Sound Federal Bancorp (NASDAQ:SFFS)
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Sound Federal Bancorp, Inc. Announces Fourth Fiscal Quarter and
Year End Earnings
WHITE PLAINS, N.Y., April 29 /PRNewswire-FirstCall/ -- Sound Federal Bancorp,
Inc. (NASDAQ:SFFS) (the "Company"), the holding company for Sound Federal
Savings (the "Bank"), announced net income of $1.1 million or diluted earnings
per share of $0.10 for the quarter ended March 31, 2005, as compared to $1.5
million or diluted earnings per share of $0.12 for the quarter ended March 31,
2004, a decrease of 23.4% in net income. The decrease in net income for the
quarter ended March 31, 2005 is primarily attributable to a $537,000 increase
in non-interest expense and a $186,000 decrease in net interest income,
partially offset by a $255,000 decrease in income tax expense. For the fiscal
year ended March 31, 2005, net income amounted to $5.5 million or diluted
earnings per share of $0.46, as compared to $6.6 million or diluted earnings
per share of $0.52 for fiscal 2004, a decrease of 17.4% in net income. The
decrease in net income for the fiscal year ended March 31, 2005 reflects an
increase of $2.5 million in non-interest expense, partially offset by an
increase of $231,000 in net interest income and a decrease of $701,000 in
income tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "We are very pleased to
announce that the Company's assets have passed the $1.0 billion mark. This is
a milestone that we are proud of and reflects the 114 years of diligence and
commitment that many people have devoted to Sound Federal. This quarter we
continued to grow the franchise by opening the Carmel, New York branch and the
Bethel, Connecticut branch. In total we have opened three branches this fiscal
year bringing the total number of branches to 14 in Westchester, Putnam and
Rockland Counties in New York and Fairfield County in Connecticut. We believe
that growing our franchise in these vibrant and growing communities will add
value to the franchise. While we are pleased with the growth of Sound Federal,
we are cognizant of the start-up costs associated with a de-novo strategy. We
strive to balance the Company's growth with these start-up costs and the
longer-term opportunities of a banking franchise in our market area."
Mr. Gioffre continued, "The yield curve has certainly proved challenging to us
this quarter. Net income decreased to $1.1 million from $1.4 million in the
linked quarter. Net income has been impacted by the new branches opened this
quarter, as well as rising short-term interest rates and the continued
flattening of the yield curve. Loan origination volume of $45.1 million this
quarter has met our expectations, however the interest rates on new loans have
changed very little over the past nine months. In that same time period, the
Federal Reserve has raised the Federal funds rate by 175 basis points which has
impacted the cost of our deposits. The average cost of our interest- bearing
liabilities increased 12 basis points to 1.93% during fiscal 2005 while the
average yield earned on interest-earning assets for fiscal 2005 decreased 17
basis points to 4.62%. Our deposit growth continues to be strong, with
increases of $28.8 million this quarter and $123.4 million during fiscal 2005.
As we look forward to fiscal 2006, we know that the yield curve and competitive
pressures will continue to challenge us. As we have for the past 114 years,
our goal is to position the Company for these challenges."
The Company's total assets amounted to $1.0 billion at March 31, 2005, as
compared to $890.5 million at March 31, 2004. The $116.4 million increase in
assets primarily consisted of an $82.3 million increase in net loans to $560.8
million and a $17.9 million increase in securities to $355.6 million. Our asset
growth was funded principally by a $123.4 million increase in deposits to
$831.8 million.
The increase in securities consisted of a $79.5 million increase in securities
classified as held to maturity and a $61.6 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 $9.9 million to $127.2 million at March
31, 2005 as compared to $137.1 million at March 31, 2004. The decrease
reflects treasury stock purchases at a cost of $12.1 million, dividends paid of
$2.9 million and a decrease of $3.4 million attributable to the change in
accumulated other comprehensive income or loss, partially offset by net income
of $5.5 million and proceeds of $1.1 million from the issuance of treasury
shares for stock options exercised.
The accumulated other comprehensive loss of $2.7 million at March 31, 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 March 31, 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 March 31, 2005.
