Exhibit 99.1
FOR IMMEDIATE RELEASE
Wednesday, January 26, 2005
For further information contact:
Anthony J. Fabiano
Senior Vice President, Chief Financial Officer
and Corporate Secretary
(914) 761-3636
SOUND FEDERAL BANCORP, INC. ANNOUNCES THIRD
FISCAL QUARTER EARNINGS
White Plains, New York (PR Newswire), Wednesday, January 26, 2005 -- Sound
Federal Bancorp, Inc. (Nasdaq National Market: "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
December 31, 2004, as compared to $1.8 million or diluted earnings per share of
$0.14 for the quarter ended December 31, 2003, a decrease of 20.6% in net
income. The decrease in net income for the quarter ended December 31, 2004 is
primarily attributable to a $664,000 increase in non-interest expense, partially
offset by a $177,000 decrease in income tax expense. For the nine months ended
December 31, 2004, net income amounted to $4.4 million or diluted earnings per
share of $0.36, as compared to $5.2 million or diluted earnings per share of
$0.41 for the same period in 2003, a decrease of 15.7% in net income. The
decrease in net income for the nine months ended December 31, 2004 reflects an
increase of $1.9 million in non-interest expense, partially offset by an
increase of $417,000 in net interest income and a decrease of $446,000 in income
tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "The flattening yield curve
continues to impact our net interest rate spread and net interest margin. Our
net interest rate spread decreased 8 basis points to 2.63% from the September
30, 2004 quarter and our net interest margin decreased 9 basis points to 2.85%
during the same period. Despite these decreases, net interest income remained
substantially unchanged from the prior linked quarter. We achieved this with
steady growth in our loan portfolio and the growth of deposit accounts. The
growth in deposit accounts is due primarily to our de-novo branch strategy which
we believe will grow the value of the franchise. Asset quality remains very
strong with non-performing loans amounting to $734,000 or 0.13% of total loans
at December 31, 2004. As we begin the fourth quarter of our 2005 fiscal year, we
look forward to fiscal 2006 and the opportunity to continue to grow the Sound
Federal franchise. We believe that this course of action will increase
stockholder value."
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The Company's total assets amounted to $984.4 million at December 31, 2004 as
compared to $890.5 million at March 31, 2004. The $93.9 million increase in
assets primarily consisted of a $63.5 million increase in net loans to $542.0
million and a $27.2 million increase in securities to $364.9 million. Our asset
growth was funded principally by a $94.7 million increase in deposits to $803.0
million.
The increase in securities consisted of a $69.4 million increase in securities
classified as held to maturity and a $42.2 million decrease in securities
available for sale. In June 2004, the Company began to classify substantially
all securities purchases as held to maturity. This decision was based on the
size of the portfolio classified as available for sale relative to
interest-earning assets and stockholders' equity, the Company's liquidity
position, which allows the Company to hold securities until maturity and an
increase in market interest rates. As these factors change in the future, the
Company will evaluate the classification of future securities purchases.
Total stockholders' equity decreased $6.0 million to $131.1 million at December
31, 2004 as compared to $137.1 million at March 31, 2004. The decrease reflects
treasury stock purchases at a cost of $8.3 million, dividends paid of $2.2
million and a decrease of $2.0 million attributable to the change in accumulated
other comprehensive income or loss, partially offset by net income of $4.4
million.
The accumulated other comprehensive loss of $1.3 million at December 31, 2004
represents the after-tax net unrealized loss on securities available for sale
($2.1 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, 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 December 31, 2004.
Net interest income for the quarter ended December 31, 2004 remained relatively
unchanged at $6.7 million as compared to the same quarter in the prior year. Our
net interest rate spread was 2.63% and 2.92% for the quarters ended December 31,
2004 and 2003, respectively. Our net interest margin for those respective
periods was 2.85% and 3.17%. For the nine months ended December 31, 2004, net
interest income amounted to $19.8 million as compared to $19.4 million for the
same period last year. Our net interest rate spread was 2.71% and 2.93% and our
net interest margin was 2.93% and 3.22% for the respective 2004 and 2003 nine
month periods. The decreases in net 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. Since July 2004, the Federal Reserve has
raised the Federal funds rate by 125 basis points to 2.25%. However, long-term
rates have remained substantially unchanged, resulting in a flattening yield
curve. As short-term interest rates rise, the cost of our interest-bearing
liabilities will increase faster than the yield on our interest-earning assets
which are affected by longer-term interest rates. As a result, our net interest
rate spread and net interest margin may continue to decrease.
