UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2003
Sound Federal Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-24811 22-3887679
- ------------------------------- ---------------- --------------
(State or other jurisdiction (SEC File Number) (I.R.S. Employer
of incorporation) Identification No.)
1311 Mamaroneck Avenue, Suite 190
White Plains, New York, 10605
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(Address of principal executive offices)
Registrant's telephone number, including area code: 914-761-3636
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Not Applicable
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(Former name or former address, if changed since last report)
CURRENT REPORT ON FORM 8-K
Item 1. Changes in Control of Registrant
Not Applicable
Item 2. Acquisition or Disposition of Assets
Not applicable.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other Events
Not applicable.
Item 6. Resignations of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(a) No financial statements of businesses acquired are required.
(b) No pro forma financial information is required.
(c) Attached as an exhibit is the Company's news release announcing its March
31, 2003 earnings.
Item 8. Change in Fiscal Year
Not applicable.
Item 9. Regulation FD Disclosure - Information provided pursuant to Item 12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Sound Federal Bancorp, Inc.
DATE: April 30, 2003 By: /s/ Richard P. McStravick
------------------------------
Richard P. McStravick
President and Chief Executive Officer
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EXHIBIT INDEX
99.1 News release dated April 29, 2003 announcing March 31, 2003 earnings.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Tuesday, April 29, 2003
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), Tuesday, April 29, 2003-- Sound Federal
Bancorp, Inc. (Nasdaq National Market: "SFFS") (the "Company"), the holding
company for Sound Federal Savings (the "Bank"), announced net income of $2.3
million, or diluted earnings per share of $0.18 for the quarter ended March 31,
2003, as compared to $1.8 million, or $0.13 per diluted share for the quarter
ended March 31, 2002, an increase in net income of 31.3%. All per share
comparisons have been adjusted to reflect the shares issued in the second-step
conversion of Sound Federal, MHC discussed below. For the fiscal year ended
March 31, 2003, net income amounted to $8.5 million, or diluted earnings per
share of $0.65 as compared to $5.8 million, or $0.44 per share for the prior
fiscal year. The increase in net income for the quarter ended March 31, 2003 as
compared to the same quarter in the prior year is primarily attributable to a
$1.3 million increase in net interest income and a $95,000 increase in
non-interest income, partially offset by a $301,000 increase in non-interest
expense and a $500,000 increase in income tax expense. The increase in net
income for the year ended March 31, 2003 is primarily due to a $6.9 million
increase in net interest income and a $159,000 increase in non-interest income,
partially offset by a $2.4 million increase in non-interest expense and a $1.8
million increase in income tax expense.
In connection with the second-step mutual-to-stock conversion of Sound Federal,
MHC that was completed on January 6, 2003, a total of 7,780,737 shares of common
stock were sold at a price of $10.00 per share. In addition, 5,444,263 shares
were issued to existing stockholders of our mid-tier holding company resulting
in an exchange ratio of 2.7667. At the completion of the second-step conversion,
the Company had 13,225,000 shares issued and outstanding.
Bruno J. Gioffre, Chairman of the Board, commented, "We are proud to announce
record earnings for the fourth quarter and 2003 fiscal year. Net income for the
full year increased 47.8% to $8.5 million and diluted earnings per share
increased 47.7% to $0.65. The 31.3% increase in net income for the quarter is
attributable in large part to the investment of the proceeds received in the
Company's second-step conversion. During fiscal 2003, total deposits grew $84.4
million or 16.2% to $604.3 million and total assets grew $172.1 million or 27.6%
to $796.1 million."
Mr. Gioffre continued, "On behalf of the entire Sound Federal team, I would like
to welcome the Company's new investors. Be assured that your Board of Directors
and Management Team are committed to the goals of creating stockholder value,
growing the Bank's franchise and delivering quality service to our customers. We
look forward to the challenge of leveraging the capital raised by growing the
Bank's retail franchise - always mindful of the goal of growing earnings per
share. It has always been our belief that, as the largest thrift institution
headquartered in Westchester County, we are well positioned to serve this market
area and its environs. We also believe that we are uniquely qualified to serve
this market since all of the Company's Board Members and Management Team live
and work in the communities served by the Bank. As always, thank you for your
support and for your interest in Sound Federal."
