PFSB Pennfed Financial Svcs (MM)

PennFed Financial Services, Inc. Reports Fiscal Year End Earnings Results Include Non-Recurring Charge WEST ORANGE, N.J., July 28 /PRNewswire-FirstCall/ -- PennFed Financial Services, Inc. (NASDAQ:PFSB), the $1.9 billion holding company for New Jersey-based Penn Federal Savings Bank, announced earnings for the fourth quarter ended June 30, 2004. Adjusting for a non-recurring charge associated with an environmental liability, earnings for the June 2004 quarter would have been 43 cents per diluted share. Actual reported earnings for the current quarter, including the non-recurring charge, were 40 cents per diluted share. Earnings for the quarter ended June 30, 2003 included a non- recurring charge associated with the refinance of trust preferred securities. Excluding this charge in the June 2003 quarter, earnings would have been 48 cents per diluted share. Actual reported earnings for the June 2003 quarter, including the non-recurring charge, were 34 cents per diluted share. Certain information provided in this press release excludes non-recurring expenses which management believes should be excluded in order to have a clear understanding of the Company's financial results. These items, which are included in the financial results prepared in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP) but which are excluded from adjusted results, are described in the reconciliation tables following this press release. As disclosed in prior year Form 10-Ks and in accordance with a New Jersey Department of Environmental Protection directive, the Bank is involved with ExxonMobil in the development and implementation of a remedial action work plan for environmental contamination at a branch site. Based upon the results of recent testing conducted at the site, it appears that some degree of active ground water remediation will more likely be required at the site than natural remediation. The ExxonMobil cost estimate for active ground water remediation is $595,000 and is to be shared 50% by ExxonMobil and 50% by the Bank under a cost sharing arrangement. The Company has, therefore, recognized a non-recurring expense of $298,000, or $0.03 per share net of income taxes, to cover the environmental remediation liability. As shown on the attached schedules, for the year ended June 30, 2004, earnings adjusted for the previously mentioned non-recurring charge were $1.70 per diluted share compared to $1.97 of adjusted earnings for the prior fiscal year. Commenting on fiscal year 2004 results, Joseph L. LaMonica, President and Chief Executive Officer of PennFed, noted that "the effects of the low interest rate environment, increased expense from ESOP accounting rules as well as the significantly reduced dividends on our required holdings of Federal Home Loan Bank of New York stock, all contributed to a challenging year." At June 30, 2004, assets totaled $1.902 billion, representing a 5% increase from June 30, 2003. Despite significant loan prepayments during fiscal year 2004, loans increased 5% as loan origination levels remained strong. Additionally, loan sales were reduced in the second half of fiscal 2004 until the excess cash from prepayments was utilized. As a result, gains on sales of loans were only $759,000 in fiscal year 2004 compared to $1.9 million in fiscal 2003, and were only $5,000 for the quarter ended June 30, 2004 compared to $571,000 for the same prior year quarter. Subsequent to the end of the fiscal year, the Company returned to its loan sale strategy as a means of managing interest rate risk. During the current fiscal year the Bank expanded its retail franchise by opening three new branches. In September 2003, the Company opened its 22nd branch -- located in the Ironbound section of Newark. Deposits at this branch total over $18 million. In February 2004, our 23rd branch was opened in Union, New Jersey, where deposits now total over $14 million. Finally, in June 2004, our newest branch was opened -- a full-service branch located in West Caldwell. Although opened less than two months