Exhibit 99.1
FOR IMMEDIATE RELEASE
Friday, April 28, 2006
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 28, 2006 -- Sound Federal
Bancorp, Inc. (Nasdaq National Market: "SFFS") (the "Company"), the holding
company for Sound Federal Savings (the "Bank"), announced net income of $635,000
or diluted earnings per share of $0.05 for the quarter ended March 31, 2006 as
compared to $1.12 million or diluted earnings per share of $0.10 for the quarter
ended March 31, 2005. Net income for the quarter ended March 31, 2006 included
$480,000 of merger costs related to the Company's announced merger with Hudson
City Bancorp, Inc. A substantial majority of these costs are not tax deductible.
Excluding merger costs, net income amounted to $1.09 million for the fourth
fiscal quarter. The $480,000 decrease in net income for the quarter ended March
31, 2006 as compared to the same quarter in 2005 was primarily due to an
$885,000 increase in non-interest expense, including the merger-related costs,
partially offset by a $446,000 increase in net interest income. For the year
ended March 31, 2006, net income amounted to $4.16 million or diluted earnings
per share of $0.35, as compared to $5.47 million or diluted earnings per share
of $0.46 for fiscal 2005, a decrease of $1.31 million or 23.9% in net income.
Excluding merger costs totaling $541,000 incurred during fiscal year 2006, net
income amounted to $4.66 million. The decrease in net income for the year ended
March 31, 2006 is primarily attributable to a $2.6 million increase in
non-interest expense, including the merger-related costs, partially offset by
increases of $408,000 in non-interest income and $398,000 in net interest
income, and a $530,000 decrease in income tax expense.
Bruno J. Gioffre, Chairman of the Board, commented, "Net income for the quarter,
excluding merger costs of $480,000, was $1.09 million. The flat yield curve
continues to affect our earnings. Our net interest margin decreased 34 basis
points to 2.57% for fiscal year 2006. However, our ability to originate loans
and increase deposits enabled us to increase net interest income by 1.5% despite
the reduction in net interest margin. During fiscal 2006, we increased the size
of our loan portfolio by 32.2% and our deposit balances by 20.7%."
Mr. Gioffre continued, "As we previously announced, the Company entered into a
merger agreement with Hudson City Bancorp, Inc. This transaction provides our
stockholders $20.75 in cash for each share of Sound Federal Bancorp, Inc. common
stock they own. For those stockholders who bought their shares in our initial
public offering in 1998, this represents a 474% return on their investment
excluding dividends paid on these shares. In addition, we believe that our
customers will be very pleased with Hudson City's product offerings and their
commitment to providing the same level of personal service that our customers
have come to expect of Sound Federal. The Board of Directors and I are very
proud of the dedication and loyalty of the Sound Federal staff. Their hard work
helped to build and enhance the Sound Federal franchise by constantly focusing
on providing superior customer service. This merger with Hudson City will enable
us to continue this tradition of service to customers and the community."
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The Company's total assets amounted to $1.2 billion at March 31, 2006, as
compared to $1.0 billion at March 31, 2005. The $162.6 million increase in
assets primarily consisted of a $180.8 million increase in net loans to $741.6
million, partially offset by a decrease in total securities of $28.9 million.
Our asset growth was funded principally by a $171.9 million increase in deposits
to $1.0 billion.
Total stockholders' equity increased $1.5 million to $128.7 million at March 31,
2006 as compared to $127.2 million at March 31, 2005. The increase reflects net
income of $4.2 million and total increases of $3.2 million related to stock
options, stock awards and ESOP shares, partially offset by common stock
repurchases at a cost of $1.4 million, dividends paid of $3.3 million and an
increase of $1.2 million in the accumulated other comprehensive loss.
The accumulated other comprehensive loss of $3.9 million at March 31, 2006
represents the after-tax net unrealized loss on securities available for sale
($6.5 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, 2006 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 and intent 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, 2006.
Net interest income for the quarter ended March 31, 2006 increased $446,000 to
$7.0 million as compared to $6.6 million for the quarter ended March 31, 2005.
Our net interest rate spread was 2.30% and 2.62% for the quarters ended March
31, 2006 and 2005, respectively. Our net interest margin for those respective
periods was 2.60% and 2.85%. For the fiscal year ended March 31, 2006, net
interest income amounted to $26.8 million as compared to $26.4 million for the
prior year. Our interest rate spread was 2.29% and 2.69% and our net interest
margin was 2.57% and 2.91% for fiscal years 2006 and 2005, respectively. 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. At March 31, 2006, the spread between the 1-month and 10-year Treasury
yield rates was 21 basis points as compared to 187 basis points at March 31,
2005. As a result, the Company's average cost of interest-bearing liabilities
has increased faster than the yield on interest-earning assets which are
principally affected by longer-term interest rates.
