PFSB Pennfed Financial Svcs (MM)

PennFed Financial Services, Inc. Reports First Quarter Earnings WEST ORANGE, N.J., Oct. 29 /PRNewswire-FirstCall/ -- PennFed Financial Services, Inc. , the $1.8 billion holding company for New Jersey-based Penn Federal Savings Bank, announced earnings of 47 cents per diluted share for its first fiscal quarter ended September 30, 2003. Earnings for the comparable prior year quarter were 50 cents per diluted share. Joseph L. LaMonica, President and Chief Executive Officer of PennFed, noted that, "the challenges that we experienced in Fiscal 2003 continued into our first quarter of fiscal 2004." Total assets at September 30, 2003 of $1.778 billion reflected a decline from $1.812 billion at June 30, 2003. One- to four-family mortgage loan production for the September 2003 quarter of $178 million represented the highest quarterly level in PennFed's history. The balance in this portfolio, however, continued to decline during the quarter due to the effects of continued accelerated prepayments on loans as well as the sale of over $56 million of one- to four-family mortgage loans. As a result of the low interest rate environment and as a means of managing interest rate risk and long-term profitability, the Company continues to sell predominately conforming, fixed rate one- to four-family loan production. For the quarter ended September 30, 2003, as part of its mortgage banking activities, PennFed recorded $334,000 of gains from loan sales. Net interest margin for the three months ended September 30, 2003 was reported as 2.11%, down from 2.28% for the three months ended June 30, 2003. Approximately 0.15% of the total 0.17% margin compression is attributable to the Company's adoption of Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). Pursuant to FIN 46, the Company's trust preferred subsidiaries are no longer consolidated and the costs associated with the related issuance of trust preferred securities are now reflected as interest expense. Previously, these costs had been categorized as non-interest expense. The decrease in net interest income is offset by a decrease in non-interest expense resulting in no overall effect on net income. PennFed's deposit composition continued to show reduced levels of certificates of deposit and increased reliance on core deposits (checking, money market and savings accounts). As of September 30, 2003, core deposits represent 50% of total deposits compared to 48% at June 30, 2003. During September, Penn Federal Savings Bank opened its 22nd branch located on Chestnut Street in the Ironbound section of Newark. Mr. LaMonica commented that, "After being open less than two months, deposits at this community branch total over $8 million." For the three months ended September 30, 2003 service charges and other non-interest income, while greater than the prior year quarter, showed a modest decline when compared to the June 2003 quarter. With a recent rise in interest rates, income associated with loan prepayments and modifications slowed. Asset quality remained exceptional. Non-performing assets totaled $2.2 million, or 0.12% of total assets at September 30, 2003. Furthermore, the Company's current quarter expense ratio also remained strong at 1.28%. The expense ratio for the three months ended September 30, 2002 was 1.51%, but because this was prior to the adoption of FIN 46 this ratio included 0.23% of expense associated with trust preferred securities. PennFed continues to employ stock repurchases as a means of utilizing capital. During the September 2003 quarter, the Company repurchased 50,000 shares for a total cost of $1.4 million. PennFed stockholders of record as of November 14, 2003 will be paid