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<page>
The Company's total assets amounted to $796.1 million at March 31, 2003 as
compared to $624.0 million at March 31, 2002. The $172.1 million increase in
total assets is primarily due to a $16.3 million increase in Federal funds sold
and other overnight deposits to $36.1 million, a $144.8 million increase in
securities available for sale to $295.0 million and a $9.3 million increase in
net loans to $427.7 million. These increases were funded by net proceeds
received in the offering of $70.1 million and an $84.4 million increase in
deposits.
Total stockholders' equity increased $77.3 million to $138.3 million at March
31, 2003 as compared to $61.0 million at March 31, 2002. The increase was due
primarily to an increase in additional paid-in capital of $72.9 million and net
income of $8.5 million, partially offset by an increase in the common stock held
by the Employee Stock Ownership Plan ("ESOP") of $6.0 million and a decrease in
accumulated other comprehensive income of $1.1 million. The increase in
additional paid-in capital is primarily due to the net proceeds received in the
offering. The increase in the common stock held by the ESOP primarily represents
shares purchased by the ESOP in the offering. These shares will be allocated to
eligible employees over a 20 year period commencing on the closing date of the
conversion (January 6, 2003). The decrease in accumulated other comprehensive
income is due primarily to an increase in the minimum pension liability of $3.3
million ($2.0 million after taxes), partially offset by an increase of $906,000
in the after-tax net unrealized gain on securities available for sale.
Net interest income for the quarter ended March 31, 2003 amounted to $6.9
million, a $1.3 million increase from the same period in the prior year. The
interest rate spread was 3.41% and 3.81% for the quarters ended March 31, 2003
and 2002, respectively. The net interest margin for those periods was 3.79% and
3.93%, respectively. For the year ended March 31, 2003, net interest income
amounted to $25.8 million as compared to $18.9 million for the prior fiscal
year. The interest rate spread was 3.70% and 3.31% and the net interest margin
was 3.93% and 3.51% for the respective years. The increases in interest rate
spread and net interest margin for the comparative fiscal years are primarily
the result of decreasing market interest rates. The decrease in market interest
rates reduced the cost of our interest-bearing liabilities (primarily deposits)
faster than the rates on our interest-earning assets such as loans and
securities. However, if market interest rates decrease further, interest rate
spread and net interest margin may decrease since competitive factors could
inhibit our ability to further lower interest rates on deposit accounts. The
Company's interest rate spread and net interest margin decreased during the
quarter ended March 31, 2003 as compared to the same quarter last year, as the
full effect of recent mortgage refinancings and the higher level of short-term
investments were reflected in asset yields. If interest rates remain at these
low levels or decrease further, mortgage refinancings may continue to adversely
affect the Company's interest rate spread and net interest margin.
Non-interest income totaled $267,000 and $172,000 for the quarters ended March
31, 2003 and 2002, respectively. For the year ended March 31, 2003, non-interest
income amounted to $890,000 as compared to $731,000 for fiscal 2002. The
increase in non-interest income was primarily due to higher levels of income
from fees earned on the sale of investment products, service charges on deposit
accounts, late charges on loans and various other service fees. To a lesser
extent, non-interest income was affected by different levels of gains and losses
on sales of real estate owned.
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<page>
Non-interest expense totaled $3.3 million for the quarter ended March 31, 2003
as compared to $3.0 million for the quarter ended March 31, 2002. This increase
is due primarily to an increase of $383,000 in compensation and benefits and a
$49,000 increase in data processing service fees, partially offset by a decrease
of $110,000 in other non-interest expense. For the year ended March 31, 2003,
non-interest expense totaled $12.7 million as compared to $10.3 million for the
year ended March 31, 2002. The increase is primarily the result of an increase
of $1.4 million in compensation and benefits, a $331,000 increase in advertising
and promotion expense, a $174,000 increase in occupancy and equipment expense
and a $392,000 increase in other non-interest expense. The increases in
non-interest expense were due primarily to operating expenses for the New
Rochelle and Somers branches, which were opened in December 2001 and July 2002,
respectively, as well as internal growth to support lending and branch
operations.