The provision for loan losses was $75,000 for the quarters ended March 31, 2006
and 2005 and $300,000 for fiscal years 2006 and 2005. Non-performing loans
amounted to $2.9 million or 0.39% of total loans at March 31, 2006, as compared
to $580,000 or 0.10% of total loans at March 31, 2005. The allowance for loan
losses amounted to $3.3 million and $3.0 million at March 31, 2006 and March 31,
2005, respectively. Charge-offs amounted to $2,000 during fiscal 2006 and $1,000
during fiscal 2005. 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 $362,000 and $403,000 for the quarters ended March
31, 2006 and 2005, respectively. For the fiscal year ended March 31, 2006,
non-interest income amounted to $1.9 million as compared to $1.4 million for the
prior year. The increase in non-interest income for the year was 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 to be used in connection with the
operation of the branch.
Non-interest expense totaled $6.0 million for the quarter ended March 31, 2006
as compared to $5.1 million for the quarter ended March 31, 2005. This increase
is due to increases of $527,000 in compensation and benefits expense and
$480,000 in merger costs as previously discussed. For the fiscal year ended
March 31,
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2006, non-interest expense increased $2.6 million to $21.2 million as compared
to $18.6 million for the fiscal year ended March 31, 2005. This increase is due
primarily to increases of $1.8 million in compensation and benefits, $301,000 in
occupancy and equipment expense, $96,000 in advertising and promotion expense
and $541,000 in merger costs.
Income tax expense amounted to $722,000 for the quarters ended March 31, 2006
and 2005. The effective tax rates for those same periods were 53.2% and 39.3%,
respectively. Income tax expense amounted to $3.0 million and $3.5 million for
fiscal years 2006 and 2005, respectively. The effective tax rates for those
respective fiscal years were 41.9% and 39.2%. The increases in the effective tax
rates are due primarily to merger costs that are not deductible for tax
purposes.
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) March 31, March 31,
2006 2005
--------- ---------
Assets
Cash and due from banks $ 12,194 $ 11,512
Federal funds sold and other overnight deposits 42,092 31,095
Securities:
Available for sale, at fair value 215,455 276,154
Held to maturity, at amortized cost 111,246 79,489
----------- -----------
Total securities 326,701 355,643
----------- -----------
Loans, net:
Mortgage loans 737,274 558,662
Other loans 7,624 5,100
Allowance for loan losses (3,309) (3,011)
----------- -----------
Total loans, net 741,589 560,751
----------- -----------
Accrued interest receivable 5,319 4,277
Federal Home Loan Bank stock 2,842 5,738
Premises and equipment, net 5,546 6,214
Goodwill 13,970 13,970
Bank-owned life insurance 10,845 10,464
Prepaid pension costs 4,177 3,057
Deferred income taxes 2,645 2,236
Other assets 1,671 1,993
----------- -----------
Total assets $ 1,169,591 $ 1,006,950
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 1,003,691 $ 831,768
Borrowings 28,000 38,000
Mortgagors' escrow funds 6,160 5,264
Due to brokers for securities purchased -- 2,513
Accrued expenses and other liabilities 3,054 2,245
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Total liabilities 1,040,905 879,790
----------- -----------
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; 12,336,040 and 12,377,206 shares
outstanding at March 31, 2006 and
March 31, 2005, respectively) 136 136
Additional paid-in capital 105,092 103,728
Treasury stock, at cost (1,300,130 and
1,258,964 shares at March 31, 2006 and
March 31, 2005, respectively) (18,813) (18,131)
Common stock held by Employee Stock
Ownership Plan (5,549) (6,053)
Unearned stock awards (3,252) (4,435)
Retained earnings 54,960 54,638
Accumulated other comprehensive loss,
net of taxes (3,888) (2,723)
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Total stockholders' equity 128,686 127,160
----------- -----------
Total liabilities and
stockholders' equity $ 1,169,591 $ 1,006,950
=========== ===========
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,
-------------------------- ------------------
2006 2005 2006 2005
---- ---- ---- ----
Interest and Dividend Income
Loans $10,423 $ 7,697 $37,395 $29,430
Mortgage-backed and other securities 3,369 3,081 12,761 11,998
Federal funds sold and other overnight deposits 306 95 972 340
Other earning assets 73 45 313 132
