PennFed Financial Services, Inc. Reports Fourth Quarter and Fiscal Year Earnings


WEST ORANGE, N.J., July 26, 2006 (PRIMEZONE) -- PennFed Financial Services, Inc. (Nasdaq:PFSB), the $2.3 billion holding company for New Jersey-based Penn Federal Savings Bank, announced earnings for the fourth quarter and fiscal year ended June 30, 2006. Earnings for the current quarter were 21 cents per diluted share compared to earnings for the June 2005 quarter of 28 cents per diluted share. Reported earnings for the year ended June 30, 2006, were $1.00 per diluted share compared to $1.11 per diluted share for the prior fiscal year.

PennFed's net interest margin of 1.56% for the quarter ended June 30, 2006, reflected 18 basis points of compression from the March 2006 quarter. Joseph L. LaMonica, PennFed's President and Chief Executive Officer, stated that, "The extremely competitive New Jersey deposit market coupled with rising deposit and borrowing costs and a flat yield curve resulted in continued compression in net interest margin." With concerns about inflation and questionable economic growth, further increases in short-term rates are uncertain. Absent future rate hikes, net interest margin should stabilize, but actual improvement in the margin would probably not begin to occur until the yield curve steepens. "Notwithstanding this difficult and competitive operating environment, we continue to focus on asset quality and expense management," LaMonica stated.

Non-performing assets declined to $1.8 million and represented just 0.08% of total assets at June 30, 2006. A year earlier, non-performing assets were $2.6 million, or 0.13% of total assets and only three months ago, at March 31, 2006, nonperforming assets were $2.6 million, or 0.12% of total assets.

The Company's ratio of non-interest expense to average assets was 0.95% and 1.12% for the three months and year ended June 30, 2006, respectively, compared to 1.13% and 1.22%, respectively, for the same prior year periods. As noted earlier in the fiscal year, non-interest expense includes the effects of the payment of a penalty associated with the prepayment of certain advances from the Federal Home Loan Bank (FHLB) of New York, the acceleration of depreciation on branch automation software and an increase in the Company's obligation under certain long-term benefit plans. Excluding these items, the Company's non-interest expense ratio for the current fiscal year was at 1.02%, compared to 1.21% for fiscal 2005 after adjusting for increased regulatory compliance costs.

Asset growth of over 12% since June 30, 2005, resulted in total assets of $2.3 billion at June 30, 2006. With total loan production of $134 million and $515 million for the three months and full year ended June 30, 2006, respectively, net loans receivable grew more than 15% during the fiscal year 2006. "Focus on the origination of home equity loans and commercial real estate loans in addition to one- to four-family mortgage loans continues," said LaMonica. For the three months and year ended June 30, 2006, PennFed's consumer loan originations totaled $36.5 million and $131.7 million, respectively -- 24% and 45% increases for the quarter and year, respectively. Commercial and multi-family real estate loan production was strong at $12.4 million and $42.1 million for the current quarter and fiscal year, respectively.

Since June 30, 2005, total deposits have increased $75 million, or 5.6%. LaMonica noted that, "By pricing deposits appropriately, we were able to grow deposit balances. However, the shift in the mix of deposits continued as savings account customers move 'parked' funds to other higher yielding alternatives, including money market accounts, the balances of which have grown significantly over the year." In addition, throughout fiscal 2006, wholesale borrowings have been an alternate, lower costing source of funds when compared to the competition's pricing on retail deposits. Overall, the rate paid on deposits and borrowings increased 19 basis points over the linked quarter and 51 basis points year over year due to the continued rise in short term rates and the very strong competitive deposit pricing.

For the year ended June 30, 2006, fees and service charges included the effects of a $2.7 million prepayment premium on a commercial loan, resulting from the payoff of one of the Company's largest commercial loans.

The Company continued to employ stock repurchases as a means of utilizing capital. During fiscal 2006, 626,300 shares of the Company's outstanding stock were repurchased at prices ranging from $17.10 to $19.75, for a total cost of $11.6 million.