The Bank is a federally-chartered savings bank offering traditional financial
services and products through its branches in New York in Mamaroneck, Harrison,
Rye Brook, New Rochelle, Peekskill, Yorktown, Somers and Cortlandt in
Westchester County and New City in Rockland County, and in Greenwich,
Connecticut.
* * * * * *
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 and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data) March 31, March 31,
-----------------------------
2003 2002
-----------------------------
Assets
Cash and due from banks .............................................. $ 8,776 $ 6,931
Federal funds sold and other overnight deposits ...................... 36,121 19,847
Securities available for sale, at fair value ......................... 295,048 150,231
Loans, net:
Mortgage loans ..................................................... 428,558 419,120
Consumer loans ..................................................... 1,551 1,469
Allowance for loan losses .......................................... (2,425) (2,221)
Total loans, net ......................................... -- --
427,684 418,368
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Accrued interest receivable ......................................... 3,678 3,241
Federal Home Loan Bank stock ........................................ 4,141 4,141
Premises and equipment, net ......................................... 5,467 5,459
Deferred income taxes ............................................... 392 942
Goodwill ............................................................ 13,970 13,970
Other assets ........................................................ 811 855
--------- ---------
Total assets ............................................. $ 796,088 $ 623,985
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits ........................................................... $ 604,260 $ 519,905
Borrowings ......................................................... 35,000 34,922
Mortgagors' escrow funds ........................................... 4,603 5,021
Due to brokers for securities purchased ............................ 10,495 --
Accrued expenses and other liabilities ............................. 3,409 3,122
--------- ---------
Total liabilities ........................................ 657,767 562,970
--------- ---------
Stockholders' equity:
Preferred stock ($0.01 par value and 1,000,000 shares authorized at
March 31, 2003; none issued and outstanding) ................... -- --
Common stock (par value, shares authorized and shares issued of
$0.01, 24,000,000 and 13,247,133 at March 31, 2003;
$0.10, 20,000,000 and 5,220,218 at March 31, 2002) .............. 132 522
Additional paid-in capital ........................................ 95,395 22,525
Treasury stock, at cost ........................................... -- (4,350)
Common stock held by the Employee Stock Ownership Plan ............ (7,059) (1,105)
Common stock awards under the Recognition and Retention Plan ...... (100) (244)
Retained earnings ................................................. 49,937 42,566
Accumulated other comprehensive income, net of taxes .............. 16 1,101
--------- ---------
Total stockholders' equity ............................... 138,321 61,015
--------- ---------
Total liabilities and stockholders' equity ............... $ 796,088 $ 623,985
========= =========
4
Sound Federal Bancorp and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended For the Year Ended
March 31, March 31,
-------------------------------------------
2003 2002 2003 2002
Interest and Dividend Income
Loans .................................................................... $ 7,139 $ 6,932 $29,906 $25,560
Mortgage-backed and other securities ..................................... 2,763 2,091 8,940 10,838
Federal funds sold and other overnight deposits .......................... 136 107 526 777
Other earning assets ..................................................... 67 41 206 270
------ ----- ------ ------
Total interest and dividend income ....................................... 10,105 9,171 39,578 37,445
------ ----- ------ ------
Interest Expense
Deposits ................................................................. 2,797 3,273 12,008 17,403
Borrowings ............................................................... 394 298 1,630 1,065
Other interest-bearing liabilities ....................................... 26 18 101 71
------ ----- ------ ------
Total interest expense ................................................... 3,217 3,589 13,739 18,539
------ ----- ------ ------
Net interest income ...................................................... 6,888 5,582 25,839 18,906
Provision for loan losses ................................................ 100 50 275 175
------ ----- ------ ------
Net interest income after provision for loan losses ...................... 6,788 5,532 25,564 18,731
------ ----- ------ ------
Non-Interest Income
Service charges and fees ................................................. 221 187 831 662
Gain on sale of real estate owned ........................................ 46 (15) 59 69
------ ----- ------ ------
Total non-interest income ................................................ 267 172 890 731
------ ----- ------ ------
Non-Interest Expense
Compensation and benefits ................................................ 1,839 1,456 6,540 5,137
Occupancy and equipment .................................................. 422 438 1,746 1,572
Data processing service fees ............................................. 235 186 959 866
Advertising and promotion ................................................ 130 135 884 553
Other .................................................................... 701 811 2,580 2,188
------ ----- ------ ------
Total non-interest expense ............................................... 3,327 3,026 12,709 10,316
------ ----- ------ ------
Income before income tax expense ......................................... 3,728 2,678 13,745 9,146
Income tax expense ....................................................... 1,420 920 5,219 3,376
------ ----- ------ ------
Net income ............................................................... $ 2,308 $ 1,758 $ 8,526 $ 5,770
====== ===== ====== ======
Basic earnings per share (1) .............................................. $ 0.19 $ 0.14 $ 0.67 $ 0.45
====== ===== ====== ======
Diluted earnings per share (1) ............................................ $ 0.18 $ 0.13 $ 0.65 $ 0.44
====== ===== ====== ======
(1) Earnings per share data for prior periods have been adjusted to reflect the
shares issued in the second-step conversion completed on January 6, 2003.