------- ------- ------- -------
Total interest and dividend income 14,171 10,918 51,441 41,900
------- ------- ------- -------
Interest Expense
Deposits 6,830 3,966 23,207 13,968
Borrowings 306 363 1,390 1,489
Other interest-bearing liabilities 5 5 23 20
------- ------- ------- -------
Total interest expense 7,141 4,334 24,620 15,477
------- ------- ------- -------
Net interest income 7,030 6,584 26,821 26,423
Provision for loan losses 75 75 300 300
------- ------- ------- -------
Net interest income after provision for loan losses 6,955 6,509 26,521 26,123
------- ------- ------- -------
Non-Interest Income
Service charges and fees 264 213 1,149 953
Income on bank-owned life insurance 98 92 381 379
Gain on sale of assets -- 93 325 93
Gain on sale of mortgage loans -- 5 -- 22
------- ------- ------- -------
Total non-interest income 362 403 1,855 1,447
------- ------- ------- -------
Non-Interest Expense
Compensation and benefits 3,060 2,533 11,697 9,945
Occupancy and equipment 782 750 3,018 2,717
Data processing service fees 320 340 1,230 1,218
Advertising and promotion 387 440 1,215 1,119
Merger-related costs 480 -- 541 --
Other 931 1,012 3,508 3,569
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Total non-interest expense 5,960 5,075 21,209 18,568
------- ------- ------- -------
Income before income tax expense 1,357 1,837 7,167 9,002
Income tax expense 722 722 3,003 3,533
------- ------- ------- -------
Net income $ 635 $ 1,115 $ 4,164 $ 5,469
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Earnings per share:
Basic earnings per share $ 0.06 $ 0.10 $ 0.36 $ 0.47
======= ======= ======= =======
Diluted earnings per share $ 0.05 $ 0.10 $ 0.35 $ 0.46
======= ======= ======= =======
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, 2006 Dec. 31, 2005 Sept. 30, 2005 June 30, 2005 March 31, 2005
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Net interest income $ 7,030 $ 6,723 $ 6,548 $ 6,520 $ 6,584
Provision for loan losses 75 75 75 75 75
Non-interest income 362 346 778 369 403
Non-interest expense:
Compensation and benefits 3,059 2,969 2,841 2,827 2,533
Occupancy and equipment 782 748 751 737 750
Other non-interest expense 2,119 1,528 1,442 1,406 1,792
---------- ---------- ---------- ---------- ----------
Total non-interest expense 5,960 5,245 5,034 4,970 5,075
---------- ---------- ---------- ---------- ----------
Income before income tax expense 1,357 1,749 2,217 1,844 1,837
Income tax expense 722 703 858 720 722
---------- ---------- ---------- ---------- ----------
Net income $ 635 $ 1,046 $ 1,359 $ 1,124 $ 1,115
========== ========== ========== ========== ==========
Total assets $1,169,591 $1,149,326 $1,083,065 $1,060,811 $1,006,950
Loans, net 741,589 710,750 668,019 613,481 560,751
Mortgage-backed securities
Available for sale 140,053 150,758 165,474 184,491 199,746
Held to maturity 65,303 64,988 60,530 60,314 59,777
Other securities
Available for sale 75,402 76,779 77,183 76,988 76,408
Held to maturity 45,943 42,943 34,211 23,713 19,712
Deposits 1,003,691 969,702 913,722 890,191 831,768
Borrowings 28,000 35,000 35,000 35,000 38,000
Stockholders' equity 128,686 128,651 128,179 128,084 127,160
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Performance Data:
Return on average assets (1) 0.23% 0.37% 0.51% 0.44% 0.46%
Return on average equity (1) 2.02% 3.25% 4.14% 3.57% 3.51%
Net interest rate spread (1) 2.30% 2.20% 2.27% 2.41% 2.62%
Net interest margin (1) 2.60% 2.50% 2.55% 2.66% 2.85%
Efficiency ratio (2) 74.13% 74.20% 71.90% 72.14% 73.61%
Per Common Share Data:
Basic earnings per common share $ 0.06 $ 0.09 $ 0.12 $ 0.10 $ 0.10
Diluted earnings per common share $ 0.05 $ 0.09 $ 0.12 $ 0.10 $ 0.10
Book value per share (3) $ 10.43 $ 10.44 $ 10.41 $ 10.41 $ 10.27
Tangible book value per share (3) $ 9.30 $ 9.31 $ 9.28 $ 9.28 $ 9.15
Dividends per share $ 0.075 $ 0.075 $ 0.070 $ 0.065 $ 0.06
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Capital Ratios:
Equity to total assets (consolidated) 11.00% 11.19% 11.83% 12.07% 12.63%
Tier 1 leverage capital (Bank) 9.34% 9.43% 9.80% 9.85% 10.24%
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Asset Quality Data:
Total non-performing loans $ 2,893 $ 2,689 $ 1,285 $ 2,183 $ 580
Total non-performing assets $ 2,893 $ 2,689 $ 1,285 $ 2,183 $ 580
====================================================================================================================================
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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.