PennFed stockholders of record as of August 11, 2006, will be paid a cash dividend of 7 cents per share on August 25, 2006. The Company's dividend policy will continue to be reviewed on a regular basis.

Certain information provided in this press release excludes income and expense items which management believes should be excluded in order to provide investors with a clear understanding of the results of the Company's normal business operations. These items, which are included in the financial results prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) but which are excluded from adjusted results, are described above and in the reconciliation tables following this press release.

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 words or phrases, such as "will," "expect," "anticipate," "continue" and similar expressions, 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 and competitive 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,
                                  2006          2006          2005
                                ----------   ----------    ---------
 Selected Financial 
 Condition Data:
   Cash and cash equivalents   $  16,614     $  17,393     $  15,220
   Investments, net              445,296       445,332       410,509
   Mortgage-backed 
     securities, net              62,963        65,749        78,201
   Loans held for sale               217           520         4,826
 Loans receivable:
     One- to four-family 
       mortgag                 1,302,230     1,256,817     1,143,663
     Commercial and 
       multi-family real 
       estate loans              172,600       166,321       169,765
     Consumer loans              204,446       186,124       144,423
     Allowance for loan losses    (5,888)       (5,898)       (6,050)
     Other, net                   10,619         9,972         8,853
                               ----------     ----------    ---------
   Loans receivable, net       1,684,007     1,613,336     1,460,654

   FHLB stock                     27,714        26,261        22,391
   Other assets                   68,014        68,755        58,750
                               ----------     ----------    ---------
                                                                
Total assets                  $ 2,304,825   $ 2,237,346  $ 2,050,551
                              ===========   ===========  ============

Deposits:
  Checking and money market     $ 312,489     $ 289,638    $ 227,031
  Savings                         300,247       318,834      385,360
  Certificates of deposit and 
    accrued interest              801,852       763,687      727,100
                               ----------     ----------    ---------
Total deposits                  1,414,588     1,372,159    1,339,491

  FHLB advances                   465,465       465,465      415,465
  Other borrowings                240,193       214,334      107,952
  Junior subordinated 
    debentures                     42,126        42,115       42,082
  Other liabilities                19,032        19,688       21,507
  Stockholders' equity            123,421 (a)   123,585      124,054
                               ----------     ----------    ---------
  Total liabilities and 
    stockholders' equity      $ 2,304,825   $ 2,237,346  $ 2,050,551
                              ===========   ===========  ============

  Book value per share             $ 9.59        $ 9.59       $ 9.34

  Equity to assets                   5.35%         5.52%        6.05%

 Asset Quality Data:
   Non-performing loans           $ 1,780       $ 2,611      $ 2,619
   Real estate owned, net               0             0            0
                               ----------     ----------    ---------
   Total non-performing assets    $ 1,780       $ 2,611      $ 2,619
                               ==========     ==========    =========

   Non-performing loans to 
     total loans                     0.11%         0.16%        0.18%
   Non-performing assets to 
     total assets                    0.08%         0.12%        0.13%
   Allowance for loan losses 
     to non-performing loans       330.79%       225.89%      231.00%
   Allowance for loan losses 
     to total gross loans            0.35%         0.36%        0.41%

 Regulatory Capital Ratios 
 (of the Bank):
   Tangible capital ratio 
     (requirement - 1.50%)           7.33%         7.57%        8.28%
   Core capital ratio 
     (requirement - 4.00%)           7.33%         7.57%        8.28%
   Risk-based capital ratio 
     (requirement - 8.00%)          13.81%        14.39%       15.84%

 (a) Common shares outstanding as of June 30, 2006,
     totaled 12,864,047 shares.