Non-interest income totaled $382,000 and $252,000 for the quarters ended
December 31, 2004 and 2003, respectively. For the nine months ended December 31,
2004, non-interest income amounted to $1.0 million as compared to $765,000 for
the nine months ended December 31, 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 December 31,
2004 as compared to $3.9 million for the quarter ended December 31, 2003. This
increase is due to increases of $431,000 in compensation and benefits, $120,000
in occupancy and equipment expense, and $161,000 in other non-interest
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expense, partially offset by a $42,000 decrease in advertising and promotion
expense.
The increase in compensation and benefits expense is due primarily to a $260,000
increase in expense related to stock awards made pursuant to the Company's 2004
Stock Incentive Plan and a $116,000 increase in compensation costs due primarily
to additional staff to support the growth in the Company's lending operations
and the addition of the Brookfield branch, which opened in June 2004. At
December 31, 2004, we had 124 full-time equivalent employees as compared to 119
at December 31, 2003.
For the nine months ended December 31, 2004, non-interest expense increased $1.9
million to $13.5 million as compared to $11.6 million for the nine months ended
December 31, 2003. This increase is due primarily to increases of $1.3 million
in compensation and benefits, $268,000 in occupancy and equipment expense,
$127,000 in data processing service fees, and $326,000 in other non-interest
expense, partially offset by a decrease of $103,000 in advertising and promotion
expense.
The increase in compensation and benefits expense for the nine month period is
due primarily to a $779,000 increase in expense related to stock awards and a
$431,000 increase in compensation costs.
The increase in occupancy and equipment expense is primarily due to the addition
of the Stamford and Brookfield branches, which opened in September 2003 and June
2004, respectively. The decrease in advertising and promotion expense is
primarily due to the timing of the marketing campaigns for the new branch
locations.
Other non-interest expense for the three and nine months ended December 31, 2004
includes $135,000 and $270,000, respectively, of costs related to the Company's
implementation of the internal controls and procedures provisions of the
Sarbanes-Oxley Act of 2002. There were no comparable costs in the same periods a
year ago.
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.
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Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)
December 31, March 31,
2004 2004
------------ ---------
Assets
Cash and due from banks $ 10,493 $ 10,455
Federal funds sold and other overnight deposits 21,150 20,756
Securities:
Available for sale, at fair value 295,497 337,730
Held to maturity, at amortized cost 69,430 --
--------- ---------
Total securities 364,927 337,730
--------- ---------
Loans, net:
Mortgage loans 542,135 477,771
Consumer loans 2,757 3,396
Allowance for loan losses (2,937) (2,712)
--------- ---------
Total loans, net 541,955 478,455
--------- ---------
Accrued interest receivable 3,857 3,623
Federal Home Loan Bank stock 5,738 5,303
Premises and equipment, net 5,969 5,630
Goodwill 13,970 13,970
Bank-owned life insurance 10,373 10,085
Prepaid pension costs 2,954 2,547
Deferred income taxes 1,091 --
Other assets 1,895 1,987
--------- ---------
Total assets $ 984,372 $ 890,541
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 802,990 $ 708,330
Borrowings 38,000 35,000
Mortgagors' escrow funds 6,012 4,522
Due to brokers for securities purchased 3,916 4,000
Accrued expenses and other liabilities 2,320 1,630
--------- ---------
Total liabilities 853,238 753,482
--------- ---------
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 103,372 102,637
Treasury stock, at cost (1,028,329 and 459,297 shares
at December 31, 2004 and March 31, 2004, respectively) (14,644) (7,150)
Common stock held by Employee Stock Ownership Plan (6,178) (6,556)
Unearned stock awards (4,731) (5,618)
Retained earnings 54,448 52,908
Accumulated other comprehensive (loss) income,
net of taxes (1,269) 702
--------- ---------
Total stockholders' equity 131,134 137,059
--------- ---------
Total liabilities and stockholders' equity $ 984,372 $ 890,541
========= =========
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Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
-------------------------- -------------------------
2004 2003 2004 2003
------- ------- ------- -------
Interest and Dividend Income
