Sound Federal Bancorp, Inc. Announces Second Fiscal Quarter
Earnings WHITE PLAINS, N.Y., Oct. 27 /PRNewswire-FirstCall/ --
Sound Federal Bancorp, Inc. (the "Company"), the holding company
for Sound Federal Savings (the "Bank"), announced net income of
$1.7 million or diluted earnings per share of $0.13 for the quarter
ended September 30, 2003, as compared to $2.0 million or diluted
earnings per share of $0.15 for the quarter ended September 30,
2002, a decrease of 18.7% in net income. For the six months ended
September 30, 2003, net income amounted to $3.4 million or diluted
earnings per share of $0.26 as compared to $4.2 million or diluted
earnings per share of $0.32 for the same period in the prior year.
The decrease in net income for the quarter ended September 30, 2003
as compared to the same quarter in the prior year is primarily
attributable to a $439,000 increase in non-interest expense and a
$63,000 decrease in net interest income partially offset by a
decrease of $143,000 in income tax expense. The decrease in net
income for the six months ended September 30, 2003 reflects an
increase of $1.6 million in non-interest expense partially offset
by an increase of $182,000 in net interest income and a decrease of
$455,000 in income tax expense. In connection with the second-step
mutual-to-stock conversion of Sound Federal, MHC that was completed
on January 6, 2003, a total of 7,780,737 shares of common stock
were sold at a price of $10.00 per share. In addition, 5,444,263
shares were issued to existing stockholders of our mid-tier holding
company resulting in an exchange ratio of 2.7667. At the completion
of the second-step conversion, the Company had 13,225,000 shares
issued and outstanding. Bruno J. Gioffre, Chairman of the Board,
commented, "The interest rate environment continues to be a
challenging one for the thrift industry. In recognition of this, we
continue to increase our adjustable-rate loan production and to
shorten the maturity of our other securities as well as to continue
to expand our presence in the commercial mortgage market.
One-to-four family adjustable rate mortgage loans amounted to
$103.7 million or 24% of total loans at September 30, 2003 as
compared to $83.7 million or 19.5% at March 31, 2003.
Adjustable-rate mortgage-backed securities amounted to $151.6
million or 42% of our securities portfolio as compared to $150.3
million or 51% at March 31, 2003. By continuing to emphasize ARM
loan production, we are preparing for the anticipated increase in
market interest rates. We continue to grow the deposit base both in
our existing branches and through de-novo branch openings. Deposits
increased by $49.1 million or 8.1% in the first half of fiscal
2004. The current interest rate environment allows us to open new
branches and grow our deposit base at a relatively low cost. We
then grow our new branches in our continually expanding market area
by offering a full range of services to our new customers. Asset
quality continues to be good. Although our non-performing loans
increased to $1.8 million at September 30, 2003 as compared to
$889,000 at June 30, 2003, this increase was primarily due to the
delinquency of one borrower's mortgage and home equity loans. These
loans amounted to $811,000 and are secured by a single family home
with a total loan-to-value ratio of less than 60%." Mr. Gioffre
continued, "As always, we continue to pursue a business plan
designed to grow stockholder value. We are pursuing a buy-back
strategy as part of this business plan and have acquired 77,000
shares of the Company's common stock since we announced our stock
buyback program in July. In addition, we increased our quarterly
cash dividend by 20% -- from $0.05 per share to $0.06 per share. We
continue to explore opportunities to expand our market presence, to
build franchise value and to deploy the capital raised in the
Company's second-step conversion. As always, we appreciate your
investment in Sound Federal." The Company's total assets amounted
to $851.0 million at September 30, 2003 as compared to $796.1
million at March 31, 2003. The $54.9 million increase in total
assets is primarily due to a $62.8 million increase in securities
available for sale to $357.9 million and a $9.5 million increase in
net loans to $437.2 million, partially offset by a $22.4 million
decrease in federal funds sold. The asset growth was funded
principally by a $49.1 million increase in deposits to $653.4
million and a $20.0 million increase in borrowings to $55.0 million
partially offset by a $10.5 million decrease in amounts due to
brokers for securities purchased. Total stockholders' equity
decreased $541,000 to $137.8 million at September 30, 2003 as
compared to $138.3 million at March 31, 2003. The decrease reflects
the purchase of 77,000 shares of the Company's common stock at a
cost of $1.2 million, dividends paid of $1.3 million and a decrease
in accumulated other comprehensive income of $1.9 million,
partially offset by net income of $3.4 million and an increase in
additional paid-in capital of $178,000. The decrease in
stockholders' equity attributed to accumulated other comprehensive
income (loss) is primarily due to a net unrealized holding loss of
$3.2 million on securities available for sale, less a $1.3 million
income tax effect. Net interest income for the quarter ended
September 30, 2003 amounted to $6.2 million, a $63,000 decrease
from the same period in the prior year. The interest rate spread
was 2.85% and 3.77% for the quarters ended September 30, 2003 and
2002, respectively. The net interest margin for those periods was
3.14% and 3.94%, respectively. For the six months ended September
30, 2003, net interest income amounted to $12.7 million as compared
to $12.6 million for the same period in the prior year. The
interest rate spread was 2.94% and 3.89% and the net interest
margin was 3.25% and 4.06% for the respective six-month periods.
