Exhibit 99.1
FOR IMMEDIATE RELEASE
Friday, April 29, 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 FOURTH
FISCAL QUARTER AND YEAR END EARNINGS
White Plains, New York (PR Newswire), Friday, April 29, 2005 -- Sound Federal
Bancorp, Inc. (Nasdaq National Market: "SFFS") (the "Company"), the holding
company for Sound Federal Savings (the "Bank"), announced net income of $1.1
million or diluted earnings per share of $0.10 for the quarter ended March 31,
2005, as compared to $1.5 million or diluted earnings per share of $0.12 for the
quarter ended March 31, 2004, a decrease of 23.4% in net income. The decrease in
net income for the quarter ended March 31, 2005 is primarily attributable to a
$537,000 increase in non-interest expense and a $186,000 decrease in net
interest income, partially offset by a $255,000 decrease in income tax expense.
For the fiscal year ended March 31, 2005, net income amounted to $5.5 million or
diluted earnings per share of $0.46, as compared to $6.6 million or diluted
earnings per share of $0.52 for fiscal 2004, a decrease of 17.4% in net income.
The decrease in net income for the fiscal year ended March 31, 2005 reflects an
increase of $2.5 million in non-interest expense, partially offset by an
increase of $231,000 in net interest income and a decrease of $701,000 in income
tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "We are very pleased to
announce that the Company's assets have passed the $1.0 billion mark. This is a
milestone that we are proud of and reflects the 114 years of diligence and
commitment that many people have devoted to Sound Federal. This quarter we
continued to grow the franchise by opening the Carmel, New York branch and the
Bethel, Connecticut branch. In total we have opened three branches this fiscal
year bringing the total number of branches to 14 in Westchester, Putnam and
Rockland Counties in New York and Fairfield County in Connecticut. We believe
that growing our franchise in these vibrant and growing communities will add
value to the franchise. While we are pleased with the growth of Sound Federal,
we are cognizant of the start-up costs associated with a de-novo strategy. We
strive to balance the Company's growth with these start-up costs and the
longer-term opportunities of a banking franchise in our market area."
Mr. Gioffre continued, "The yield curve has certainly proved challenging to us
this quarter. Net income
decreased to $1.1 million from $1.4 million in the linked quarter. Net income
has been impacted by the new branches opened this quarter, as well as rising
short-term interest rates and the continued flattening of the yield curve. Loan
origination volume of $45.1 million this quarter has met our expectations,
however the interest rates on new loans have changed very little over the past
nine months. In that same time period, the Federal Reserve has raised the
Federal funds rate by 175 basis points which has impacted the cost of our
deposits. The average cost of our interest-bearing liabilities increased 12
basis points to 1.93% during fiscal 2005 while the average yield earned on
interest-earning assets for fiscal 2005 decreased 17 basis points to 4.62%. Our
deposit growth continues to be strong, with increases of $28.8 million this
quarter and $123.4 million during fiscal 2005. As we look forward to fiscal
2006, we know that the yield curve and competitive pressures will continue to
challenge us. As we have for the past 114 years, our goal is to position the
Company for these challenges."
The Company's total assets amounted to $1.0 billion at March 31, 2005, as
compared to $890.5 million at March 31, 2004. The $116.4 million increase in
assets primarily consisted of an $82.3 million increase in net loans to $560.8
million and a $17.9 million increase in securities to $355.6 million. Our asset
growth was funded principally by a $123.4 million increase in deposits to $831.8
million.
The increase in securities consisted of a $79.5 million increase in securities
classified as held to maturity and a $61.6 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 $9.9 million to $127.2 million at March 31,
2005 as compared to $137.1 million at March 31, 2004. The decrease reflects
treasury stock purchases at a cost of $12.1 million, dividends paid of $2.9
million and a decrease of $3.4 million attributable to the change in accumulated
other comprehensive income or loss, partially offset by net income of $5.5
million and proceeds of $1.1 million from the issuance of treasury shares for
stock options exercised.
The accumulated other comprehensive loss of $2.7 million at March 31, 2005
represents the after-tax net unrealized loss on securities available for sale
($4.5 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 March 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 March 31, 2005.
Net interest income for the quarter ended March 31, 2005 decreased $186,000 to
$6.6 million as compared to $6.8 million for the same quarter in the prior year.
