PennFed Financial Services, Inc. Reports Third Quarter Earnings


WEST ORANGE, N.J., April 26, 2006 (PRIMEZONE) -- PennFed Financial Services, Inc. (Nasdaq:PFSB), the $2.2 billion holding company for New Jersey-based Penn Federal Savings Bank, reported earnings for its third fiscal quarter ended March 31, 2006 of 23 cents per diluted share compared to 28 cents per diluted share for the comparable prior year quarter.

For the first nine months ended March 31, 2006, PennFed reported earnings of 79 cents per diluted share, compared to 82 cents per diluted share for the comparable nine-month period of fiscal 2005.

Joseph L. LaMonica, PennFed's President and Chief Executive Officer commented, "We continue to experience net interest margin compression due to the flat yield curve and the extremely competitive New Jersey deposit market." Net interest margin contracted to 1.74% for the current quarter from 1.89% last quarter and 2.26% for the quarter a year ago as a result of the continuing rise in short term rates and the further flattening of the yield curve. While the challenging operating environment and flat yield curve will likely improve at some point in the future, the expectation is that the improvement will be slow and the current environment will remain for the near term.

"Given this difficult operating environment, PennFed is even more focused on productivity and efficiency," LaMonica stated.

Total assets at March 31, 2006 of $2.237 billion reflected growth of approximately 12% on an annualized basis from June 30, 2005. Loans receivable showed 14% growth annualized.

Total loan production was $108 million for the March 2006 quarter. "Focus continues to be placed on loan production, with a particular emphasis on the origination of home equity loans in addition to one- to four-family mortgage loans and commercial real estate loans," said LaMonica. Reaching a record level, consumer loan originations totaled $36.8 million for the current quarter -- a 55% increase from the prior year quarter.

The Company continues to experience strong competition for deposits. Furthermore, a shift in the mix of deposits continues as savings account customers move "parked" funds to other higher yielding alternatives. Checking and money market balances have increased by over 27% since June 30, 2005. With the pricing on retail deposits driven increasingly higher by competition, wholesale borrowings have been and will continue to be periodically used as a lower costing alternative source of funds. Nevertheless, the rate paid on interest bearing liabilities increased 20 basis points over the linked quarter due to the continued rise in short term rates and very strong competitive deposit pricing.

On February 27, 2006, the Company notified customers of its planned May 31, 2006 closing of its branch located at 493 Bloomfield Avenue in Montclair, New Jersey. The decision to close the branch was principally due to economies of scale. Deposits will be transferred to a branch located less than two miles from the branch to be closed.

Asset quality has been and continues to be a priority for PennFed. Underwriting standards are strong and the relaxing of such standards for the sake of improving margin is not an option. The Company closely monitors non-performing assets and charge-offs continue to be minimal.

The Company is recognized as an efficient and low cost provider of financial services. For the current quarter, the non-interest expense ratio of just 1.04% continued to be very strong and reflects an improvement from 1.24% for the three months ended March 31, 2005.

PennFed continues to employ stock repurchases as a means of managing capital. During the March 2006 quarter, the Company repurchased 163,100 shares for a total cost of $3.0 million.

PennFed stockholders of record as of May 12, 2006 will be paid a cash dividend of $0.07 per share on May 26, 2006. The Company's dividend policy will continue to be reviewed on a regular basis.

Penn Federal Savings Bank maintains 25 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)

                       March 31,   December 31,  June 30,    March 31,
                         2006          2005        2005        2005
                      ----------    ----------  ----------  ----------
 Selected Financial
 Condition Data:

 Cash and cash
  equivalents         $   17,393    $   17,988  $   15,220  $   12,757
 Investments, net        445,332       425,405     410,509     424,491
 Mortgage-backed
  securities, net         65,749        68,978      78,201      83,079
 Loans held for sale         520           242       4,826           0
 Loans receivable:
  One- to four-family
   mortgage loans      1,256,817     1,222,023   1,143,663   1,093,072
  Commercial and
   multi-family real
   estate loans          166,321       170,653     169,765     167,783
  Consumer loans         186,124       166,723     144,423     132,543
  Allowance for
   loan losses            (5,898)       (5,913)     (6,050)     (6,054)
  Other, net               9,972         9,592       8,853       8,101
                      ----------    ----------  ----------  ----------
 Loans receivable,
  net                  1,613,336     1,563,078   1,460,654   1,395,445

