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/
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