ago, deposits at this branch already total over $10 million. "It is encouraging to note that these branches have performed so well in such a short period of time", stated LaMonica. Service charges and other non-interest income showed a decline for the year ended June 30, 2004, when compared to the prior year. Fee income associated with loan prepayments and modifications during fiscal year 2004 reflected a significant decrease when compared to the prior year. "Our reputation as a low-risk, low-cost provider of financial services continues to be validated," LaMonica remarked. Non-performing assets of $2.2 million represented just 0.11% of total assets at June 30, 2004. With respect to expenses, after adjusting for the non-recurring charges, the Company's non-interest expense ratio was 1.39% for fiscal 2004. For the year ended June 30, 2004, the Company recorded compensation expense related to the Employee Stock Ownership Plan (ESOP) of $4.0 million compared to $3.1 million for the year ended June 30, 2003. The majority of the ESOP expense represents a non-cash valuation adjustment to reflect the value of PennFed stock. After June 30, 2004, when the ESOP shares became fully allocated, the Company has ceased recognizing compensation expense related to the ESOP. Modifications to the Bank's existing benefit plans after June 30, 2004 are expected to cost less than 25% of the fiscal 2004 expense level of the ESOP. During fiscal 2004, the Company repurchased 396,100 shares of its outstanding stock at prices ranging from $27.68 to $36.06, for a total cost of $12.9 million. PennFed continues to employ stock repurchases as a means of utilizing capital. PennFed stockholders of record as of August 13, 2004 will be paid a cash dividend of $0.10 per share on August 27, 2004. The Company's dividend policy will continue to be reviewed on a regular basis. Penn Federal Savings Bank maintains 24 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) June 30, March 31, June 30, 2004 2004 2003 Selected Financial Condition Data: Cash and cash equivalents $14,859 $18,897 $83,046 Investments, net 424,980 425,103 344,239 Mortgage-backed securities, net 100,079 99,487 93,632 Loans held for sale 0 0 11,496 Loans receivable: One- to four-family mortgage loans 996,659 917,375 935,064 Commercial and multi-family real estate loans 172,244 164,200 165,905 Consumer loans 117,688 115,874 116,658 Allowance for loan losses (6,249) (6,252) (6,284) Other, net 7,131 6,533 6,079 Loans receivable, net 1,287,473 1,197,730 1,217,422 FHLB stock 23,773 24,273 25,223 Other intangible assets 1,361 1,814 3,175 Other assets 49,761 49,109 34,219 Total assets $1,902,286 $1,816,413 $1,812,452 Deposits: Checking and money market $169,609 $163,893 $172,898 Savings 418,678 406,830 355,118 Certificates of deposit and accrued interest 599,813 558,814 566,650 Total deposits 1,188,100 1,129,537 1,094,666 FHLB advances 475,465 485,465 504,465 Other borrowings 59,346 27,046 26,644 Junior subordinated debentures 42,037 42,026 30,005 Other liabilities 18,939 14,759 28,216 Preferred securities of Trust, net 0 0 11,621 Stockholders' equity 118,399 (a) 117,580 116,835 Total liabilities and stockholders' equity $1,902,286 $1,816,413 $1,812,452 Book value per share $17.44 $17.63 (b) $17.41 (b) Tangible book value per share $17.24 $17.35 (b) $16.94 (b) Equity to assets 6.22% 6.47% 6.45% Tangible equity to tangible assets 6.16% 6.38% 6.28% Asset Quality Data: Non-performing loans $2,182 $2,900 $1,682 Real estate owned, net 0 28 28 Total non-performing assets $2,182 $2,928 $1,710 Non-performing loans to total loans 0.17% 0.24% 0.14% Non-performing assets to total assets 0.11% 0.16% 0.09% Allowance for loan losses to non-performing loans 286.39% 215.59% 373.60% Allowance for loan losses to total gross loans 0.48% 0.52% 0.51% Regulatory Capital Ratios (of the Bank): Tangible capital ratio (requirement - 1.50%) 8.61% 8.86% 8.73% Core capital ratio (requirement - 4.00%) 8.61% 8.86% 8.73% Risk-based capital ratio (requirement - 8.00%) 16.86% 17.48% 17.21% (a) Common shares outstanding as