                      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        year ended
                                   June 30,               June 30,
                       -----------------------  ----------------------
                            2006        2005        2006        2005 
                       ----------   ----------  ----------  ----------
Selected Operating Data:
  Interest and dividend 
    income               $ 30,270     $ 26,751    $ 115,276   $ 104,722
   Interest expense        21,814       16,290       77,782      61,384
                         --------     --------    ---------   ---------
     Net interest and  
       dividend income      8,456       10,461       37,494      43,338
   Provision for loan 
     losses                     0            0            0           0
                         --------     --------    ---------   ---------
   Net interest and  
     dividend income 
     after provision 
     for loan losses        8,456       10,461       37,494      43,338
   Non-interest income:
     Fees and service 
       charges                718          800        5,670       3,096
     Net gain (loss) 
       from real estate 
        operations             (2)          (1)          (6)        156
     Net gain on sales 
       of loans                 0          128          143         394
     Income on Bank 
      Owned Life 
      Insurance               293          224          967         690
     Other                    204          146          739         660
                         --------     --------    ---------   ---------
     Total non-interest 
       income               1,213        1,297        7,513       4,996
   Non-interest expenses
     Compensation & 
      employee benefits     2,742        2,856       12,202      12,263
     Net occupancy 
       expense                583          578        2,426       2,319
     Equipment                534          546        2,573       2,140
     Advertising              170          170          637         719
     Amortization of 
      intangible assets         0            0            0       1,361
     Federal deposit 
      insurance premium        43           44          175         172
     Extinguishment of 
       debt                     0            0        1,351           0
     Other                  1,325        1,534        4,834       5,197
                         --------     --------    ---------   ---------
     Total non-interest 
       expenses             5,397        5,728       24,198      24,171
                         --------     --------    ---------   ---------
   Income before income 
     taxes                  4,272        6,030       20,809      24,163
   Income tax expense       1,509        2,158        7,411       8,669
                         --------      --------   ---------   ---------
   Net income             $ 2,763      $ 3,872     $ 13,398    $ 15,494
                         ========      ========    ========    ========
   Weighted avg. no. of 
    diluted common 
    shares             13,241,182    13,742,337  13,451,005  14,010,684
   Diluted earnings 
     per common share      $ 0.21        $ 0.28      $ 1.00      $ 1.11

   Return on average 
     common equity (a)       8.97%        12.50%      10.78%     12.64%

   Return on average 
     assets (a)              0.49%         0.76%       0.62%      0.78%

   Average total 
     assets            $2,267,507    $2,029,268  $2,169,145  $1,981,090

   Average earning 
     assets            $2,188,499    $1,959,481  $2,096,020  $1,913,717

Yield on average 
  interest-earning assets    5.53%         5.46%       5.50%      5.47%
Cost of average deposits 
  and borrowings             4.09%         3.44%       3.84%      3.33%
                       -----------    ----------   --------- ----------
Net interest rate spread     1.44%         2.02%       1.66%      2.14%
                       ===========    ==========   ========= ==========
Net interest margin          1.56%         2.14%       1.79%      2.26%

Non-interest exp. 
  as a % of avg. assets      0.95%         1.13%       1.12%      1.22%
Efficiency ratio            55.81%        48.71%      53.76%     47.35%

Loan originations and purchases:
  One- to four-family 
    mortgage loans        $ 84,925    $ 107,521    $ 340,852  $ 350,274
  Commercial and multi-
    family real estate 
    loans                   12,353        8,470       42,060     38,612
  Consumer loans            36,472       29,301      131,729     90,808
                       -----------     --------     ---------  --------
Total loan originations 
  and purchases          $ 133,750    $ 145,292    $ 514,641  $ 479,694
                       ===========    =========    =========  =========

(a) - Annualized.


                   PennFed Financial Services, Inc.
            (Holding Company for Penn Federal Savings Bank)
              Selected Consolidated Financial Information
           (dollars in thousands, except per share amounts)


                     CALCULATION OF ADJUSTED NET INCOME

                                For the
                           three months ended      For the year ended
                                June 30,                June 30,
                        ----------------------  ----------------------
                           2006        2005        2006        2005
                        ----------  ----------  ----------  ----------
 Reported net income       $ 2,763     $ 3,872    $ 13,398    $ 15,494

