax expense 909 1,060 1,855 2,124 Net income $1,431 $1,650 $2,928 $3,367 Earnings per share: Basic earnings per share $0.12 $0.13 $0.25 $0.27 Diluted earnings per share $0.12 $0.13 $0.25 $0.26 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, 2004 2004 2004 2003 2003 Net interest income $6,706 $6,458 $6,770 $6,687 $6,205 Provision for loan losses 75 75 75 75 75 Non-interest income 310 352 276 252 228 Non-interest expense: Compensation and benefits 2,462 2,412 2,628 2,107 2,006 Occupancy and equipment 661 633 592 553 584 Other non-interest expense 1,478 1,247 1,318 1,276 1,058 Total non-interest expense 4,601 4,292 4,538 3,936 3,648 Income before income tax expense 2,340 2,443 2,433 2,928 2,710 Income tax expense 909 946 977 1,133 1,060 Net income $1,431 $1,497 $1,456 $1,795 $1,650 Total assets $965,388 $914,610 $890,541 $881,637 $850,988 Loans, net 529,638 501,239 478,455 461,453 437,205 Mortgage-backed securities Available for sale 252,931 246,850 255,853 269,604 264,359 Held to maturity 30,691 7,157 -- -- -- Other securities Available for sale 64,041 85,427 81,877 86,656 93,532 Held to maturity 10,640 2,796 -- -- -- Deposits 789,794 746,160 708,330 698,416 653,395 Borrowings 38,000 38,000 35,000 35,000 55,000 Stockholders' equity 129,439 125,016 137,059 132,091 137,780 Performance Data: Return on average assets (1) 0.60% 0.66% 0.67% 0.82% 0.80% Return on average equity (1) 4.56% 4.49% 4.49% 5.26% 4.76% Average interest rate spread (1) 2.71% 2.80% 2.98% 2.92% 2.85% Net interest margin (1) 2.94% 3.02% 3.20% 3.17% 3.14% Efficiency ratio 65.58% 63.02% 64.41% 56.72% 56.71% Per Common Share Data: Basic earnings per common share $0.12 $0.13 $0.12 $0.15 $0.13 Diluted earnings per common share $0.12 $0.12 $0.12 $0.14 $0.13 Book value per share (2) $10.29 $9.96 $10.40 $10.32 $10.46 Tangible book value per share (2) $9.18 $8.85 $9.34 $9.23 $9.40 Dividends per share $0.06 $0.06 $0.06 $0.06 $0.05 Capital Ratios: Equity to total assets (consolidated) 13.41% 13.67% 15.39% 14.98% 16.19% Tier 1 leverage capital (Bank) 10.40% 10.71% 10.92% 10.74% 10.82% Asset Quality Data: Total non-performing loans $963 $1,728 $1,981 $1,290 $1,751 Total non-performing assets $963 $1,728 $1,981 $1,290 $1,751 (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 of Sound Federal Bancorp, Inc., +1-914-761-3636 Web site: http://www.soundfed.com/

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