Exhibit 99.1
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FOR IMMEDIATE RELEASE
Friday, October 28, 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 SECOND
FISCAL QUARTER EARNINGS
White Plains, New York (PR Newswire), Friday, October 28, 2005 -- Sound Federal
Bancorp, Inc. (Nasdaq National Market: "SFFS") (the "Company"), the holding
company for Sound Federal Savings (the "Bank"), announced net income of $1.36
million or diluted earnings per share of $0.12 for the quarter ended September
30, 2005 as compared to $1.43 million or diluted earnings per share of $0.12 for
the quarter ended September 30, 2004. Net income decreased $72,000 for the
quarter ended September 30, 2005 which is attributable to a $433,000 increase in
non-interest expense and a $158,000 decrease in net interest income, partially
offset by a $468,000 increase in non-interest income and a $51,000 decrease in
income tax expense. For the six months ended September 30, 2005, net income
amounted to $2.5 million or diluted earnings per share of $0.21, as compared to
$2.9 million or diluted earnings per share of $0.25 for the same period in 2004,
a decrease of 15.2% in net income. The decrease in net income for the six months
ended September 30, 2005 is primarily attributable to a $1.1 million increase in
non-interest expense, partially offset by a $485,000 increase in non-interest
income and a $277,000 decrease in income tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "The yield curve continues
to affect our net interest rate spread and net interest margin, which decreased
14 basis points and 11 basis points respectively from the linked quarter.
However, the average balance of net interest-earning assets increased $10.5
million to $114.2 million during the current quarter as compared to $103.7
million during the linked quarter. A significant component of this growth was an
8.9% or $54.6 million increase in total loans during the quarter. Total deposits
grew 2.6% or $23.5 million during the same period. Loan production continues to
be strong with originations of $91.7 million in the second quarter of fiscal
2006. This record loan production has helped Sound Federal to mitigate
increasing funding costs that are driven by short-term rates. While the yield
curve continues to challenge us, we remain focused on the growth of the Sound
Federal franchise. We will continue to strive to grow our customer base - both
deposit and loan products. One of the Company's strengths is the relative
affluence and economic diversity of our market area. This provides us with
opportunities to increase the Company's income and franchise value as evidenced
by our ability to continue to originate loans and increase our deposit base. The
yield curve will eventually change - market forces will dictate how and when. We
believe that our continued ability to develop customer relationships in the New
York counties of
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Westchester, Putnam and Rockland and in Fairfield County, Connecticut, is an
investment that, if cultivated and nurtured, will return future earnings and
increase franchise value. As always, we value and thank you for your continued
support of our Company."
The Company's total assets amounted to $1.1 billion at September 30, 2005, as
compared to $1.0 billion at March 31, 2005. The $76.1 million increase in assets
primarily consisted of a $107.3 million increase in net loans to $668.0 million,
partially offset by a decrease in total securities of $18.2 million. Our asset
growth was funded principally by an $81.9 million increase in deposits to $913.7
million.
Total stockholders' equity increased $1.0 million to $128.2 million at September
30, 2005 as compared to $127.2 million at March 31, 2005. The increase reflects
net income of $2.5 million and an increase in additional paid-in capital of
$530,000, partially offset by treasury stock purchases at a cost of $1.3 million
and dividends paid of $1.6 million.
The accumulated other comprehensive loss of $2.7 million at September 30, 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 September 30, 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 September 30, 2005.
Net interest income for the quarter ended September 30, 2005 decreased $158,000
to $6.5 million as compared to $6.7 million for the quarter ended September 30,
2004. Our net interest rate spread was 2.27% and 2.71% for the quarters ended
September 30, 2005 and 2004, respectively. Our net interest margin for those
respective periods was 2.55% and 2.94%. For the six months ended September 30,
2005, net interest income amounted to $13.1 million as compared to $13.2 million
for the prior year. Our interest rate spread was 2.33% and 2.76% and our net
interest margin was 2.61% and 2.98% for the respective six month periods. The
decreases in interest rate spread and net interest margin are primarily the
result of a decrease in the spread between short and long-term market interest
rates. The Federal Reserve began raising the Federal funds rate in July 2004.
Since that time and through September 30, 2005, the Federal Reserve has raised
the Federal funds rate by 250 basis points to 3.50%. However, long term rates
have only begun to rise, resulting in a flattening yield curve. Consequently, as
short-term interest rates increased, the cost of our interest-bearing
liabilities increased faster than the yield on interest-earning assets which are
affected by longer-term interest rates.