 Adjustments:
   Commercial loan
    prepayment
    premium                      0           0      (2,688)          0
   Prepayment
    penalty on FHLB
    advances                     0           0       1,351           0
   Acceleration of
    depreciation
    on branch
    automation
    system software              0           0         372           0
   Increase in
    obligation
    under certain
    long-term
    benefit plans                0           0         259           0
   Additional
    Sarbanes Oxley
    compliance
    costs                        0         208           0         208
   Net tax effect                0         (73)        247         (73)
                        ----------  ----------  ----------  ----------
   Adjustments,
    net of taxes                 0         135        (459)        135
                        ----------  ----------  ----------  ----------
  "Adjusted" net
   income               $    2,763  $    4,007  $   12,939  $   15,629
                        ==========  ==========  ==========  ==========

 Weighted avg. no.
  of diluted
  common shares         13,241,182  13,742,337  13,451,005  14,010,684
 Diluted earnings
  per common share          $ 0.21      $ 0.29      $ 0.96      $ 1.12

 Return on average
  common equity(a)           8.97%      12.93%      10.41%      12.75%

 Return on average
  assets(a)                  0.49%       0.79%       0.60%       0.79%

 Non-interest exp.
  as a % of avg.
  assets                     0.95%       1.09%       1.02%       1.21%
 Efficiency ratio           55.81%      46.94%      52.49%      46.91%


 (a) - Annualized


                  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,    Sep. 30,    Jun. 30,
               2006        2006         2005        2005        2005
            ----------  ----------  ----------  ----------  ----------
Selected
 Operating Data:
 Interest
  and
  dividend
  income      $ 30,270    $ 28,973    $ 28,350    $ 27,683    $ 26,751
 Interest
  expense       21,814      19,762      18,715      17,491      16,290
            ----------  ----------  ----------  ----------  ----------
   Net
   interest
   and
   dividend
   income        8,456       9,211       9,635      10,192      10,461
 Provision
  for loan
  losses             0           0           0           0           0
            ----------  ----------  ----------  ----------  ----------
 Net
  interest
  and
  dividend
  income
  after
  provision
  for loan
  losses         8,456       9,211       9,635      10,192      10,461
 Non-
  interest
  income:
  Fees and
   service
   charges         718         778         704       3,470         800
  Net gain
   (loss)
   from
  real
  estate
  opera-
  tions             (2)         (3)          2          (3)         (1)
 Net gain
  on sales
  of loans           0           0          21         122         128
 Income on
  Bank
  Owned
  Life
  Insurance        293         239         219         216         224
 Other             204         201         153         181         146
            ----------  ----------  ----------  ----------  ----------
  Total
   non-
   interest
   income        1,213       1,215       1,099       3,986       1,297
 Non-
  interest
  expenses:
  Compen-
   sation &
   employee
   benefits      2,742       3,134       3,067       3,259       2,856
  Net
   occupancy
   expense         583         664         594         585         578
  Equipment        534         530         538         971         546
  Adver-
   tising          170         168         165         134         170
  Amorti-
   zation
   of
   intangible
   assets            0           0           0           0           0
  Federal
   deposit
   insurance
   premium          43          45          45          42          44
  Extin-
  guishment
  of debt            0           0           0       1,351           0
  Other          1,325       1,119         979       1,411       1,534
            ----------  ----------  ----------  ----------  ----------
  Total
   non-
   interest
   expenses      5,397       5,660       5,388       7,753       5,728
            ----------  ----------  ----------  ----------  ----------
 Income
  before
  income
  taxes          4,272       4,766       5,346       6,425       6,030
 Income
  tax
  expense        1,509       1,717       1,892       2,293       2,158
            ----------  ----------  ----------  ----------  ----------
 Net
 income     $    2,763  $    3,049  $    3,454  $    4,132  $    3,872
            ==========  ==========  ==========  ==========  ==========


 Weighted
  avg. no.
  of
  diluted
  common
  shares    13,241,182  13,349,234  13,509,140  13,700,349  13,742,337
 Diluted
  earnings
  per
  common
  share         $ 0.21      $ 0.23      $ 0.26      $ 0.30      $ 0.28

 Return on
  average
  common
  equity(a)      8.97%       9.87%      11.09%      13.12%      12.50%