Our net interest rate spread was 2.62% and 2.98% for the quarters ended March
31, 2005 and 2004, respectively. Our net interest margin for those respective
periods was 2.85% and 3.20%. For fiscal 2005, net interest income amounted to
$26.4 million as compared to $26.2 million for fiscal 2004. Our net interest
rate spread was 2.69% and 2.98% and our net interest margin was 2.91% and 3.24%
for the respective fiscal years. 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 175 basis points
to 2.75%. 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 $403,000 and $276,000 for the quarters ended March
31, 2005 and 2004, respectively. For the year ended March 31, 2005, non-interest
income amounted to $1.4 million as compared to $1.0 million for the year ended
March 31, 2004. The increases in non-interest income were primarily due to an
increase of $293,000 in income on bank-owned life insurance which was purchased
in December 2003 and a $93,000 gain on the sale of land. The land sold was
contiguous to an existing branch site. Management determined that this parcel
was not going to be used in connection with the operation of the branch.
Non-interest expense totaled $5.1 million for the quarter ended March 31, 2005
as compared to $4.5 million for the quarter ended March 31, 2004. This increase
is due to increases of $158,000 in occupancy and equipment expense, $66,000 in
data processing service fees, $202,000 in advertising and promotion expense and
$206,000 in other non-interest expense. The increases include costs attributable
to the three new branches opened during fiscal 2005.
Other non-interest expense for the quarter ended March 31, 2005 included $97,000
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 period a year ago.
For the year ended March 31, 2005, non-interest expense increased $2.5 million
to $18.6 million as compared to $16.1 million for the year ended March 31, 2004.
This increase is due primarily to increases of $1.2 million in compensation and
benefits, $426,000 in occupancy and equipment expense, $193,000 in data
processing service fees, $99,000 in advertising and promotion expense and
$532,000 in other non-interest expense.
The increase in compensation and benefits expense is due primarily to a $787,000
increase in expense related to stock awards made pursuant to the Company's 2004
Stock Incentive Plan and a $586,000 increase in compensation costs due primarily
to additional staff to support the growth in the Company's lending operations
and the new branches. At March 31, 2005, we had 138 full-time equivalent
employees as compared to 119 at March 31, 2004.
Other non-interest expense for the year ended March 31, 2005 included $367,000
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 fiscal 2004.
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) March 31, March 31,
2005 2004
----------- -----------
Assets
Cash and due from banks $ 11,512 $ 10,455
Federal funds sold and other overnight deposits 31,095 20,756
Securities:
Available for sale, at fair value 276,154 337,730
Held to maturity, at amortized cost 79,489 --
----------- -----------
Total securities 355,643 337,730
----------- -----------
Loans, net:
Mortgage loans 558,662 477,771
Other loans 5,100 3,396
Allowance for loan losses (3,011) (2,712)
----------- -----------
Total loans, net 560,751 478,455
----------- -----------
Accrued interest receivable 4,277 3,623
Federal Home Loan Bank stock 5,738 5,303
Premises and equipment, net 6,214 5,630
Goodwill 13,970 13,970
Bank-owned life insurance 10,464 10,085
Prepaid pension costs 3,057 2,547
Deferred income taxes 2,236 --
Other assets 1,993 1,987
----------- -----------
Total assets $ 1,006,950 $ 890,541
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 831,768 $ 708,330
Borrowings 38,000 35,000
Mortgagors' escrow funds 5,264 4,522
Due to brokers for securities purchased 2,513 4,000
Accrued expenses and other liabilities 2,245 1,630
----------- -----------
Total liabilities 879,790 753,482
----------- -----------
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 103,728 102,637
Treasury stock, at cost (1,258,964 and 459,297 shares at March 31, 2005
and March 31, 2004, respectively) (18,131) (7,150)
Common stock held by Employee Stock Ownership Plan (6,053) (6,556)
Unearned stock awards (4,435) (5,618)
Retained earnings 54,638 52,908
Accumulated other comprehensive (loss) income, net of taxes (2,723) 702
----------- -----------
Total stockholders' equity 127,160 137,059
----------- -----------
Total liabilities and stockholders' equity $ 1,006,950 $ 890,541
=========== ===========
Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Three Months Ended For the Year Ended
March 31, March 31,