The decreases in interest rate spread and net interest margin for
the comparative quarters are primarily the result of the effect of
mortgage refinancings and lower returns on our investment
portfolio, as interest rates remain at 40-year lows. If interest
rates remain at these low levels or decrease further, the yields
earned on our interest-earning assets may continue to decrease and
adversely affect the Company's interest rate spread and net
interest margin. Non-interest income totaled $228,000 and $224,000
for the quarters ended September 30, 2003 and 2002, respectively.
For the six months ended September 30, 2003, non-interest income
amounted to $513,000 as compared to $394,000 for the same period in
2002. The increase in non-interest income was primarily due to
higher levels of income from service charges on deposit accounts,
late charges on loans and various other service fees. Non-interest
expense totaled $3.6 million for the quarter ended September 30,
2003 as compared to $3.2 million for the quarter ended September
30, 2002. This increase is due primarily to increases of $383,000
in compensation and benefits, $199,000 in occupancy and equipment
expense and $67,000 in other non-interest expense, partially offset
by decreases of $69,000 in data processing fees and $141,000 in
advertising and promotion expense. For the six months ended
September 30, 2003, non-interest expense increased $1.5 million to
$7.6 million as compared to $6.1 million for the same period in the
prior year. This increase is due to increases of $947,000 in
compensation and benefits, $317,000 in occupancy and equipment
expense, $125,000 in advertising and promotion expense and $247,000
increase in other non-interest expense. The increase in
compensation expense is due primarily to normal salary increases,
additional staff to support the growth in the Company's lending
operations and for the Stamford branch, which opened in September
2003, and additional ESOP expense. The increase in ESOP expense
reflects the increase in shares committed to be released for
allocation as a result of the second-step conversion and the
increase in the market value of those shares. Compensation expense
is recognized for the ESOP equal to the fair value of shares
committed to be released for allocation to participant accounts.
The difference between the fair value at that time and the ESOP's
original acquisition cost is charged or credited to stockholders'
equity. For the quarter and six months ended September 30, 2003,
this difference amounted to $106,000 and $178,000, respectively, as
compared to $69,000 and $108,000 for the same periods in 2002. The
increase in occupancy and equipment expense is primarily due to two
new branch locations (Somers, New York and Stamford, Connecticut)
and the Company's new corporate office which opened in April 2003.
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 and Stamford. 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, 2003 2003 Assets Cash and due from banks $10,911
$8,776 Federal funds sold and other overnight deposits 13,739
36,121 Securities available for sale, at fair value 357,891 295,048
Loans, net: Mortgage loans 438,401 428,575 Consumer loans 1,366
1,551 Allowance for loan losses (2,562) (2,442) Total loans, net
437,205 427,684 Accrued interest receivable 3,604 3,678 Federal
Home Loan Bank stock 5,303 4,141 Premises and equipment, net 5,711
5,467 Deferred income taxes 1,490 392 Goodwill 13,970 13,970 Other
assets 1,164 811 Total assets $850,988 $796,088 Liabilities and
Stockholders' Equity Liabilities: Deposits $653,395 $604,260
Borrowings 55,000 35,000 Mortgagors' escrow funds 1,948 4,603 Due
to brokers for securities purchased -- 10,495 Accrued expenses and
other liabilities 2,865 3,409 Total liabilities 713,208 657,767
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; 13,247,133 shares
issued) 132 132 Additional paid-in capital 95,573 95,395 Treasury
stock, at cost (77,000 shares at September 30, 2003) (1,203) --
Common stock held by the Employee Stock Ownership Plan (6,808)
(7,059) Common stock awards under the Recognition and Retention