The provision for loan losses was $75,000 for the quarters ended September 30,
2005 and 2004 and $150,000 for the six months ended September 30, 2005 and 2004.
Non-performing loans amounted to $1.3 million or 0.19% of total loans at
September 30, 2005, as compared to $963,000 or 0.18% of total loans at September
30, 2004. At March 31, 2005, non-performing loans amounted to $580,000 or 0.10%
of total loans. The allowance for loan losses amounted to $3.2 million and $3.0
million at September 30, 2005 and March 31, 2005, respectively. There were no
charge-offs or recoveries during the quarters ended September 30, 2005 and 2004.
The increase in the allowance for loan losses primarily reflects an increase in
the origination of adjustable rate mortgage loans, commercial mortgage loans and
commercial loans (not secured by real estate) as well as overall portfolio
growth.
Non-interest income totaled $778,000 and $310,000 for the quarters ended
September 30, 2005 and 2004, respectively. For the six months ended September
30, 2005, non-interest income amounted to $1.1 million as compared to $662,000
for the six months ended September 30, 2004. The increases in non-interest
income were primarily due to a $325,000 gain on the sale of real estate which
was completed in September 2005. The property was contiguous to an existing
branch site. Management determined that this property was not going
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to be used in connection with the operation of the branch.
Non-interest expense totaled $5.0 million for the quarter ended September 30,
2005 as compared to $4.6 million for the quarter ended September 30, 2004. This
increase is primarily due to increases of $379,000 in compensation and benefits
expense, $90,000 in occupancy and equipment expense and $90,000 in data
processing servicing fees. For the six months ended September 30, 2005,
non-interest expense increased $1.1 million to $10.0 million as compared to $8.9
million for the six months ended September 30, 2004. This increase is due
primarily to increases of $794,000 in compensation and benefits, $194,000 in
occupancy and equipment expense, and $82,000 in data processing servicing fees.
The increases include costs attributable to the three new branches opened during
fiscal 2005.
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, Cortlandt and Carmel in
Westchester County and New City in Rockland County, and in Connecticut in
Greenwich, Stamford, Brookfield and Bethel.
* * * * * *
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)
September 30, March 31,
2005 2005
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Assets
Cash and due from banks $ 10,850 $ 11,512
Federal funds sold and other overnight deposits 18,037 31,095
Securities:
Available for sale, at fair value 242,657 276,154
Held to maturity, at amortized cost 94,741 79,489
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Total securities 337,398 355,643
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Loans, net:
Mortgage loans 664,447 558,662
Other loans 6,733 5,100
Allowance for loan losses (3,161) (3,011)
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Total loans, net 668,019 560,751
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Accrued interest receivable 4,741 4,277
Federal Home Loan Bank stock 6,385 5,738
Premises and equipment, net 5,902 6,214
Goodwill 13,970 13,970
Bank-owned life insurance 10,652 10,464
Prepaid pension costs 3,078 3,057
Deferred income taxes 2,431 2,236
Other assets 1,602 1,993
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Total assets $ 1,083,065 $ 1,006,950
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Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 913,722 $ 831,768
Borrowings 35,000 38,000
Mortgagors' escrow funds 3,368 5,264
Due to brokers for securities purchased -- 2,513
Accrued expenses and other liabilities 2,796 2,245
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Total liabilities 954,886 879,790
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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;
12,310,206 and 12,377,206 shares outstanding at September 30, 2005 and March 31, 2005,
respectively) 136 136
Additional paid-in capital 104,258 103,728
Treasury stock, at cost (1,325,964 and 1,258,964 shares at September 30, 2005 and
March 31, 2005, respectively) (19,186) (18,131)
Common stock held by Employee Stock Ownership Plan (5,801) (6,053)
Unearned stock awards (3,844) (4,435)
Retained earnings 55,325 54,638
Accumulated other comprehensive loss, net of taxes (2,709) (2,723)
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Total stockholders' equity 128,179 127,160
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Total liabilities and stockholders' equity $ 1,083,065 $ 1,006,950
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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 Six Months Ended
September 30, September 30,
