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Sound Federal Bancorp, Inc. Announces Third Fiscal Quarter Earnings
WHITE PLAINS, N.Y., Jan. 30 /PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (NASDAQ: SFFS) (the "Company"), the holding company for Sound Federal Savings (the "Bank"), announced net income of $1.05 million or diluted earnings per share of $0.09 for the quarter ended December 31, 2005 as compared to $1.43 million or diluted earnings per share of $0.12 for the quarter ended December 31, 2004. Net income decreased $380,000 for the quarter ended December 31, 2005, compared to the same quarter a year ago, primarily due to a $645,000 increase in non-interest expense, partially offset by a $48,000 increase in net interest income and a $253,000 decrease in income tax expense. For the nine months ended December 31, 2005, net income amounted to $3.53 million or diluted earnings per share of $0.30, as compared to $4.35 million or diluted earnings per share of $0.36 for the same period in 2004, a decrease of $825,000 or 18.9% in net income. The decrease in net income for the nine months ended December 31, 2005 is primarily attributable to a $1.7 million increase in non-interest expense, partially offset by a $449,000 increase in non-interest income and a $530,000 decrease in income tax expense. Bruno J. Gioffre, Chairman of the Board, commented, "The results for the quarter reflect the effect of the flat yield curve and increased operating expenses. The increase in operating expenses is due primarily to the growth of the franchise. Our growth is evidenced by increases, since March 31, 2005, of 14.1% in total assets, 26.8% in net loans and 16.6% in deposits. This growth has occurred at a time when the yield curve has remained flat for several consecutive quarters. While the growth of the Company in this interest rate environment has restrained earnings, we believe that the value of the franchise has been enhanced and will be a positive factor in the future earnings stream. While we do not know what the yield curve will look like in the future, we do know that the yield curve will not remain flat indefinitely. We will continue to pursue a prudent growth strategy and remain committed to enhancing stockholder 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 December 31, 2005, as compared to $1.0 billion at March 31, 2005. The $142.4 million increase in assets primarily consisted of a $150.0 million increase in net loans to $710.8 million, partially offset by a decrease in total securities of $20.2 million. Our asset growth was funded principally by a $137.9 million increase in deposits to $969.7 million. Total stockholders' equity increased $1.5 million to $128.7 million at December 31, 2005 as compared to $127.2 million at March 31, 2005. The increase reflects net income of $3.5 million and increases of $2.3 million related to stock options, stock awards and ESOP shares, partially offset by common stock repurchases at a cost of $1.3 million, dividends paid of $2.5 million and an increase of $512,000 in the accumulated other comprehensive loss. The accumulated other comprehensive loss of $3.2 million at December 31, 2005 represents the after-tax net unrealized loss on securities available for sale ($5.4 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 December 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 December 31, 2005. Net interest income for the quarter ended December 31, 2005 increased $48,000 to $6.72 million as compared to $6.68 million for the quarter ended December 31, 2004. Our net interest rate spread was 2.20% and 2.63% for the quarters ended December 31, 2005 and 2004, respectively. Our net interest margin for those respective periods was 2.50% and 2.85%. For the nine months ended December 31, 2005, net interest income amounted to $19.79 million as compared to $19.84 million for the prior year. Our interest rate spread was 2.28% and 2.71% and our net interest margin was 2.57% and 2.93% for the respective nine 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. At December 31, 2005, the spread between the 1-month and 10-year Treasury yield rates was 38 basis points as compared to 205 basis points at December 31, 2004. As a result, the Company's average cost of interest-bearing liabilities has increased faster than the yield on interest-earning assets which are principally affected by longer-term interest rates. The provision for loan losses was $75,000 for the quarters ended December 31, 2005 and 2004 and $225,000 for the nine months ended December 31, 2005 and 2004. Non-performing loans amounted to $2.7 million or 0.38% of total loans at December 31, 2005, as compared to $734,000 or 0.14% of total loans at December 31, 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 December 31, 2005 and March 31, 2005, respectively. There were no charge-offs or recoveries during the quarters ended December 31, 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 $346,000 and $382,000 for the quarters ended December 31, 2005 and 2004, respectively. For the nine months ended December 31, 2005, non-interest income amounted to $1.5 million as compared to $1.0 million for the nine months ended December 31, 2004. The increase in non- interest income for the nine month period was 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 $5.2 million for the quarter ended December 31, 2005 as compared to $4.6 million for the quarter ended December 31, 2004. This increase is due to increases of $431,000 in compensation and benefits expense, $75,000 in occupancy and equipment expense, $114,000 in advertising and promotion expense and $75,000 in other non-interest expense, partially offset by a decrease of $50,000 in data processing service fees. For the nine months ended December 31, 2005, non-interest expense increased $1.7 million to $15.2 million as compared to $13.5 million for the nine months ended December 31, 2004. This increase is due primarily to increases of $1.2 million in compensation and benefits, $269,000 in occupancy and equipment expense, and $149,000 in advertising and promotion expense. The increases include costs attributable to two new branches opened during the fourth quarter of 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)
