PFSB Pennfed Financial Svcs (MM)

PennFed Financial Services, Inc. Reports Third Quarter Earnings Announces Plans For 24th Branch WEST ORANGE, N.J., April 28 /PRNewswire-FirstCall/ -- PennFed Financial Services, Inc. , the $1.8 billion holding company for New Jersey-based Penn Federal Savings Bank, reported earnings of 41 cents per diluted share for the third fiscal quarter ended March 31, 2004 compared to 48 cents per diluted share for the comparable prior year quarter. The March 2004 earnings represent an increase from 40 cents per diluted share for the previous quarter ended December 31, 2003. For the first nine months of fiscal 2004, PennFed reported earnings of $1.28 per diluted share, compared to $1.49 per diluted share for the nine months ended March 31, 2003. At March 31, 2004, total assets of $1.816 billion were relatively unchanged from June 30, 2003 but up slightly from $1.792 billion at December 31, 2003. During the first six months of fiscal 2004, the effects of accelerated prepayments on loans and the sale of conforming, fixed rate, one- to four-family mortgage loans into the secondary market more than offset total loan originations. At the end of the December 2003 quarter, with a significant slowdown in mortgage loan applications and as a means to invest available cash at higher yields, the Company discontinued its loan sale strategy and began to retain originated one- to four-family loans for portfolio. "With the retention of loans in portfolio, reported gains were minimal for the current quarter. However, the Company reported a continuing increase in net interest margin," stated President and Chief Executive Officer Joseph L. LaMonica. For the three months ended March 31, 2004, net interest margin was 2.24%, a 10 basis point improvement from 2.14% for the three months ended December 31, 2003. Deposits continue to grow modestly. "Our focus on gathering deposits continues," LaMonica commented. Deposits at Penn Federal's newest branches in the Ironbound section of Newark (opened September 2003) and in Union, New Jersey (opened February 2004) currently total over $15 million and $10 million, respectively. Following the opening of these two new branches, the Bank filed for regulatory approval in early April to open a 24th branch -- a full-service branch located in West Caldwell. "The facility is a complement to existing Penn Federal branches in the area and is expected to open in June 2004," said LaMonica. For the three months ended March 31, 2004, service charges and other non- interest income showed a decline when compared to the comparable prior year quarter, but an increase when compared to the December 2003 quarter. Fee income associated with loan prepayments and modifications in the March 2004 quarter reflected a decrease when compared to the prior year March 2003 quarter but accelerated slightly when compared to the December 2003 quarter. LaMonica stated, "Asset quality during the quarter remained strong. Non- performing assets totaled $2.9 million and represented only 0.16% of total assets at March 31, 2004." Furthermore, the Company's expense ratio also remained strong at 1.47% for the current quarter. For the three and nine months ended March 31, 2004, the Company recorded compensation expense related to the Employee Stock Ownership Plan (ESOP) of $1.1 million and $3.0 million, respectively. This compares to $784,000 and $2.3 million for the three and nine months ended March 31, 2003, respectively. The majority of the ESOP expense represents a non-cash valuation adjustment to reflect the value of PennFed stock. The Company will cease recognizing compensation expense related to the ESOP after June 2004, when the ESOP shares will be fully allocated. Modifications to the Bank's existing benefit plans after June 30, 2004 are expected to cost less than 25% of the current expense level of the ESOP. The Company continues to employ stock repurchases as a means of utilizing capital. During the March 2004 quarter, the Company was successful in repurchasing 188,500 shares of its outstanding stock at prices ranging from $33.61 to $36.06, for a total cost of $6.5 million. PennFed continues to employ stock repurchases as a means of utilizing capital. PennFed stockholders of record as of May 14, 2004 will be paid a cash dividend of $0.10 per share on May 28, 2004. The Company continues to review its dividend policy on a regular basis. With its February 2004 opening of a branch in Union, New Jersey, Penn Federal Savings Bank now maintains 23 New Jersey branch offices. The Bank's deposits are insured by the Federal Deposit Insurance Corporation. This release contains forward-looking statements that are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates and demand for loans in the Company's market area, the relationship