of June 30, 2004 totaled 6,788,030 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 For the year ended June 30, ended June 30, 2004 2003 2004 2003 Selected Operating Data: Interest and dividend income $24,551 $24,433 $96,276 $106,371 Interest expense 14,652 14,548 58,674 62,956 Net interest and dividend income 9,899 9,885 37,602 43,415 Provision for loan losses 0 0 0 525 Net interest and dividend income after provision for loan losses 9,899 9,885 37,602 42,890 Non-interest income: Service charges 1,044 1,585 4,175 5,232 Net gain (loss) from real estate operations 57 0 58 3 Net gain on sales of loans 5 571 759 1,863 Other 375 261 1,437 973 Total non-interest income 1,481 2,417 6,429 8,071 Non-interest expenses: Compensation & employee benefits 3,752 3,302 14,593 13,454 Net occupancy expense 477 384 1,894 1,692 Equipment 537 514 2,057 2,085 Advertising 154 56 390 210 Amortization of intangibles 454 459 1,816 1,866 Federal deposit insurance premium 42 45 168 192 Preferred securities expense 0 2,362 0 5,638 Other 1,421 1,045 4,512 3,983 Total non-interest expenses 6,837 8,167 25,430 29,120 Income before income taxes 4,543 4,135 18,601 21,841 Income tax expense 1,705 1,621 6,543 8,107 Net income $2,838 $2,514 $12,058 $13,734 Weighted avg. no. of diluted common shares (c) 7,102,972 7,290,877 7,224,585 7,485,781 Diluted earnings per common share (c) $ 0.40 $ 0.34 $ 1.67 $ 1.83 Return on average common equity 9.69% 8.54% 10.20% 11.53% Return on average assets 0.61% 0.56% 0.67% 0.75% Average earning assets $1,782,562 $1,741,302 $1,738,814 $1,777,396 Yield on average interest-earning assets 5.51% 5.61% 5.54% 5.98% Cost of average interest-bearing liabilities 3.41% 3.55% 3.52% 3.79% Net interest rate spread 2.10% 2.06% 2.02% 2.19% Net interest margin 2.23% 2.28% 2.16% 2.44% Non-interest exp. as a % of avg. assets 1.48% 1.81% 1.41% 1.58% Efficiency ratio 56.37% 62.66% 53.70% 52.94% Loan originations and purchases: One- to four-family mortgage loans $143,758 $113,411 $462,833 $529,545 Commercial and multi-family real estate loans 15,863 11,039 43,222 49,049 Consumer loans 19,581 32,842 75,002 89,775 Total loan originations and purchases $179,202 $157,292 $581,057 $668,369 (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) CALCULATION OF NET INCOME ADJUSTED FOR NON-RECURRING CHARGES For the three months For the year ended June 30, ended June 30, 2004 2003 2004 2003 Reported net income $2,838 $2,514 $12,058 $13,734 Non-recurring charges: Accelerated amortization on PennFed Capital Trust I issuance costs 0 1,514 0 1,514 Additional environmental accrual 298 0 298 0 Tax effect (110) (530) (110) (530) Non-recurring charges, net of taxes 188 984 188 984 "Adjusted" net income $3,026 $3,498 $12,246 $14,718 Weighted avg. no. of diluted common shares (d) 7,102,972 7,290,877 7,224,585 7,485,781 Diluted earnings per common share (d) $0.43 $0.48 $1.70 $1.97 Return on average common equity 10.33% 11.89% 10.35% 12.36% Return on average assets 0.66% 0.78% 0.68% 0.80% Non-interest exp. as a % of avg. assets 1.42% 1.47% 1.39% 1.50% Efficiency ratio 53.74% 50.35% 53.02% 50.00% (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) For the three months ended Jun. 30, Mar. 31, Dec. 31, 2004 2004 2003 Selected Operating Data: Interest and dividend income $24,551 $24,326 $23,658 Interest expense 14,652 14,598 14,620 Net interest and dividend income 9,899 9,728 9,038 Provision for loan losses 0 0 0 Net interest and dividend income after provision for loan losses 9,899 9,728 9,038 Non-interest income: Service charges 1,044 957 871 Net gain from real estate operations 57 0 1 Net gain on sales of loans 5 57 363 Other 375 360 329 Total non-interest income 1,481 1,374 1,564 Non-interest expenses: Compensation & employee benefits 3,752 3,901 3,616 Net occupancy expense 477 514 480 Equipment 537 536 498 Advertising 154 102 78 Amortization of intangibles 454 453 454 Federal deposit insurance premium 42 41 41 Preferred securities expense 0 0 0 Other 1,421 1,090 1,090 Total non-interest expenses 6,837 6,637 6,257 Income before income taxes 4,543 