SFFS Sound Federal Bancorp (MM)

Sound Federal Bancorp, Inc. Announces First Fiscal Quarter Earnings WHITE PLAINS, N.Y., July 28 /PRNewswire-FirstCall/ -- Sound Federal Bancorp, Inc. (NASDAQ: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 June 30, 2005, as compared to $1.5 million or diluted earnings per share of $0.12 for the quarter ended June 30, 2004, a decrease of 24.9% in net income. The decrease in net income for the quarter is primarily attributable to a $678,000 increase in non- interest expense, partially offset by a $226,000 decrease in income tax expense and a $62,000 increase in net interest income. Bruno J. Gioffre, Chairman of the Board, commented, "The results for the quarter ended June 30, 2005 reflect the continued pressures that the current yield curve has on our net interest margin. While the net interest margin decreased 19 basis points to 2.66% from the linked quarter, net interest income increased $62,000 to $6.5 million. This is a result of the continued growth of our loan portfolio and deposit base. Net loans increased 9.4% to $613.5 million. This growth was funded with a 7.0% increase in deposits to $890.2 million. We are pleased with the growth of our franchise and with the de novo strategy we have employed over the last two years. To position the Bank for the eventual steepening of the yield curve, we continue to pursue a strategy of originating adjustable-rate loans and investing in shorter-term or adjustable-rate securities. The increase in operating expenses generally accompanies and in our case reflects the growth of the franchise. Partly as a consequence thereof, operating expenses increased $678,000 or 15.8% in the quarter ended June 30, 2005 as compared to the same quarter in 2004. During that same time, total assets increased 16.0%. We realize that until the yield curve steepens, our net interest margin will continue to be under pressure. However, we believe that the growth of the Sound Federal franchise will continue to provide value for stockholders." The Company's total assets amounted to $1.1 billion at June 30, 2005, as compared to $1.0 billion at March 31, 2005. The $53.9 million increase in assets primarily consisted of a $52.7 million increase in net loans to $613.5 million. Our asset growth was funded principally by a $58.4 million increase in deposits to $890.2 million. Total stockholders' equity increased $924,000 to $128.1 million at June 30, 2005 as compared to $127.2 million at March 31, 2005. The increase reflects net income of $1.1 million and a decrease in accumulated other comprehensive loss of $1.2 million, partially offset by treasury stock purchases at a cost of $1.3 million and dividends paid of $758,000. The accumulated other comprehensive loss of $1.5 million at June 30, 2005 represents the after-tax net unrealized loss on securities available for sale ($2.5 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 June 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 June 30, 2005. Net interest income for the quarter ended June 30, 2005 remained relatively unchanged at $6.5 million as compared to the same quarter in 2004. Our net interest rate spread was 2.41% and 2.80% for the quarters ended June 30, 2005 and 2004, respectively. Our net interest margin for those respective periods was 2.66% and 3.02%. The decreases in interest rate spread and net interest margin are primarily the result of the effect of mortgage refinancings and lower returns on our investment portfolio as interest rates remained near 40-year lows. Since July 2004, the Federal Reserve raised the Federal funds rate by 225 basis points to 3.25%. However, long term rates have remained substantially unchanged, resulting in a flattening yield curve. 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 decrease in net interest rate spread and net interest margin was also a result of the decrease in the ratio of interest-earning assets to interest-bearing liabilities to 1.12x for the quarter ended June 30, 2005 from 1.14x for the same quarter in 2004, reflecting treasury stock purchases. The provision for loan losses was $75,000 for the quarters ended June 30, 2005 and 2004. Non-performing loans amounted to $2.2 million or 0.36% of total loans at June 30, 2005, as compared to $1.7 million or 0.34% of total loans at June 30, 2004. At March 31, 2005, non-performing loans amounted to $580,000 or 0.10% of total loans. The increase in non-performing loans in the current quarter is due primarily to the delinquencies of two borrowers. The loans to these borrowers are secured by mortgages on single-family residences. The allowance for loan losses amounted to $3.1 million and $3.0 million at June 30, 2005 and March 31, 2005, respectively. There were no charge-offs or recoveries in the quarters ended June 30, 2005 and 2004. The increase in the allowance for loan losses is primarily due to 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 $369,000 and $352,000 for the quarters ended June 30, 2005 and 2004, respectively. Non-interest expense totaled $5.0 million for the quarter ended June 30, 2005 as compared to $4.3 million for the quarter ended June 30, 2004. This increase is primarily due to increases of $415,000 in compensation and benefits expense, $104,000 in occupancy and equipment expense, $87,000 in advertising and promotion expense and $80,000 in other non-interest expense. The increases include costs attributable to the three new branches opened during fiscal 2005. The increase in compensation and benefits expense includes a $236,000 increase in compensation costs due primarily to additional staff to support