Loans $ 7,482 $ 6,641 $21,733 $19,900
Mortgage-backed and other securities 3,101 3,186 8,917 8,693
Federal funds sold and other overnight deposits 113 46 245 220
Other earning assets 32 -- 87 123
------- ------- ------- -------
Total interest and dividend income 10,728 9,873 30,982 28,936
------- ------- ------- -------
Interest Expense
Deposits 3,677 2,798 10,002 8,342
Borrowings 371 381 1,126 1,130
Other interest-bearing liabilities 5 7 15 42
------- ------- ------- -------
Total interest expense 4,053 3,186 11,143 9,514
------- ------- ------- -------
Net interest income 6,675 6,687 19,839 19,422
Provision for loan losses 75 75 225 200
------- ------- ------- -------
Net interest income after provision for
loan losses 6,600 6,612 19,614 19,222
------- ------- ------- -------
Non-Interest Income
Service charges and fees 244 252 740 765
Increase in cash surrender value of bank-owned
life insurance 121 -- 287 --
Gains on sales of mortgage loans 17 -- 17 --
------- ------- ------- -------
Total non-interest income 382 252 1,044 765
------- ------- ------- -------
Non-Interest Expense
Compensation and benefits 2,538 2,107 7,412 6,105
Occupancy and equipment 673 553 1,967 1,699
Data processing service fees 314 320 878 751
Advertising and promotion 189 231 679 782
Other 886 725 2,557 2,231
------- ------- ------- -------
Total non-interest expense 4,600 3,936 13,493 11,568
------- ------- ------- -------
Income before income tax expense 2,382 2,928 7,165 8,419
Income tax expense 956 1,133 2,811 3,257
------- ------- ------- -------
Net income $ 1,426 $ 1,795 $ 4,354 $ 5,162
======= ======= ======= =======
Earnings per share:
Basic earnings per share $ 0.12 $ 0.15 $ 0.37 $ 0.42
======= ======= ======= =======
Diluted earnings per share $ 0.12 $ 0.14 $ 0.36 $ 0.41
======= ======= ======= =======
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Sound Federal Bancorp, Inc. and Subsidiary
Other Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
At or for the Quarter Ended
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Dec. 31, 2004 Sept. 30, 2004 June 30, 2004 March 31, 2004 Dec. 31, 2003
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Net interest income $ 6,675 $ 6,706 $ 6,458 $ 6,770 $ 6,687
Provision for loan losses 75 75 75 75 75
Non-interest income 382 310 352 276 252
Non-interest expense:
Compensation and benefits 2,538 2,462 2,412 2,628 2,107
Occupancy and equipment 673 661 633 592 553
Other non-interest expense 1,389 1,478 1,247 1,318 1,276
-------- -------- -------- -------- --------
Total non-interest expense 4,600 4,601 4,292 4,538 3,936
-------- -------- -------- -------- --------
Income before income tax expense 2,382 2,340 2,443 2,433 2,928
Income tax expense 956 909 946 977 1,133
-------- -------- -------- -------- --------
Net income $ 1,426 $ 1,431 $ 1,497 $ 1,456 $ 1,795
======== ======== ======== ======== ========
Total assets $984,372 $965,388 $914,610 $890,541 $881,637
Loans, net 541,955 529,638 501,239 478,455 461,453
Mortgage-backed securities
Available for sale 216,133 231,986 246,850 255,853 269,604
Held to maturity 54,717 30,691 7,157 -- --
Other securities
Available for sale 79,364 84,986 85,427 81,877 86,656
Held to maturity 14,713 10,640 2,796 -- --
Deposits 802,990 789,794 746,160 708,330 698,416
Borrowings 38,000 38,000 38,000 35,000 35,000
Stockholders' equity 131,134 129,439 125,016 137,059 132,091
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Performance Data:
Return on average assets (1) 0.58% 0.60% 0.66% 0.67% 0.82%
Return on average equity (1) 4.38% 4.56% 4.49% 4.49% 5.26%
Net interest rate spread (1) 2.63% 2.71% 2.80% 2.98% 2.92%
Net interest margin (1) 2.85% 2.94% 3.02% 3.20% 3.17%
Efficiency ratio (2) 65.18% 65.58% 63.02% 64.41% 56.72%
Per Common Share Data:
Basic earnings per common share $ 0.12 $ 0.12 $ 0.13 $ 0.12 $ 0.15
Diluted earnings per common share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.14
Book value per share (3) $ 10.40 $ 10.29 $ 9.96 $ 10.40 $ 10.32
Tangible book value per share (3) $ 9.29 $ 9.18 $ 8.85 $ 9.34 $ 9.23
Dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06
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Capital Ratios:
Equity to total assets (consolidated) 13.32% 13.41% 13.67% 15.39% 14.98%
Tier 1 leverage capital (Bank) 10.37% 10.40% 10.71% 10.92% 10.74%
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Asset Quality Data:
Total non-performing loans $ 734 $ 963 $ 1,728 $ 1,981 $ 1,290
Total non-performing assets $ 734 $ 963 $ 1,728 $ 1,981 $ 1,290
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(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.