 Return on
  average
  assets(a)      0.49%       0.56%       0.65%       0.79%       0.76%

 Average
  total
  assets    $2,267,507  $2,184,365  $2,137,449  $2,087,261  $2,029,268

  Average
   earning
   assets   $2,188,499  $2,111,183  $2,066,915  $2,017,484  $1,959,481

  Yield on
   average
   interest-
   earning
   assets        5.53%       5.51%       5.46%       5.47%       5.46%
  Cost of
   average
   deposits
   and
   borrow-
   ings          4.09%       3.90%       3.70%       3.55%       3.44%
            ----------  ----------  ----------  ----------  ----------
  Net
  interest
  rate
  spread         1.44%       1.61%       1.76%       1.92%       2.02%
            ==========  ==========  ==========  ==========  ==========

  Net
   interest
   margin        1.56%       1.74%       1.89%       2.05%       2.14%

  Non-
   interest
   exp. as
   a % of
   avg.
  assets         0.95%       1.04%       1.01%       1.49%       1.13%
  Efficiency
   ratio        55.81%      54.27%      50.20%      54.67%      48.71%

  Loan
   origina-
   tions
   and
   purchases:
   One- to
   four-
   family
   mortgage
   loans      $ 84,925    $ 64,637    $ 73,061   $ 118,229   $ 107,521
   Commer-
    cial
    and
    multi-
    family
    real
    estate
    loans       12,353       7,005      14,387       8,315       8,470
   Consumer
    loans       36,472      36,791      27,996      30,470      29,301
            ----------  ----------  ----------  ----------  ----------
   Total
    loan
    origina-
    tions
    and
    pur-
    chases  $  133,750  $  108,433  $  115,444  $  157,014  $  145,292
            ==========  ==========  ==========  ==========  ==========

 (a) - Annualized.



                  PennFed Financial Services, Inc.
            (Holding Company for Penn Federal Savings Bank)
              Selected Consolidated Financial Information
           (dollars in thousands, except per share amounts)


                  CALCULATION OF ADJUSTED NET INCOME

                             For the three months ended
            ----------------------------------------------------------
             Jun. 30,    Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,
               2006       2006         2005        2005        2005
            ----------  ----------  ----------  ----------  ----------
 Reported
  net
  income       $ 2,763     $ 3,049     $ 3,454     $ 4,132     $ 3,872

 Adjustments:
  Commercial
  loan pre-
   payment
   premium           0           0           0      (2,688)          0
  Prepayment
   penalty
   on FHLB
   advances          0           0           0       1,351           0
  Accelera-
   tion of
   deprecia-
   tion on
   branch
   auto-
   mation
   system
   software          0           0           0         372           0
   Increase
    in
    obliga-
    tion
    under
    certain
    long-
    term
    benefit
    plans            0           0           0         259           0
  Additional
   Sarbanes
   Oxley
   compliance
   costs             0           0           0           0         208
   Net tax
    effect           0           0           0         247         (73)
            ----------  ----------  ----------  ----------  ----------
  Adjust-
   ments,
   net of
   taxes             0           0           0        (459)        135
            ----------  ----------  ----------  ----------  ----------

 "Adjusted"
  net
  income    $    2,763  $    3,049  $    3,454  $    3,673  $    4,007
            ==========  ==========  ==========  ==========  ==========

 Weighted
  avg. no.
  of
  diluted
  common
  shares    13,241,182  13,349,234  13,509,140  13,700,349  13,742,337
 Diluted
  earnings
  per
  common
  share     $     0.21  $     0.23  $     0.26  $     0.27  $     0.29

 Return on
  average
  common
  equity(a)      8.97%       9.87%      11.09%      11.66%      12.93%

 Return on
  average
  assets(a)      0.49%       0.56%       0.65%       0.70%       0.79%

 Non-
  interest
  exp. as
  a % of
  avg.
  assets         0.95%       1.04%       1.01%       1.11%       1.09%
 Efficiency
  ratio         55.81%      54.27%      50.20%      50.21%      46.94%

 (a) - Annualized

            

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