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Sound Federal Bancorp and Subsidiary
Other Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
At or for the Quarter Ended
------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2003 2002 2002 2002 2002
-----------------------------------------------------------
Net interest income ................. $ 6,888 $ 6,398 $ 6,268 $ 6,285 $ 5,582
Provision for loan losses ........... 100 50 50 75 50
Non-interest income ................. 267 229 224 170 172
Non-interest expense:
Compensation and benefits ........ 1,839 1,650 1,623 1,428 1,456
Occupancy and equipment .......... 422 495 385 444 438
Other non-interest expense ....... 1,066 1,185 1,201 971 1,132
-------- -------- -------- -------- --------
Total non-interest expense ......... 3,327 3,330 3,209 2,843 3,026
-------- -------- -------- -------- --------
Income before income tax expense .... 3,728 3,247 3,233 3,537 2,678
Income tax expense .................. 1,420 1,220 1,203 1,376 920
-------- -------- -------- -------- --------
Net income .......................... $ 2,308 $ 2,027 $ 2,030 $ 2,161 $ 1,758
======== ======== ======== ======== ========
Total assets ........................ $796,088 $779,465 $672,632 $651,465 $623,985
Loans, net .......................... 427,684 434,166 442,724 437,419 418,368
Securities available for sale:
Mortgage-backed securities ....... 211,484 148,754 111,762 101,615 104,127
Other securities ................. 83,564 73,061 47,416 42,227 46,104
Deposits ............................ 604,260 592,417 565,834 544,626 519,905
Stockholders' equity ................ 138,321 68,246 66,179 63,820 61,015
Performance Data:
Return on average assets (1) ........ 1.17% 1.14% 1.21% 1.36% 1.20%
Return on average equity (1) ........ 7.75% 12.07% 12.52% 14.03% 11.84%
Average interest rate spread (1) .... 3.41% 3.66% 3.77% 4.02% 3.81%
Net interest margin (1) ............. 3.79% 3.81% 3.94% 4.19% 3.93%
Efficiency ratio .................... 46.80% 50.25% 49.53% 44.04% 52.44%
Per Common Share Data:
Basic earnings per common share (2) . $ 0.19 $ 0.16 $ 0.16 $ 0.17 $ 0.14
Diluted earnings per common share (2) $ 0.18 $ 0.15 $ 0.16 $ 0.17 $ 0.13
Book value per share (3) ............ $ 10.44 $ 14.27 $ 13.85 $ 13.36 $ 12.78
Tangible book value per share (3) ... $ 9.39 $ 11.35 $ 10.93 $ 10.43 $ 9.85
Dividends per share (2) ............. $ 0.05 $ 0.03 $ 0.03 $ 0.03 $ 0.03
Capital Ratios:
Equity to total assets (consolidated) 17.38% 8.76% 9.84% 9.80% 9.78%
Tier 1 leverage capital (Bank) ...... 11.29% 6.14% 6.76% 6.63% 6.54%
Asset Quality Data:
Total non-performing loans .......... $ 477 $ 795 $ 876 $ 952 $ 755
Total non-performing assets ......... $ 477 $ 966 $ 1,048 $ 952 $ 869
(1) Ratios are annualized.
(2) Earnings per share and dividends per share for quarters prior to the
current quarter have been adjusted to reflect the shares issued in
the second-step conversion completed on January 6, 2003.
(3) Computed based on total common shares issued, less treasury shares.
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