of short-term interest rates to long-term interest rates, competition and terrorist acts that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above, as well as other factors, could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. PennFed Financial Services, Inc. (Holding Company for Penn Federal Savings Bank) Selected Consolidated Financial Information (dollars in thousands, except per share amounts) March 31, December 31, June 30, March 31, 2004 2003 2003 2003 Selected Financial Condition Data: Cash and cash equivalents $18,897 $ 36,737 $83,046 $90,714 Investments, net 425,103 417,994 344,239 260,834 Mortgage-backed securities, net 99,487 104,856 93,632 106,017 Loans held for sale 0 3,364 11,496 14,443 Loans receivable: One- to four-family mortgage loans 917,374 879,479 935,064 1,021,697 Commercial and multi-family real estate loans 164,200 160,926 165,905 162,911 Consumer loans 115,875 114,206 116,658 110,014 Allowance for loan losses (6,252) (6,271) (6,284) (6,314) Other, net 6,533 6,251 6,079 6,887 Loans receivable, net 1,197,730 1,154,591 1,217,422 1,295,195 FHLB stock 24,273 24,273 25,223 25,223 Other intangible assets 1,814 2,268 3,175 3,636 Other assets 49,109 47,903 34,219 32,841 Total assets $1,816,413 $1,791,986 $1,812,452 $1,828,903 Deposits: Checking and money market $163,893 $168,113 $172,898 $172,340 Savings 406,830 388,229 355,118 347,204 Certificates of deposit and accrued interest 558,814 550,915 566,650 586,492 Total deposits 1,129,537 1,107,257 1,094,666 1,106,036 FHLB advances 485,465 485,465 504,465 504,465 Other borrowings 27,046 23,118 26,644 26,456 Junior subordinated debentures 42,026 42,015 30,005 0 Other liabilities 14,759 13,367 28,216 28,994 Preferred securities of Trust, net 0 0 11,621 44,594 Stockholders' equity 117,580(a) 120,764 116,835 118,358 Total liabilities and stockholders' equity $1,816,413 $1,791,986 $1,812,452 $1,828,903 Book value per share(b) $17.63 $17.74 $17.41 $17.36 Tangible book value per share(b) $17.35 $17.41 $16.94 $16.82 Equity to assets 6.47% 6.74% 6.45% 6.47% Tangible equity to tangible assets 6.38% 6.62% 6.28% 6.29% Asset Quality Data: Non-performing loans $2,900 $3,116 $1,682 $1,752 Real estate owned, net 28 28 28 28 Total non-performing assets $2,928 $3,144 $1,710 $1,780 Non-performing loans to total loans 0.24% 0.27% 0.14% 0.13% Non-performing assets to total assets 0.16% 0.18% 0.09% 0.10% Allowance for loan losses to non- performing loans 215.59% 201.25% 373.60% 360.39% Allowance for loan losses to total gross loans 0.52% 0.54% 0.51% 0.48% Regulatory Capital Ratios (of the Bank): Tangible capital ratio (requirement - 1.50%) 8.86% 8.91% 8.73% 8.94% Core capital ratio (requirement - 4.00%) 8.86% 8.91% 8.73% 8.94% Risk-based capital ratio (requirement - 8.00%) 17.48% 17.69% 17.21% 17.29% (a) Common shares outstanding as of March 31, 2004 totaled 6,703,004 shares. (b) In accordance with SOP 93-6, the calculation of book value per share only includes ESOP shares to the extent that they are released or committed to be released during the fiscal year. PennFed Financial Services, Inc. (Holding Company for Penn Federal Savings Bank) Selected Consolidated Financial Information (dollars in thousands, except per share amounts) For the For the three months ended nine months ended March 31, March 31, 2004 2003 2004 2003 Selected Operating Data: Interest and dividend income $24,326 $25,576 $71,725 $81,938 Interest expense 14,598 14,787 44,022 48,408 Net interest and dividend income 9,728 10,789 27,703 33,530 Provision for loan losses 0 100 0 525 Net interest and dividend income after provision for loan losses 9,728 10,689 27,703 33,005 Non-interest income: Service charges 957 1,294 3,131 3,647 Net gain (loss) from real estate operations 0 1 1 3 Net gain on sales of loans 57 498 754 1,292 Other 360 220 1,062 712 Total non-interest income 1,374 2,013 4,948 5,654 Non-interest expenses: Compensation & employee benefits 3,901 3,358 10,841 10,152 Net occupancy expense 514 498 1,417 1,308 Equipment 536 544 1,520 1,571 Advertising 102 36 236 154 Amortization of intangibles 453 465 1,362 1,407 Federal deposit insurance premium 41 49 126 147 Preferred securities expense 0 1,092 0 3,276 Other 1,090 982 3,091 2,938 Total non-interest expenses 6,637 7,024 18,593 20,953 Income before income taxes 4,465 5,678 14,058 17,706 Income tax expense 1,499 2,106 4,838 6,486 Net income $2,966 $3,572 $9,220 $11,220 Weighted avg. no. of diluted common shares(c) 7,192,948 7,464,791 7,227,905 7,546,527 Diluted earnings per common share(c) $ 0.41 $ 0.48 $ 1.28 $ 1.49 Return on average common equity 9.98% 11.89% 10.36% 12.51% Return on average assets 0.66% 0.79% 0.69% 0.81% Average earning assets $1,741,017 $1,754,724 $1,724,232 $1,789,428 Yield on average interest-earning assets 5.59% 5.85% 5.53% 