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2005 2004 2005 2004
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Interest and Dividend Income
Loans $ 8,874 $ 7,354 $17,138 $14,251
Mortgage-backed and other securities 3,184 3,024 6,226 5,816
Federal funds sold and other overnight deposits 195 73 376 132
Other earning assets 85 34 152 55
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Total interest and dividend income 12,338 10,485 23,892 20,254
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Interest Expense
Deposits 5,423 3,384 10,091 6,325
Borrowings 361 390 722 755
Other interest-bearing liabilities 6 5 11 10
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Total interest expense 5,790 3,779 10,824 7,090
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Net interest income 6,548 6,706 13,068 13,164
Provision for loan losses 75 75 150 150
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Net interest income after provision for loan losses 6,473 6,631 12,918 13,014
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Non-Interest Income
Service charges and fees 359 220 634 496
Income on bank-owned life insurance 94 90 188 166
Gain on sale of assets 325 -- 325 --
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Total non-interest income 778 310 1,147 662
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Non-Interest Expense
Compensation and benefits 2,841 2,462 5,668 4,874
Occupancy and equipment 751 661 1,488 1,294
Data processing service fees 354 264 646 564
Advertising and promotion 187 239 525 490
Other 901 975 1,677 1,671
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Total non-interest expense 5,034 4,601 10,004 8,893
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Income before income tax expense 2,217 2,340 4,061 4,783
Income tax expense 858 909 1,578 1,855
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Net income $ 1,359 $ 1,431 $ 2,483 $ 2,928
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Earnings per share:
Basic earnings per share $ 0.12 $ 0.12 $ 0.22 $ 0.25
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Diluted earnings per share $ 0.12 $ 0.12 $ 0.21 $ 0.25
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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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Sept. 30, 2005 June 30, 2005 March 31, 2005 Dec. 31, 2004 Sept. 30, 2004
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Net interest income $ 6,548 $ 6,520 $ 6,584 $ 6,675 $ 6,706
Provision for loan losses 75 75 75 75 75
Non-interest income 778 369 403 382 310
Non-interest expense:
Compensation and benefits 2,841 2,827 2,533 2,538 2,462
Occupancy and equipment 751 737 750 673 661
Other non-interest expense 1,442 1,406 1,792 1,389 1,478
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Total non-interest expense 5,034 4,970 5,075 4,600 4,601
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Income before income tax expense 2,217 1,844 1,837 2,382 2,340
Income tax expense 858 720 722 956 909
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Net income $ 1,359 $ 1,124 $ 1,115 $ 1,426 $ 1,431
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Total assets $1,083,065 $1,060,811 $1,006,950 $984,372 $965,388
Loans, net 668,019 613,481 560,751 541,955 529,638
Mortgage-backed securities
Available for sale 165,474 184,491 199,746 216,133 231,986
Held to maturity 60,530 60,314 59,777 54,717 30,691
Other securities
Available for sale 77,183 76,988 76,408 79,364 84,986
Held to maturity 34,211 23,713 19,712 14,713 10,640
Deposits 913,722 890,191 831,768 802,990 789,794
Borrowings 35,000 35,000 38,000 38,000 38,000
Stockholders' equity 128,179 128,084 127,160 131,134 129,439
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Performance Data:
Return on average assets (1) 0.51% 0.44% 0.46% 0.58% 0.60%
Return on average equity (1) 4.14% 3.57% 3.51% 4.38% 4.56%
Net interest rate spread (1) 2.27% 2.41% 2.62% 2.63% 2.71%
Net interest margin (1) 2.55% 2.66% 2.85% 2.85% 2.94%
Efficiency ratio (2) 71.90% 72.14% 73.61% 65.18% 65.58%
Per Common Share Data:
Basic earnings per common share $ 0.12 $ 0.10 $ 0.10 $ 0.12 $ 0.12
Diluted earnings per common share $ 0.12 $ 0.10 $ 0.10 $ 0.12 $ 0.12
Book value per share (3) $ 10.41 $ 10.41 $ 10.27 $ 10.40 $ 10.29
Tangible book value per share (3) $ 9.28 $ 9.28 $ 9.15 $ 9.29 $ 9.18
Dividends per share $ 0.070 $ 0.065 $ 0.06 $ 0.06 $ 0.06
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Capital Ratios:
Equity to total assets (consolidated) 11.83% 12.07% 12.63% 13.32% 13.41%
Tier 1 leverage capital (Bank) 9.80% 9.85% 10.24% 10.37% 10.40%
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Asset Quality Data:
Total non-performing loans $ 1,285 $ 2,183 $ 580 $ 734 $ 963
Total non-performing assets $ 1,285 $ 2,183 $ 580 $ 734 $ 963
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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.