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Sound Federal Bancorp, Inc. Announces Second Fiscal Quarter Earnings
WHITE PLAINS, N.Y., Oct. 28 /PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (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.
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