a cash dividend of $0.10 per share on November 28, 2003. The Company's dividend policy will continue to be reviewed on a regular basis. Penn Federal Savings Bank maintains 22 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) September 30, June 30, September 30, 2003 2003 2002 Selected Financial Condition Data: Cash and cash equivalents $80,655 $83,046 $52,427 Investments, net and FHLB stock 379,407 369,462 208,538 Mortgage-backed securities, net 82,548 93,632 155,889 Loans held for sale 11,530 11,496 4,437 Loans receivable: One- to four-family mortgage loans 895,274 935,064 1,143,734 Commercial and multi-family real estate loans 164,269 165,905 161,021 Consumer loans 115,305 116,658 118,541 Allowance for loan losses (6,279) (6,284) (6,038) Other, net 6,300 6,079 8,489 Loans receivable, net 1,174,869 1,217,422 1,425,747 Other intangible assets 2,721 3,175 4,535 Other assets 46,439 34,219 31,014 Total assets $1,778,169 $1,812,452 $1,882,587 Deposits: Checking and money market $169,710 $172,898 $167,648 Savings 371,672 355,118 326,695 Certificates of deposit and accrued interest 539,472 566,650 672,461 Total deposits 1,080,854 1,094,666 1,166,804 FHLB advances 495,465 504,465 504,465 Other borrowings 24,390 26,644 25,420 Junior subordinated debentures 42,003 30,005 0 Other liabilities 15,902 28,216 22,104 Preferred securities of Trust, net 0 11,621 44,556 Stockholders' equity 119,555(a) 116,835 119,238 Total liabilities and stockholders' equity $1,778,169 $1,812,452 $1,882,587 Book value per share(b) $17.65 $17.41 $16.98 Tangible book value per share(b) $17.25 $16.94 $16.33 Equity to assets 6.72% 6.45% 6.33% Tangible equity to tangible assets 6.58% 6.28% 6.11% Asset Quality Data: Non-performing loans $2,164 $1,682 $2,431 Real estate owned, net 28 28 28 Total non-performing assets $2,192 $1,710 $2,459 Non-performing loans to total loans 0.18% 0.14% 0.17% Non-performing assets to total assets 0.12% 0.09% 0.13% Allowance for loan losses to non-performing loans 290.16% 373.60% 248.38% Allowance for loan losses to total gross loans 0.53% 0.51% 0.42% Regulatory Capital Ratios (of the Bank): Tangible capital ratio (requirement - 1.50%) 8.97% 8.73% 8.59% Core capital ratio (requirement - 4.00%) 8.97% 8.73% 8.59% Risk-based capital ratio (requirement - 8.00%) 17.57% 17.21% 16.29% (a) Common shares outstanding as of September 30, 2003 totaled 6,870,178 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 three months ended September 30, 2003 2002 Selected Operating Data: Interest and dividend income $23,741 $29,001 Interest expense 14,804 17,211 Net interest and dividend income 8,937 11,790 Provision for loan losses 0 225 Net interest and dividend income after provision for loan losses 8,937 11,565 Non-interest income: Service charges 1,303 1,123 Net gain from real estate operations 0 2 Net gain on sales of loans 334 231 Other 373 226 Total non-interest income 2,010 1,582 Non-interest expenses: Compensation & employee benefits 3,324 3,481 Net occupancy expense 423 403 Equipment 486 517 Advertising 56 87 Amortization of intangibles 455 474 Federal deposit insurance premium 44 48 Preferred securities expense 0 1,092 Other 911 1,015 Total non-interest expenses 5,699 7,117 Income before income taxes 5,248 6,030 Income tax expense 1,875 2,206 Net income $3,373 $3,824 Weighted avg. no. of diluted common shares(c) 7,233,777 7,655,481 Diluted earnings per common share(c) $0.47 $0.50 Return on average common equity 11.47% 12.81% Return on average assets 0.76% 0.81% Average earning assets $1,715,887 $1,821,783 Yield on average interest-earning assets 5.51% 6.34% Cost of average interest-bearing liabilities 3.55% 4.01% Net interest rate spread 1.96% 2.33% Net interest margin 