Sound Federal Bancorp (NASDAQ:SFFS)
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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/