 FHLB stock               26,261        25,028      22,391      21,733
 Other assets             68,755        60,546      58,750      58,859
                      ----------    ----------  ----------  ----------
 Total assets         $2,237,346    $2,161,265  $2,050,551  $1,996,364
                      ==========    ==========  ==========  ==========
 Deposits:
  Checking and
   money market       $  289,638    $  266,674  $  227,031  $  210,327
  Savings                318,834       335,367     385,360     419,112
  Certificates of
   deposit and
   accrued interest      763,687       784,334     727,100     655,028
                      ----------    ----------  ----------  ----------
 Total deposits        1,372,159     1,386,375   1,339,491   1,284,467

 FHLB advances           465,465       450,465     415,465     425,465
 Other borrowings        214,334       141,770     107,952     103,059
 Junior subordinated
  debentures              42,115        42,104      42,082      42,070
 Other liabilities        19,688        16,379      21,507      17,074
 Stockholders'
  equity                 123,585(a)    124,172     124,054     124,229
                      ----------    ----------  ----------  ----------
 Total liabilities
  and stockholders'
  equity              $2,237,346    $2,161,265  $2,050,551  $1,996,364
                      ==========    ==========  ==========  ==========
 Book value per
  share               $     9.59    $     9.54  $     9.34  $     9.20

 Equity to assets           5.52%         5.75%       6.05%       6.22%


 Asset Quality Data:

 Non-performing
  loans               $    2,611    $    2,718  $    2,619  $    1,611
 Real estate owned,
  net                          0           502           0           0
                      ----------    ----------  ----------  ----------
 Total non-performing
  assets              $    2,611    $    3,220  $    2,619  $    1,611
                      ==========    ==========  ==========  ==========

 Non-performing loans
  to total loans            0.16%         0.17%       0.18%       0.11%
 Non-performing assets
  to total assets           0.12%         0.15%       0.13%       0.08%
 Allowance for loan
  losses to non-
  performing loans        225.89%       217.55%     231.00%     375.79%
 Allowance for loan
  losses to total
  gross loans               0.36%         0.38%       0.41%       0.43%

 Regulatory Capital
 Ratios (of the Bank):

 Tangible capital
  ratio (requirement
   - 1.50%)                 7.57%         7.80%       8.28%       8.51%
 Core capital ratio
  (requirement - 4.00%)     7.57%         7.80%       8.28%       8.51%
 Risk-based capital
  ratio (requirement
   - 8.00%)                14.39%        14.89%      15.84%      16.43%

 (a) Common shares outstanding as of March 31, 2006 totaled
     12,891,478 shares.


                      
                              For the                 For the         
                        Three months ended       Nine months ended    
                              March 31,               March 31,       
 Selected Operating   -----------------------  -----------------------
 Data:                   2006         2005        2006         2005   
                      ----------   ----------  ----------   ----------
 Interest and         
  dividend income     $   28,973   $   26,167  $   85,006   $   77,971
 Interest expense         19,762       15,300      55,968       45,094
                      ----------   ----------  ----------   ----------
  Net interest and
   dividend income         9,211       10,867      29,038       32,877
 Provision for
  loan losses                  0            0           0            0
                      ----------   ----------  ----------   ----------
 Net interest and
  dividend income
  after provision for
  loan losses              9,211       10,867      29,038       32,877
 Non-interest income:
  Service charges            778          703       4,952        2,296
  Net gain (loss) from
   real estate
   operations                 (3)           0          (4)         157
  Net gain on sales
   of loans                    0          172         143          266
  Income on BOLI             239          217         674          466
  Other                      201          152         535          514
                      ----------   ----------  ----------   ----------
  Total non-interest
   income                  1,215        1,244       6,300        3,699

 Non-interest expenses:
  Compensation &
   employee benefits       3,134        3,135       9,460        9,407
  Net occupancy expense      664          643       1,843        1,741
  Equipment                  530          516       2,039        1,594
  Advertising                168          155         467          549
  Amortization of
   intangible assets           0          454           0        1,361
  Federal deposit
   insurance premium          45           44         132          128
  Extinguishment
   of debt                     0            0       1,351            0
  Other                    1,119        1,196       3,509        3,663
                      ----------   ----------  ----------   ----------
   Total non-interest
    expenses               5,660        6,143      18,801       18,443
                      ----------   ----------  ----------   ----------
 Income before
  income taxes             4,766        5,968      16,537       18,133
 Income tax expense        1,717        2,114       5,902        6,511
                      ----------   ----------  ----------   ----------
 Net income           $    3,049   $    3,854  $   10,635   $   11,622
                      ==========   ==========  ==========   ==========