2.11% 2.62% Non-interest exp. as a % of avg. assets 1.28% 1.51% Efficiency ratio 47.90% 49.69% Loan originations and purchases: One- to four-family mortgage loans $178,333 $89,379 Commercial and multi-family real estate loans 9,072 19,828 Consumer loans 22,732 18,187 Total loan originations and purchases $210,137 $127,394 (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 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2003 2003 2003 2002 2002 Selected Operating Data: Interest and dividend income $23,741 $24,433 $25,576 $27,361 $29,001 Interest expense 14,804 14,548 14,787 16,410 17,211 Net interest and dividend income 8,937 9,885 10,789 10,951 11,790 Provision for loan losses 0 0 100 200 225 Net interest and dividend income after provision for loan losses 8,937 9,885 10,689 10,751 11,565 Non-interest income: Service charges 1,303 1,585 1,294 1,230 1,123 Net gain from real estate operations 0 0 1 0 2 Net gain on sales of loans 334 571 498 563 231 Other 373 261 220 266 226 Total non-interest income 2,010 2,417 2,013 2,059 1,582 Non-interest expenses: Compensation & employee benefits 3,324 3,302 3,358 3,313 3,481 Net occupancy expense 423 384 498 407 403 Equipment 486 514 544 510 517 Advertising 56 56 36 31 87 Amortization of intangibles 455 459 465 468 474 Federal deposit insurance premium 44 45 49 50 48 Preferred securities expense 0 2,362 1,092 1,092 1,092 Other 911 1,045 982 941 1,015 Total non-interest expenses 5,699 8,167 7,024 6,812 7,117 Income before income taxes 5,248 4,135 5,678 5,998 6,030 Income tax expens 1,875 1,621 2,106 2,174 2,206 Net income $3,373 $2,514 $3,572 $3,824 $3,824 Weighted avg. no. of diluted common shares(d) 7,233,777 7,290,877 7,464,791 7,526,698 7,655,481 Diluted earnings per common share(d) $ 0.47 $ 0.34 $ 0.48 $ 0.51 $ 0.50 Return on average common equity 11.47% 8.54% 11.89% 12.84% 12.81% Return on average assets 0.76% 0.56% 0.79% 0.82% 0.81% Average earning assets $1,715,887 $1,741,302 $1,754,724 $1,791,775 $1,821,783 Yield on average interest-earning assets 5.51% 5.61% 5.85% 6.08% 6.34% Cost of average interest-bearing liabilities 3.55% 3.55% 3.64% 3.86% 4.01% Net interest rate spread 1.96% 2.06% 2.21% 2.22% 2.33% Net interest margin 2.11% 2.28% 2.45% 2.47% 2.62% Non-interest exp. as a % of avg. assets 1.28% 1.81% 1.55% 1.46% 1.51% Efficiency ratio 47.90% 62.66% 51.24% 48.76% 49.69% Loan originations and purchases: One- to four- family mortgage loans $178,333 $113,411 $154,118 $172,637 $89,379 Commercial and multi-family real estate loans 9,072 11,039 9,196 8,986 19,828 Consumer loans 22,732 32,842 19,939 18,807 18,187 Total loan originations and purchases $210,137 $157,292 $183,253 $200,430 $127,394 (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 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2003 2003 2003 2002 2002 Reported net income $3,373 $2,514 $3,572 $3,824 $3,824 Non-recurring charges: Accelerated amorti- zation on PennFed Capital Trust I issuance costs 0 1,514 0 0 0 Tax effect 0 (530) 0 0 0 Non-recurring charges, net of taxes 0 984 0 0 0 "Adjusted" net income $3,373 $3,498 $3,572 $3,824 $3,824 Weighted avg. no. of diluted common shares(e) 7,233,777 7,290,877 7,464,791 7,526,698 7,655,481 Diluted earnings per common share(e) $ 0.47 $ 0.48 $ 0.48 $ 0.51 $ 0.50 Return on average common equity 11.47% 11.89% 11.89% 12.84% 12.81% Return on average assets 0.76% 0.78% 0.79% 0.82% 0.81% Non-interest exp. as a % of avg. assets 1.28% 1.47% 1.55% 1.46% 1.51% Efficiency ratio 47.90% 50.35% 51.24% 48.76% 49.69% (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: Claire M. Chadwick, CFO of PennFed Financial Services, Inc., +1-973-669-7366, ext. 267

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