Net interest income for the quarter ended March 31, 2005 decreased $186,000 to
$6.6 million as compared to $6.8 million for the same quarter in the prior
year. Our net interest rate spread was 2.62% and 2.98% for the quarters ended
March 31, 2005 and 2004, respectively. Our net interest margin for those
respective periods was 2.85% and 3.20%. For fiscal 2005, net interest income
amounted to $26.4 million as compared to $26.2 million for fiscal 2004. Our
net interest rate spread was 2.69% and 2.98% and our net interest margin was
2.91% and 3.24% for the respective fiscal years. 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 175 basis
points to 2.75%. 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 $403,000 and $276,000 for the quarters ended March
31, 2005 and 2004, respectively. For the year ended March 31, 2005,
non-interest income amounted to $1.4 million as compared to $1.0 million for
the year ended March 31, 2004. The increases in non-interest income were
primarily due to an increase of $293,000 in income on bank-owned life insurance
which was purchased in December 2003 and a $93,000 gain on the sale of land.
The land sold was contiguous to an existing branch site. Management determined
that this parcel was not going to be used in connection with the operation of
the branch.
Non-interest expense totaled $5.1 million for the quarter ended March 31, 2005
as compared to $4.5 million for the quarter ended March 31, 2004. This
increase is due to increases of $158,000 in occupancy and equipment expense,
$66,000 in data processing service fees, $202,000 in advertising and promotion
expense and $206,000 in other non-interest expense. The increases include
costs attributable to the three new branches opened during fiscal 2005.
Other non-interest expense for the quarter ended March 31, 2005 included
$97,000 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 period a year ago.
For the year ended March 31, 2005, non-interest expense increased $2.5 million
to $18.6 million as compared to $16.1 million for the year ended March 31,
2004. This increase is due primarily to increases of $1.2 million in
compensation and benefits, $426,000 in occupancy and equipment expense,
$193,000 in data processing service fees, $99,000 in advertising and promotion
expense and $532,000 in other non-interest expense.
The increase in compensation and benefits expense is due primarily to a
$787,000 increase in expense related to stock awards made pursuant to the
Company's 2004 Stock Incentive Plan and a $586,000 increase in compensation
costs due primarily to additional staff to support the growth in the Company's
lending operations and the new branches. At March 31, 2005, we had 138 full-
time equivalent employees as compared to 119 at March 31, 2004.
Other non-interest expense for the year ended March 31, 2005 included $367,000
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 fiscal 2004.
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.
Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per
share data) March 31, March 31,
2005 2004
Assets
Cash and due from banks $11,512 $10,455
Federal funds sold and other
overnight deposits 31,095 20,756
Securities:
Available for sale, at fair value 276,154 337,730
Held to maturity, at amortized cost 79,489 -
Total securities 355,643 337,730
Loans, net:
Mortgage loans 558,662 477,771
Other loans 5,100 3,396
Allowance for loan losses (3,011) (2,712)
Total loans, net 560,751 478,455
Accrued interest receivable 4,277 3,623
Federal Home Loan Bank stock 5,738 5,303
Premises and equipment, net 6,214 5,630
Goodwill 13,970 13,970
Bank-owned life insurance 10,464 10,085
Prepaid pension costs 3,057 2,547
Deferred income taxes 2,236 -
Other assets 1,993 1,987
Total assets $1,006,950 $890,541
Liabilities and Stockholders' Equity
Liabilities:
Deposits $831,768 $708,330
Borrowings 38,000 35,000
Mortgagors' escrow funds 5,264 4,522
Due to brokers for securities purchased 2,513 4,000
Accrued expenses and other liabilities 2,245 1,630
Total liabilities 879,790 753,482
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 103,728 102,637