-------------------------- -----------------------
2005 2004 2005 2004
---- ---- ---- ----
Interest and Dividend Income
Loans $ 7,697 $ 6,919 $29,430 $26,819
Mortgage-backed and other securities 3,081 2,845 11,998 11,538
Federal funds sold and other overnight deposits 95 20 340 240
Other earning assets 45 19 132 142
------- ------- ------- -------
Total interest and dividend income 10,918 9,803 41,900 38,739
------- ------- ------- -------
Interest Expense
Deposits 3,966 2,662 13,968 11,004
Borrowings 363 365 1,489 1,495
Other interest-bearing liabilities 5 6 20 48
------- ------- ------- -------
Total interest expense 4,334 3,033 15,477 12,547
------- ------- ------- -------
Net interest income 6,584 6,770 26,423 26,192
Provision for loan losses 75 75 300 275
------- ------- ------- -------
Net interest income after provision for loan losses 6,509 6,695 26,123 25,917
------- ------- ------- -------
Non-Interest Income
Service charges and fees 213 190 953 955
Income on bank-owned life insurance 92 86 379 86
Gain on sale of land 93 -- 93 --
Gain on sales of mortgage loans 5 -- 22 --
------- ------- ------- -------
Total non-interest income 403 276 1,447 1,041
------- ------- ------- -------
Non-Interest Expense
Compensation and benefits 2,533 2,628 9,945 8,733
Occupancy and equipment 750 592 2,717 2,291
Data processing service fees 340 274 1,218 1,025
Advertising and promotion 440 238 1,119 1,020
Other 1,012 806 3,569 3,037
------- ------- ------- -------
Total non-interest expense 5,075 4,538 18,568 16,106
------- ------- ------- -------
Income before income tax expense 1,837 2,433 9,002 10,852
Income tax expense 722 977 3,533 4,234
------- ------- ------- -------
Net income $ 1,115 $ 1,456 $ 5,469 $ 6,618
======= ======= ======= =======
Earnings per share:
Basic earnings per share $ 0.10 $ 0.12 $ 0.47 $ 0.54
======= ======= ======= =======
Diluted earnings per share $ 0.10 $ 0.12 $ 0.46 $ 0.52
======= ======= ======= =======
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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March 31, 2005 Dec. 31, 2004 Sept. 30, 2004 June 30, 2004 March 31, 2004
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Net interest income $ 6,584 $ 6,675 $ 6,706 $ 6,458 $ 6,770
Provision for loan losses 75 75 75 75 75
Non-interest income 403 382 310 352 276
Non-interest expense:
Compensation and benefits 2,533 2,538 2,462 2,412 2,628
Occupancy and equipment 750 673 661 633 592
Other non-interest expense 1,792 1,389 1,478 1,247 1,318
---------- ---------- ---------- ---------- ----------
Total non-interest expense 5,075 4,600 4,601 4,292 4,538
---------- ---------- ---------- ---------- ----------
Income before income tax expense 1,837 2,382 2,340 2,443 2,433
Income tax expense 722 956 909 946 977
---------- ---------- ---------- ---------- ----------
Net income $ 1,115 $ 1,426 $ 1,431 $ 1,497 $ 1,456
========== ========== ========== ========== ==========
Total assets $1,006,950 $ 984,372 $ 965,388 $ 914,610 $ 890,541
Loans, net 560,751 541,955 529,638 501,239 478,455
Mortgage-backed securities
Available for sale 199,746 216,133 231,986 246,850 255,853
Held to maturity 59,777 54,717 30,691 7,157 --
Other securities
Available for sale 76,408 79,364 84,986 85,427 81,877
Held to maturity 19,712 14,713 10,640 2,796 --
Deposits 831,768 802,990 789,794 746,160 708,330
Borrowings 38,000 38,000 38,000 38,000 35,000
Stockholders' equity 127,160 131,134 129,439 125,016 137,059
- ---------------------------------------------------------------------------------------------------------------------------------
Performance Data:
Return on average assets (1) 0.46% 0.58% 0.60% 0.66% 0.67%
Return on average equity (1) 3.51% 4.38% 4.56% 4.49% 4.49%
Net interest rate spread (1) 2.62% 2.63% 2.71% 2.80% 2.98%
Net interest margin (1) 2.85% 2.85% 2.94% 3.02% 3.20%
Efficiency ratio (2) 73.61% 65.18% 65.58% 63.02% 64.41%
Per Common Share Data:
Basic earnings per common share $ 0.10 $ 0.12 $ 0.12 $ 0.13 $ 0.12
Diluted earnings per common share $ 0.10 $ 0.12 $ 0.12 $ 0.12 $ 0.12
Book value per share (3) $ 10.27 $ 10.40 $ 10.29 $ 9.96 $ 10.40
Tangible book value per share (3) $ 9.15 $ 9.29 $ 9.18 $ 8.85 $ 9.34
Dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06
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Capital Ratios:
Equity to total assets (consolidated) 12.63% 13.32% 13.41% 13.67% 15.39%
Tier 1 leverage capital (Bank) 10.24% 10.37% 10.40% 10.71% 10.92%
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Asset Quality Data:
Total non-performing loans $ 580 $ 734 $ 963 $ 1,728 $ 1,981
Total non-performing assets $ 580 $ 734 $ 963 $ 1,728 $ 1,981
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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.