6.10% Cost of average interest-bearing liabilities 3.48% 3.64% 3.51% 3.84% Net interest rate spread 2.11% 2.21% 2.02% 2.26% Net interest margin 2.24% 2.45% 2.16% 2.51% Non-interest exp. as a % of avg. assets 1.47% 1.55% 1.39% 1.51% Efficiency ratio 55.70% 51.24% 52.77% 49.89% Loan originations and purchases: One- to four-family mortgage loans $79,438 $154,118 $319,075 $416,134 Commercial and multi-family real estate loans 10,143 9,196 27,359 38,010 Consumer loans 17,248 19,939 55,421 56,933 Total loan originations and purchases $106,829 $183,253 $401,855 $511,077 (c) In accordance with SOP 93-6, the calculation of EPS only includes ESOP shares to the extent that they are released or committed to be released during the fiscal year. PennFed Financial Services, Inc. (Holding Company for Penn Federal Savings Bank) Selected Consolidated Financial Information (dollars in thousands, except per share amounts) For the three months ended Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2004 2003 2003 2003 2003 Selected Operating Data: Interest and dividend income $24,326 $23,658 $23,741 $24,433 $25,576 Interest expense 14,598 14,620 14,804 14,548 14,787 Net interest and dividend income 9,728 9,038 8,937 9,885 10,789 Provision for loan losses 0 0 0 0 100 Net interest and dividend income after provision for loan losses 9,728 9,038 8,937 9,885 10,689 Non-interest income: Service charges 957 871 1,303 1,585 1,294 Net gain from real estate operations 0 1 0 0 1 Net gain on sales of loans 57 363 334 571 498 Other 360 329 373 261 220 Total non- interest income 1,374 1,564 2,010 2,417 2,013 Non-interest expenses: Compensation & employee benefits 3,901 3,616 3,324 3,302 3,358 Net occupancy expense 514 480 423 384 498 Equipment 536 498 486 514 544 Advertising 102 78 56 56 36 Amortization of intangibles 453 454 455 459 465 Federal deposit insurance premium 41 41 44 45 49 Preferred securities expense 0 0 0 2,362 1,092 Other 1,090 1,090 911 1,045 982 Total non- interest expenses 6,637 6,257 5,699 8,167 7,024 Income before income taxes 4,465 4,345 5,248 4,135 5,678 Income tax expense 1,499 1,464 1,875 1,621 2,106 Net income $2,966 $2,881 $3,373 $2,514 $3,572 Weighted avg. no. of diluted common shares (d) 7,192,948 7,243,944 7,233,777 7,290,877 7,464,791 Diluted earnings per common share (d) $ 0.41 $ 0.40 $ 0.47 $ 0.34 $ 0.48 Return on average common equity 9.98% 9.65% 11.47% 8.54% 11.89% Return on average assets 0.66% 0.65% 0.76% 0.56% 0.79% Average earning assets $1,741,017 $1,715,792 $1,715,887 $1,741,302 $1,754,724 Yield on average interest- earning assets 5.59% 5.50% 5.51% 5.61% 5.85% Cost of average interest- bearing liabilities 3.48% 3.50% 3.55% 3.55% 3.64% Net interest rate spread 2.11% 2.00% 1.96% 2.06% 2.21% Net interest margin 2.24% 2.14% 2.11% 2.28% 2.45% Non-interest exp. as a % of avg. assets 1.47% 1.40% 1.28% 1.81% 1.55% Efficiency ratio 55.70% 54.74% 47.90% 62.66% 51.24% Loan origina- tions and purchases: One- to four-family mortgage loans $79,438 $61,304 $178,333 $113,411 $154,118 Commercial and multi- family real estate loans 10,143 8,144 9,072 11,039 9,196 Consumer loans 17,248 15,441 22,732 32,842 19,939 Total loan origina- tions and purcha- ses $106,829 $84,889 $210,137 $157,292 $183,253 (d) In accordance with SOP 93-6, the calculation of EPS only includes ESOP shares to the extent that they are released or committed to be released during the fiscal year. PennFed Financial Services, Inc. (Holding Company for Penn Federal Savings Bank) Selected Consolidated Financial Information (dollars in thousands, except per share amounts) CALCULATION OF NET INCOME ADJUSTED FOR NON-RECURRING CHARGE For the three months ended Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2004 2003 2003 2003 2003 Reported net income $2,966 $2,881 $3,373 $2,514 $3,572 Non-recurring charges: Accelerated amortization on PennFed Capital Trust I issuance costs 0 0 0 1,514 0 Tax effect 0 0 0 (530) 0 Non-recurring charges, net of taxes 0 0 0 984 0 "Adjusted" net income $2,966 $2,881 $3,373 $3,498 $3,572 Weighted avg. no. of diluted common shares(e) 7,192,948 7,243,944 7,233,777 7,290,877 7,464,791 Diluted earnings per common share (e) $ 0.41 $ 0.40 $ 0.47 $ 0.48 $ 0.48 Return on average common equity 9.98% 9.65% 11.47% 11.89% 11.89% Return on average assets 0.66% 0.65% 0.76% 0.78% 0.79% Non-interest exp. as a % of avg. assets 1.47% 1.40% 1.28% 1.47% 1.55% Efficiency ratio 55.70% 54.74% 47.90% 50.35% 51.24% (e) In accordance with SOP 93-6, the calculation of EPS only includes ESOP shares to the extent that they are released or committed to be released during the fiscal year. DATASOURCE: PennFed Financial Services, Inc. CONTACT: Jeffrey J. Carfora, COO of PennFed Financial Services, Inc., +1-973-669-7366, ext. 207

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