Treasury stock, at cost (1,258,964
and 459,297 shares at March 31, 2005
and March 31, 2004, respectively) (18,131) (7,150)
Common stock held by Employee
Stock Ownership Plan (6,053) (6,556)
Unearned stock awards (4,435) (5,618)
Retained earnings 54,638 52,908
Accumulated other comprehensive
(loss) income, net of taxes (2,723) 702
Total stockholders' equity 127,160 137,059
Total liabilities and
stockholders' equity $1,006,950 $890,541
Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the For the
Three Months Ended Year Ended
March 31, March 31,
2005 2004 2005 2004
Interest and Dividend Income
Loans $7,697 $6,919 $29,430 $26,819
Mortgage-backed and other securities 3,081 2,845 11,998 11,538
Federal funds sold and other
overnight deposits 95 20 340 240
Other earning assets 45 19 132 142
Total interest and dividend income 10,918 9,803 41,900 38,739
Interest Expense
Deposits 3,966 2,662 13,968 11,004
Borrowings 363 365 1,489 1,495
Other interest-bearing liabilities 5 6 20 48
Total interest expense 4,334 3,033 15,477 12,547
Net interest income 6,584 6,770 26,423 26,192
Provision for loan losses 75 75 300 275
Net interest income after provision
for loan losses 6,509 6,695 26,123 25,917
Non-Interest Income
Service charges and fees 213 190 953 955
Income on bank-owned life insurance 92 86 379 86
Gain on sale of land 93 - 93 -
Gain on sales of mortgage loans 5 - 22 -
Total non-interest income 403 276 1,447 1,041
Non-Interest Expense
Compensation and benefits 2,533 2,628 9,945 8,733
Occupancy and equipment 750 592 2,717 2,291
Data processing service fees 340 274 1,218 1,025
Advertising and promotion 440 238 1,119 1,020
Other 1,012 806 3,569 3,037
Total non-interest expense 5,075 4,538 18,568 16,106
Income before income tax expense 1,837 2,433 9,002 10,852
Income tax expense 722 977 3,533 4,234
Net income $1,115 $1,456 $5,469 $6,618
Earnings per share:
Basic earnings per share $0.10 $0.12 $0.47 $0.54
Diluted earnings per share $0.10 $0.12 $0.46 $0.52
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,
2005 2004 2004 2004 2004
Net interest income $6,584 $6,675 $6,706 $6,458 $6,770
Provision for loan losses 75 75 75 75 75
Non-interest income 403 382 310 352 276
Non-interest expense:
Compensation and
benefits 2,533 2,538 2,462 2,412 2,628
Occupancy and equipment 750 673 661 633 592
Other non-interest
expense 1,792 1,389 1,478 1,247 1,318
Total non-interest
expense 5,075 4,600 4,601 4,292 4,538
Income before income
tax expense 1,837 2,382 2,340 2,443 2,433
Income tax expense 722 956 909 946 977
Net income $1,115 $1,426 $1,431 $1,497 $1,456
Total assets $1,006,950 $984,372 $965,388 $914,610 $890,541
Loans, net 560,751 541,955 529,638 501,239 478,455
Mortgage-backed
securities
Available for sale 199,746 216,133 231,986 246,850 255,853
Held to maturity 59,777 54,717 30,691 7,157 -
Other securities
Available for sale 76,408 79,364 84,986 85,427 81,877
Held to maturity 19,712 14,713 10,640 2,796 -
Deposits 831,768 802,990 789,794 746,160 708,330
Borrowings 38,000 38,000 38,000 38,000 35,000
Stockholders' equity 127,160 131,134 129,439 125,016 137,059
Performance Data:
Return on average
assets (1) 0.46% 0.58% 0.60% 0.66% 0.67%
Return on average
equity (1) 3.51% 4.38% 4.56% 4.49% 4.49%
Net interest rate
spread (1) 2.62% 2.63% 2.71% 2.80% 2.98%
Net interest margin (1) 2.85% 2.85% 2.94% 3.02% 3.20%
Efficiency ratio (2) 73.61% 65.18% 65.58% 63.02% 64.41%
Per Common Share Data:
Basic earnings per
common share $0.10 $0.12 $0.12 $0.13 $0.12
Diluted earnings per
common share $0.10 $0.12 $0.12 $0.12 $0.12
Book value per share (3) $10.27 $10.40 $10.29 $9.96 $10.40
Tangible book value
per share (3) $9.15 $9.29 $9.18 $8.85 $9.34
Dividends per share $0.06 $0.06 $0.06 $0.06 $0.06
Capital Ratios:
Equity to total assets
(consolidated) 12.63% 13.32% 13.41% 13.67% 15.39%
Tier 1 leverage
capital (Bank) 10.24% 10.37% 10.40% 10.71% 10.92%
Asset Quality Data:
Total non-performing
loans $580 $734 $963 $1,728 $1,981
Total non-performing
assets $580 $734 $963 $1,728 $1,981
(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, Inc.,
+1-914-761-3636
Web site: http://www.soundfed.com/