Plan (28) (100) Retained earnings 51,980 49,937 Accumulated other
comprehensive (loss) income, net of taxes (1,866) 16 Total
stockholders' equity 137,780 138,321 Total liabilities and
stockholders' equity $850,988 $796,088 Sound Federal Bancorp and
Subsidiary CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
thousands, except per share data) For the For the Six Quarter Ended
Months Ended September 30, September 30, 2003 2002 2003 2002
Interest and Dividend Income Loans $6,490 $7,626 $13,259 $15,240
Mortgage-backed and other securities 2,701 2,007 5,538 4,047
Federal funds sold and other overnight deposits 46 127 174 232
Other earning assets 35 38 92 84 Total interest and dividend income
9,272 9,798 19,063 19,603 Interest Expense Deposits 2,665 3,102
5,544 6,186 Borrowings 384 411 749 827 Other interest-bearing
liabilities 18 17 35 37 Total interest expense 3,067 3,530 6,328
7,050 Net interest income 6,205 6,268 12,735 12,553 Provision for
loan losses 75 50 125 125 Net interest income after provision for
loan losses 6,130 6,218 12,610 12,428 Non-Interest Income Service
charges and fees 228 211 513 381 Gain on sale of real estate owned
-- 13 -- 13 Total non-interest income 228 224 513 394 Non-Interest
Expense Compensation and benefits 2,006 1,623 3,998 3,051 Occupancy
and equipment 584 385 1,146 829 Data processing service fees 189
258 431 487 Advertising and promotion 137 278 551 426 Other 732 665
1,506 1,259 Total non-interest expense 3,648 3,209 7,632 6,052
Income before income tax expense 2,710 3,233 5,491 6,770 Income tax
expense 1,060 1,203 2,124 2,579 Net income $1,650 $2,030 $3,367
$4,191 Basic earnings per share (1) $0.13 $0.16 $0.27 $0.33 Diluted
earnings per share (1) $0.13 $0.15 $0.26 $0.32 (1) Earnings per
share data for the 2002 periods have been adjusted to reflect the
shares issued in the second-step conversion 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, 2003 2003 2003 2002 2002
Net interest income $6,205 $6,530 $6,888 $6,398 $6,268 Provision
for loan losses 75 50 100 50 50 Non-interest income 228 285 267 229
224 Non-interest expense: Compensation and benefits 2,006 1,992
1,839 1,650 1,623 Occupancy and equipment 584 562 422 495 385 Other
non-interest expense 1,058 1,430 1,066 1,185 1,201 Total
non-interest expense 3,648 3,984 3,327 3,330 3,209 Income before
income tax expense 2,710 2,781 3,728 3,247 3,233 Income tax expense
1,060 1,064 1,420 1,220 1,203 Net income $1,650 $1,717 $2,308
$2,027 $2,030 Total assets $850,988 $835,635 $796,088 $779,465
$672,632 Loans, net 437,205 422,461 427,684 434,166 442,724
Securities available for sale: Mortgage-backed securities 264,359
250,529 211,484 148,754 111,762 Other securities 93,532 88,752
83,564 73,061 47,416 Deposits 653,395 633,265 604,260 592,417
565,834 Borrowings 55,000 35,000 35,000 34,973 35,012 Stockholders'
equity 137,780 139,822 138,321 68,246 66,179 Performance Data:
Return on average assets (1) 0.80% 0.85% 1.17% 1.14% 1.21% Return
on average equity (1) 4.76% 4.97% 7.75% 12.07% 12.52% Average
interest rate spread (1) 2.85% 3.07% 3.41% 3.66% 3.77% Net interest
margin (1) 3.14% 3.39% 3.79% 3.81% 3.94% Efficiency ratio 56.71%
58.46% 46.80% 50.25% 49.53% Per Common Share Data: Basic earnings
per common share (2) $0.13 $0.14 $0.19 $0.16 $0.16 Diluted earnings
per common share (2) $0.13 $0.14 $0.18 $0.15 $0.15 Book value per
share (3) $10.46 $10.55 $10.44 $14.27 $13.85 Tangible book value
per share (3) $9.40 $9.50 $9.39 $11.35 $10.93 Dividends per share
(2) $0.05 $0.05 $0.05 $0.03 $0.03 Capital Ratios: Equity to total
assets (consolidated) 16.19% 16.73% 17.38% 8.76% 9.84% Tier 1
leverage capital (Bank) 10.82% 11.14% 11.29% 6.14% 6.76% Asset
Quality Data: Total non-performing loans $1,751 $889 $477 $795 $876
Total non-performing assets $1,751 $889 $477 $966 $1,048 (1) Ratios
are annualized. (2) Per share data for quarters prior to March 31,
2003 have been adjusted to reflect the shares issued in the
second-step conversion completed on January 6, 2003. (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/
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