December 31, March 31,
2005 2005
Assets
Cash and due from banks $12,591 $11,512
Federal funds sold and other overnight
deposits 44,116 31,095
Securities:
Available for sale, at fair value 227,537 276,154
Held to maturity, at amortized cost 107,931 79,489
Total securities 335,468 355,643
Loans, net:
Mortgage loans 707,288 558,662
Other loans 6,698 5,100
Allowance for loan losses (3,236) (3,011)
Total loans, net 710,750 560,751
Accrued interest receivable 4,764 4,277
Federal Home Loan Bank stock 3,157 5,738
Premises and equipment, net 5,687 6,214
Goodwill 13,970 13,970
Bank-owned life insurance 10,747 10,464
Prepaid pension costs 4,299 3,057
Deferred income taxes 1,977 2,236
Other assets 1,800 1,993
Total assets $1,149,326 $1,006,950
Liabilities and Stockholders' Equity
Liabilities:
Deposits $969,702 $831,768
Borrowings 35,000 38,000
Mortgagors' escrow funds 7,302 5,264
Due to brokers for securities purchased 5,867 2,513
Accrued expenses and other liabilities 2,804 2,245
Total liabilities 1,020,675 879,790
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;
12,322,206 and 12,377,206 shares
outstanding at December 31, 2005 and
March 31, 2005, respectively) 136 136
Additional paid-in capital 104,630 103,728
Treasury stock, at cost (1,313,964 and
1,258,964 shares at December 31, 2005
and March 31, 2005, respectively) (19,013) (18,131)
Common stock held by Employee Stock
Ownership Plan (5,675) (6,053)
Unearned stock awards (3,548) (4,435)
Retained earnings 55,356 54,638
Accumulated other comprehensive
loss, net of taxes (3,235) (2,723)
Total stockholders' equity 128,651 127,160
Total liabilities and stockholders'
equity $1,149,326 $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 Nine
Months Ended Months Ended
December 31, December 31,
2005 2004 2005 2004
Interest and Dividend Income
Loans $9,834 $7,482 $26,972 $21,733
Mortgage-backed and other securities 3,166 3,101 9,392 8,917
Federal funds sold and other
overnight deposits 290 113 666 245
Other earning assets 88 32 240 87
Total interest and dividend income 13,378 10,728 37,270 30,982
Interest Expense
Deposits 6,286 3,677 16,377 10,002
Borrowings 362 371 1,084 1,126
Other interest-bearing liabilities 7 5 18 15
Total interest expense 6,655 4,053 17,479 11,143
Net interest income 6,723 6,675 19,791 19,839
Provision for loan losses 75 75 225 225
Net interest income after provision
for loan losses 6,648 6,600 19,566 19,614
Non-Interest Income
Service charges and fees 251 244 885 740
Income on bank-owned life insurance 95 121 283 287
Gain on sale of assets - 17 325 17
Total non-interest income 346 382 1,493 1,044
Non-Interest Expense
Compensation and benefits 2,969 2,538 8,637 7,412
Occupancy and equipment 748 673 2,236 1,967
Data processing service fees 264 314 910 878
Advertising and promotion 303 189 828 679
Other 961 886 2,638 2,557
Total non-interest expense 5,245 4,600 15,249 13,493
Income before income tax expense 1,749 2,382 5,810 7,165
Income tax expense 703 956 2,281 2,811
Net income $1,046 $1,426 $3,529 $4,354
Earnings per share:
Basic earnings per share $0.09 $0.12 $0.31 $0.37
Diluted earnings per share $0.09 $0.12 $0.30 $0.36
Sound Federal Bancorp, Inc. and Subsidiary
Other Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
At or for the Quarter Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2005 2005 2005 2005 2004
Net interest
income $ 6,723 $ 6,548 $ 6,520 $ 6,584 $ 6,675
Provision for
loan losses 75 75 75 75 75
Non-interest
income 346 778 369 403 382
Non-interest
expense:
Compensation and
benefits 2,969 2,841 2,827 2,533 2,538
Occupancy and
equipment 748 751 737 750 673
Other non-interest
expense 1,528 1,442 1,406 1,792 1,389
Total non-interest
expense 5,245 5,034 4,970 5,075 4,600
Income before
income tax
expense 1,749 2,217 1,844 1,837 2,382
Income tax
expense 703 858 720 722 956
Net income $ 1,046 $ 1,359 $ 1,124 $ 1,115 $ 1,426
Total assets $1,149,326 $1,083,065 $1,060,811 $1,006,950 $ 984,372
Loans, net 710,750 668,019 613,481 560,751 541,955
Mortgage-backed
securities
Available
for sale 150,758 165,474 184,491 199,746 216,133
Held to
maturity 64,988 60,530 60,314 59,777 54,717
Other
securities
Available
for sale 76,779 77,183 76,988 76,408 79,364
Held to
maturity 42,943 34,211 23,713 19,712 14,713
Deposits 969,702 913,722 890,191 831,768 802,990
Borrowings 35,000 35,000 35,000 38,000 38,000
Stockholders'
equity 128,651 128,179 128,084 127,160 131,134
Performance Data:
Return on average
assets (1) 0.37% 0.51% 0.44% 0.46% 0.58%
Return on average
equity (1) 3.25% 4.14% 3.57% 3.51% 4.38%
Net interest
rate spread (1) 2.20% 2.27% 2.41% 2.62% 2.63%
Net interest
margin (1) 2.50% 2.55% 2.66% 2.85% 2.85%
Efficiency
ratio (2) 74.20% 71.90% 72.14% 73.61% 65.18%
Per Common Share
Data:
Basic earnings
per common share $0.09 $0.12 $0.10 $0.10 $0.12
Diluted earnings
per common share $0.09 $0.12 $0.10 $0.10 $0.12
Book value per
share (3) $10.44 $10.41 $10.41 $10.27 $10.40
Tangible book
value per
share (3) $9.31 $9.28 $9.28 $9.15 $9.29
Dividends
per share $0.075 $0.070 $0.065 $0.06 $0.06
Capital Ratios:
Equity to
total assets
(consolidated) 11.19% 11.83% 12.07% 12.63% 13.32%
Tier 1 leverage
capital (Bank) 9.43% 9.80% 9.85% 10.24% 10.37%
Asset Quality Data:
Total non-
performing
loans $ 2,689 $ 1,285 $ 2,183 $ 580 $ 734
Total non-
performing
assets $ 2,689 $ 1,285 $ 2,183 $ 580 $ 734
(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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