the growth in the Company's lending operations and the new branches. At June 30, 2005, we had 135 full-time equivalent employees as compared to 118 at June 30, 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, 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. Sound Federal Bancorp, Inc. and Subsidiary CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except per share data) June 30, March 31, 2005 2005 Assets Cash and due from banks $10,942 $11,512 Federal funds sold and other overnight deposits 43,472 31,095 Securities: Available for sale, at fair value 261,479 276,154 Held to maturity, at amortized cost 84,027 79,489 Total securities 345,506 355,643 Loans, net: Mortgage loans 611,471 558,662 Other loans 5,096 5,100 Allowance for loan losses (3,086) (3,011) Total loans, net 613,481 560,751 Accrued interest receivable 4,350 4,277 Federal Home Loan Bank stock 6,385 5,738 Premises and equipment, net 6,120 6,214 Goodwill 13,970 13,970 Bank-owned life insurance 10,558 10,464 Prepaid pension costs 3,107 3,057 Deferred income taxes 1,526 2,236 Other assets 1,394 1,993 Total assets $1,060,811 $1,006,950 Liabilities and Stockholders' Equity Liabilities: Deposits $890,191 $831,768 Borrowings 35,000 38,000 Mortgagors' escrow funds 5,162 5,264 Due to brokers for securities purchased - 2,513 Accrued expenses and other liabilities 2,374 2,245 Total liabilities 932,727 879,790 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; 12,298,206 and 12,377,206 shares outstanding at June 30, 2005 and March 31, 2005, respectively) 136 136 Additional paid-in capital 103,973 103,728 Treasury stock, at cost (1,337,964 and 1,258,964 shares at June 30, 2005 and March 31, 2005, respectively) (19,360) (18,131) Common stock held by Employee Stock Ownership Plan (5,927) (6,053) Unearned stock awards (4,139) (4,435) Retained earnings 54,911 54,638 Accumulated other comprehensive loss, net of taxes (1,510) (2,723) Total stockholders' equity 128,084 127,160 Total liabilities and stockholders' equity $1,060,811 $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 June 30, 2005 2004 Interest and Dividend Income Loans $8,264 $6,897 Mortgage-backed and other securities 3,042 2,792 Federal funds sold and other overnight deposits 181 59 Other earning assets 67 21 Total interest and dividend income 11,554 9,769 Interest Expense Deposits 4,668 2,941 Borrowings 361 365 Other interest-bearing liabilities 5 5 Total interest expense 5,034 3,311 Net interest income 6,520 6,458 Provision for loan losses 75 75 Net interest income after provision for loan losses 6,445 6,383 Non-Interest Income Service charges and fees 275 276 Income on bank-owned life insurance 94 76 Total non-interest income 369 352 Non-Interest Expense Compensation and benefits 2,827 2,412 Occupancy and equipment 737 633 Data processing service fees 292 300 Advertising and promotion 338 251 Other 776 696 Total non-interest expense 4,970 4,292 Income before income tax expense 1,844 2,443 Income tax expense 720 946 Net income $1,124 $1,497 Earnings per share: Basic earnings per share $0.10 $0.13 Diluted earnings per share $0.10 $0.12 Sound Federal Bancorp, Inc. and Subsidiary Other Financial Data (Unaudited) (Dollars in thousands, except per share data) At or for the Quarter Ended June 30, March 31, Dec. 31, Sept. 30, June 30, 2005 2005 2004 2004 2004 Net interest income $6,520 $6,584 $6,675 $6,706 $6,458 Provision for loan losses 75 75 75 75 75 Non-interest income 369 403 382 310 352 Non-interest expense: Compensation and benefits 2,827 2,533 2,538 2,462 2,412 Occupancy and equipment 737 750 673 661 633 Other non-interest expense 1,406 1,792 1,389 1,478 1,247 Total non-interest expense 4,970 5,075 4,600 4,601 4,292 Income before income tax expense 1,844 1,837 2,382 2,340 2,443 Income tax expense 720 722 956 909 946 Net income $1,124 $1,115 $1,426 $1,431 $1,497 Total assets $1,060,811 $1,006,950 $984,372 $965,388 $914,610 Loans, net 613,481 560,751 541,955 529,638 501,239 Mortgage-backed securities Available for sale 184,491 199,746 216,133 231,986 246,850 Held to maturity 60,314 59,777 54,717 30,691 7,157 Other securities Available for sale 76,988 76,408 79,364 84,986 85,427 Held to maturity 23,713 19,712 14,713 10,640 2,796 Deposits 890,191 831,768 802,990 789,794 746,160 Borrowings 35,000 38,000 38,000 38,000 38,000 Stockholders' equity 128,084 127,160 131,134 129,439 125,016 Performance Data: Return on average assets (1) 0.44% 0.46% 0.58% 0.60% 0.66% Return on average equity (1) 3.57% 3.51% 4.38% 4.56% 4.49% Net interest rate spread (1) 2.41% 2.62% 2.63% 2.71% 2.80% Net interest margin (1) 2.66% 2.85% 2.85% 2.94% 3.02% Efficiency ratio (2) 72.14% 73.61% 65.18% 65.58% 63.02% Per Common Share Data: Basic earnings per common share $0.10 $0.10 $0.12 $0.12 $0.13 Diluted earnings per common share $0.10 $0.10 $0.12 $0.12 $0.12 Book value per share (3) $10.41 $10.27 $10.40 $10.29 $9.96 Tangible book value per share (3) $9.28 $9.15 $9.29 $9.18 $8.85 Dividends per share $0.065 $0.06 $0.06 $0.06 $0.06 Capital Ratios: Equity to total assets (consolidated) 12.07% 12.63% 13.32% 13.41% 13.67% Tier 1 leverage capital (Bank) 9.85% 10.24% 10.37% 10.40% 10.71% Asset Quality Data: Total non-performing loans $2,183 $580 $734 $963 $1,728 Total non-performing assets $2,183 $580 $734 $963 $1,728 (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. DATASOURCE: Sound Federal Bancorp, Inc. CONTACT: Anthony J. Fabiano, Senior Vice President, Chief Financial Officer and Corporate Secretary of Sound Federal Bancorp, Inc., +1-914-761-3636 Web site: http://www.soundfed.com/

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