SFFS Sound Federal Bancorp (MM)

Sound Federal Bancorp, Inc. Announces First Fiscal Quarter Earnings WHITE PLAINS, N.Y., July 27 /PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (NASDAQ:SFFS) (the "Company"), the holding company for Sound Federal Savings (the "Bank"), announced net income of $1.5 million, or diluted earnings per share of $0.12 for the quarter ended June 30, 2004, as compared to $1.7 million, or diluted earnings per share of $0.14 for the quarter ended June 30, 2003, a decrease in net income of 12.8%. The decrease in net income for the quarter ended June 30, 2004 as compared to the same quarter in the prior year is primarily attributable to a $308,000 increase in non-interest expense and a $72,000 decrease in net interest income, partially offset by a $118,000 decrease in income tax expense and a $67,000 increase in non-interest income. Bruno J. Gioffre, Chairman of the Board, commented, "We remain focused on our primary goal of building a quality bank franchise in Westchester and Putnam counties in New York and in Fairfield county in Connecticut. A quality bank franchise combines great service and products with a strong market area and a management team that understands the market's needs. In May 2004, we opened our newest branch in Brookfield, Connecticut. We plan on opening a branch in Carmel, New York by the end of 2004. In addition, we are exploring opportunities to expand the Sound Federal franchise into the fast-growing northern suburbs of our market area. The initial cost of our branch expansion and the decrease in net interest income, which reflects the current interest rate environment, has reduced earnings for the current fiscal quarter. However, we believe that the current economic climate is an ideal environment for us to grow the franchise through a de novo strategy." Mr. Gioffre continued, "We were able to avail ourselves of weakening stock prices affecting most thrifts this quarter by repurchasing 627,332 shares of the Company's common stock. The stock repurchases had the effect of diluting book value but was accretive to earnings per share. The de novo growth strategy and the repurchase program reduced the Company's equity-to-asset ratio to 13.67% at June 30, 2004 from 16.73% at June 30, 2003." The Company's total assets amounted to $914.6 million at June 30, 2004 as compared to $890.5 million at March 31, 2004. The $24.1 million increase in total assets primarily consists of a $22.8 million increase in net loans to $501.2 million and a $4.5 million increase in securities to $342.2 million. These increases were partially offset by a decrease in federal funds sold of $7.0 million to $13.8 million. Our asset growth was funded principally by a $37.8 million increase in deposits to $746.1 million at June 30, 2004 from $708.3 million at March 31, 2004. Total stockholders' equity decreased $12.1 million to $125.0 million at June 30, 2004 as compared to $137.1 million at March 31, 2004. The decrease reflects treasury shares purchased at a cost of $8.3 million, dividends paid of $755,000 and a decrease of $5.0 million attributable to accumulated other comprehensive income or loss, partially offset by net income of $1.5 million. The change in accumulated other comprehensive income or loss reflects a $7.1 million ($4.3 million after tax) net unrealized loss on securities available for sale. 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 June 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 June 30, 2004. Net interest income for the quarter ended June 30, 2004 amounted to $6.5 million, a $72,000 decrease from the same quarter in the prior year. The interest rate spread was 2.80% and 3.07% for the quarters ended June 30, 2004 and 2003, respectively. The net interest margin for those periods was 3.02% and 3.39%, respectively. The decreases in interest rate spread and net interest margin for the comparative quarters 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. If interest rates increase, we expect 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 $352,000 and $285,000 for the quarters ended June 30, 2004 and 2003, respectively. The increase in non-interest income was primarily due to changes in the cash surrender value of bank-owned life insurance. Non-interest expense totaled $4.3 million for the quarter ended June 30, 2004 as compared to $4.0 million for the quarter ended June 30, 2003. This increase is due primarily to a $420,000 increase in compensation and benefits and a $71,000 increase in occupancy and equipment expense, partially offset by decreases of $163,000 in advertising and promotion and $78,000 in other non-interest expense. The increase in compensation and benefits 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). 