4,465 4,345 Income tax expense 1,705 1,499 1,464 Net income $2,838 $2,966 $2,881 Weighted avg. no. of diluted common shares (e) 7,102,972 7,192,948 7,243,944 Diluted earnings per common share (e) $ 0.40 $ 0.41 $ 0.40 Return on average common equity 9.69% 9.98% 9.65% Return on average assets 0.61% 0.66% 0.65% Average earning assets $1,782,562 $1,741,017 $1,715,792 Yield on average interest-earning assets 5.51% 5.59% 5.50% Cost of average interest-bearing liabilities 3.41% 3.48% 3.50% Net interest rate spread 2.10% 2.11% 2.00% Net interest margin 2.23% 2.24% 2.14% Non-interest exp. as a % of avg. assets 1.48% 1.28% 1.81% Efficiency ratio 56.37% 55.70% 62.66% Loan originations and purchases: One- to four-family mortgage loans $143,758 $79,438 $61,304 Commercial and multi-family real estate loans 15,863 10,143 8,144 Consumer loans 19,581 17,248 15,441 Total loan originations and purchases $179,202 $106,829 $84,889 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, 2003 2003 Selected Operating Data: Interest and dividend income $23,741 $24,433 Interest expense 14,804 14,548 Net interest and dividend income 8,937 9,885 Provision for loan losses 0 0 Net interest and dividend income after provision for loan losses 8,937 9,885 Non-interest income: Service charges 1,303 1,585 Net gain from real estate operations 0 0 Net gain on sales of loans 334 571 Other 373 261 Total non-interest income 2,010 2,417 Non-interest expenses: Compensation & employee benefits 3,324 3,302 Net occupancy expense 423 384 Equipment 486 514 Advertising 56 56 Amortization of intangibles 455 459 Federal deposit insurance premium 44 45 Preferred securities expense 0 2,362 Other 911 1,045 Total non-interest expenses 5,699 8,167 Income before income taxes 5,248 4,135 Income tax expense 1,875 1,621 Net income $3,373 $2,514 Weighted avg. no. of diluted common shares (e) 7,233,777 7,290,877 Diluted earnings per common share (e) $ 0.47 $ 0.34 Return on average common equity 11.47% 8.54% Return on average assets 0.76% 0.56% Average earning assets $1,715,887 $1,741,302 Yield on average interest-earning assets 5.51% 5.61% Cost of average interest-bearing liabilities 3.55% 3.55% Net interest rate spread 1.96% 2.06% Net interest margin 2.11% 2.28% Non-interest exp. as a % of avg. assets 1.28% 1.81% Efficiency ratio 47.90% 62.66% Loan originations and purchases: One- to four-family mortgage loans $178,333 $113,411 Commercial and multi-family real estate loans 9,072 11,039 Consumer loans 22,732 32,842 Total loan originations and purchases $210,137 $157,292 (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. 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 CHARGES For the three months ended Jun. 30, Mar. 31, Dec. 31, 2004 2004 2003 Reported net income $2,838 $2,966 $2,881 Non-recurring charges: Accelerated amortization on PennFed Capital Trust I issuance costs 0 0 0 Additional environmental accrual 298 0 0 Tax effect (110) 0 0 Non-recurring charges, net of taxes 188 0 0 "Adjusted" net income $3,026 $2,966 $2,881 Weighted avg. no. of diluted common shares (f) 7,102,972 7,192,948 7,243,944 Diluted earnings per common share (f) $ 0.43 $ 0.41 $ 0.40 Return on average common equity 10.33% 9.98% 9.65% Return on average assets 0.66% 0.66% 0.65% Non-interest exp. as a % of avg. assets 1.42% 1.47% 1.40% Efficiency ratio 53.74% 55.70% 54.74% 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 CHARGES For the three months ended Sep. 30, Jun. 30, 2003 2003 Reported net income $3,373 $2,514 Non-recurring charges: Accelerated amortization on PennFed Capital Trust I issuance costs 0 1,514 Additional environmental accrual 0 0 Tax effect 0 (530) Non-recurring charges, net of taxes 0 984 "Adjusted" net income $3,373 $3,498 Weighted avg. no. of diluted common shares (f) 7,233,777 7,290,877 Diluted earnings per common share (f) $ 0.47 $ 0.48 Return on average common equity 11.47% 11.89% Return on average assets 0.76% 0.78% Non-interest exp. as a % of avg. assets 1.28% 1.47% Efficiency ratio 47.90% 50.35% (f) 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

Copyright