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, except per share data) June 30, March 31, 2004 2004 Assets Cash and due from banks $10,873 $10,455 Federal funds sold and other overnight deposits 13,763 20,756 Securities: Available for sale, at fair value 332,277 337,730 Held to maturity, at amortized cost 9,953 - Total securities 342,230 337,730 Loans, net: Mortgage loans 502,235 477,771 Consumer loans 1,791 3,396 Allowance for loan losses (2,787) (2,712) Total loans, net 501,239 478,455 Accrued interest receivable 3,600 3,623 Federal Home Loan Bank stock 5,738 5,303 Premises and equipment, net 5,608 5,630 Goodwill 13,970 13,970 Bank-owned life insurance 10,161 10,085 Prepaid pension costs 2,538 2,547 Deferred taxes 3,018 - Other assets 1,872 1,987 Total assets $914,610 $890,541 Liabilities and Stockholders' Equity Liabilities: Deposits $746,160 $708,330 Borrowings 38,000 35,000 Mortgagors' escrow funds 3,953 4,522 Due to brokers for securities purchased - 4,000 Accrued expenses and other liabilities 1,481 1,630 Total liabilities 789,594 753,482 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 102,793 102,637 Treasury stock, at cost (1,086,629 and 459,297 shares at June 30, 2004 and March 31, 2004, respectively) (15,474) (7,150) Common stock held by the Employee Stock Ownership Plan (6,430) (6,556) Unearned stock awards (5,322) (5,618) Retained earnings 53,650 52,908 Accumulated other comprehensive (loss) income, net of taxes (4,337) 702 Total stockholders' equity 125,016 137,059 Total liabilities and stockholders' equity $914,610 $890,541 Sound Federal Bancorp, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the Quarter Ended June 30, 2004 2003 Interest and Dividend Income Loans $6,897 $6,769 Mortgage-backed and other securities 2,792 2,837 Federal funds sold and other overnight deposits 59 128 Other earning assets 21 57 Total interest and dividend income 9,769 9,791 Interest Expense Deposits 2,941 2,879 Borrowings 365 365 Other interest-bearing liabilities 5 17 Total interest expense 3,311 3,261 Net interest income 6,458 6,530 Provision for loan losses 75 50 Net interest income after provision for loan losses 6,383 6,480 Non-Interest Income Service charges, fees and other income 352 285 Non-Interest Expense Compensation and benefits 2,412 1,992 Occupancy and equipment 633 562 Data processing service fees 300 242 Advertising and promotion 251 414 Other 696 774 Total non-interest expense 4,292 3,984 Income before income tax expense 2,443 2,781 Income tax expense 946 1,064 Net income $1,497 $1,717 Basic earnings per share $0.13 $0.14 Diluted earnings per share $0.12 $0.14 Sound Federal Bancorp, Inc. and Subsidiary Other Financial Data (Unaudited) (Dollars in thousands, except per share data) At or for the Quarter Ended June 30, March 31, Dec. 31, Sept. 30, June 30, 2004 2004 2003 2003 2003 Net interest income $6,458 $6,770 $6,687 $6,205 $6,530 Provision for loan losses 75 75 75 75 50 Non-interest income 352 276 252 228 285 Non-interest expense: Compensation and benefits 2,412 2,628 2,107 2,006 1,992 Occupancy and equipment 633 592 553 584 562 Other non-interest expense 1,247 1,318 1,276 1,058 1,430 Total non-interest expense 4,292 4,538 3,936 3,648 3,984 Income before income tax expense 2,443 2,433 2,928 2,710 2,781 Income tax expense 946 977 1,133 1,060 1,064 Net income $1,497 $1,456 $1,795 $1,650 $1,717 Total assets $914,610 $890,541 $881,637 $850,988 $835,635 Loans, net 501,239 478,455 461,453 437,205 422,461 Mortgage-backed securities: Available for sale 246,850 255,853 269,604 264,359 250,529 Held to maturity 7,157 - - - - Other securities: Available for sale 85,427 81,877 86,656 93,532 88,752 Held to maturity 2,796 - - - - Deposits 746,160 708,330 698,416 653,395 633,265 Borrowings 38,000 35,000 35,000 55,000 35,000 Stockholders' equity 125,016 137,059 132,091 137,780 139,822 Performance Data: Return on average assets (1) 0.66% 0.67% 0.82% 0.80% 0.85% Return on average equity (1) 4.49% 4.49% 5.26% 4.76% 4.97% Average interest rate spread (1) 2.80% 2.98% 2.92% 2.85% 3.07% Net interest margin (1) 3.02% 3.20% 3.17% 3.14% 3.39% Efficiency ratio 63.02% 64.41% 56.72% 56.71% 58.46% Per Common Share Data: Basic earnings per common share $0.13 $0.12 $0.15 $0.13 $0.14 Diluted earnings per common share $0.12 $0.12 $0.14 $0.13 $0.14 Book value per share (2) $9.96 $10.40 $10.32 $10.46 $10.55 Tangible book value per share (2) $8.85 $9.34 $9.23 $9.40 $9.50 Dividends per share $0.06 $0.06 $0.06 $0.05 $0.05 Capital Ratios: Equity to total assets (consolidated) 13.67% 15.39% 14.98% 16.19% 16.73% Tier 1 leverage capital (Bank) 10.71% 10.92% 10.74% 10.82% 11.14% Asset Quality Data: Total non-performing loans $1,728 $1,981 $1,290 $1,751 $889 Total non-performing assets $1,728 $1,981 $1,290 $1,751 $889 (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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