 Weighted avg. no 
  of diluted common
  shares              13,349,234   13,959,738  13,520,805   14,099,360
 Diluted earnings per
  common share        $     0.23   $     0.28  $     0.79   $     0.82

 Return on average
  common equity             9.87%       12.44%      11.37%       12.68%

 Return on average
  assets                    0.56%        0.78%       0.66%        0.79%

 Average total
  assets              $2,184,365   $1,985,274  $2,136,358   $1,965,031

 Average earning
  assets              $2,111,183   $1,913,274  $2,065,194   $1,898,462

 Yield on average
  interest-earning
  assets                    5.51%        5.48%       5.48%        5.47%
 Cost of average
  interest-bearing
  liabilities               3.90%        3.34%       3.72%        3.27%
                      ----------   ----------  ----------   ----------
 Net interest
  rate spread               1.61%        2.14%       1.76%        2.20%
                      ==========   ==========  ==========   ==========

 Net interest margin        1.74%        2.26%       1.89%        2.32%

 Non-interest exp. as
  a % of avg. assets        1.04%        1.24%       1.17%        1.25%
 Efficiency ratio          54.27%       46.97%      53.20%       46.90%

 Loan originations
  and purchases:
   One- to four-
    family mortgage
    loans             $   64,637   $   63,610  $  255,927   $  242,753
  Commercial and
   multi-family real
   estate loans            7,005        8,110      29,707       30,142
  Consumer loans          36,791       23,681      95,257       61,507
                      ----------   ----------  ----------   ----------
  Total loan
   originations and
   purchases          $  108,433   $   95,401  $  380,891   $  334,402
                      ==========   ==========  ==========   ==========


                   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                For the
                         Three months ended      Nine months ended
                               March 31,              March 31,
                        ----------------------  ----------------------
                           2006        2005        2006        2005
                        ----------  ----------  ----------  ----------
 Reported net income    $    3,049  $    3,854  $   10,635  $   11,622

 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
  Net tax effect                 0           0         247           0
                        ----------  ----------  ----------  ----------
  Adjustments, net
   of taxes                      0           0        (459)          0
                        ----------  ----------  ----------  ----------
 "Adjusted" net income  $    3,049  $    3,854  $   10,176  $   11,622
                        ==========  ==========  ==========  ==========

 Weighted avg. no
  of diluted common
  shares                13,349,234  13,959,738  13,520,805  14,099,360
 Diluted earnings
  per common share      $     0.23  $     0.28  $     0.75  $     0.82

 Return on average
  common equity               9.87%      12.44%      10.88%      12.68%

 Return on average
  assets                      0.56%       0.78%       0.64%       0.79%

 Non-interest exp. as
  a % of avg. assets          1.04%       1.24%       1.05%       1.25%
 Efficiency ratio            54.27%      46.97%      51.51%      46.90%


                   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,                        
                                     2006         2005         2005                            
                                  ----------   ----------   ----------
 Selected Operating Data:

 Interest and dividend income     $   28,973   $   28,350   $   27,683
 Interest expense                     19,762       18,715       17,491
                                  ----------   ----------   ----------
  Net interest and dividend income     9,211        9,635       10,192
 Provision for loan losses                 0            0            0
                                  ----------   ----------   ----------
 Net interest and dividend income
  after provision for loan losses      9,211        9,635       10,192
 Non-interest income:
  Service charges                        778          704        3,470
  Net gain (loss) from real
   estate operations                      (3)           2           (3)
  Net gain on sales of loans               0           21          122
  Income on BOLI                         239          219          216
  Other                                  201          153          181
                                  ----------   ----------   ----------
  Total non-interest income            1,215        1,099        3,986
 Non-interest expenses:
  Compensation & employee benefits     3,134        3,067        3,259
  Net occupancy expense                  664          594          585
  Equipment                              530          538          971
  Advertising                            168          165          134
  Amortization of intangible assets        0            0            0
  Federal deposit insurance premium       45           45           42
  Extinguishment of debt                   0            0        1,351
  Other                                1,119          979        1,411
                                  ----------   ----------   ----------
  Total non-interest expenses          5,660        5,388        7,753
                                  ----------   ----------   ----------
 Income before income taxes            4,766        5,346        6,425
 Income tax expense                    1,717        1,892        2,293
                                  ----------   ----------   ----------
 Net income                       $    3,049   $    3,454   $    4,132
                                  ==========   ==========   ==========

 Weighted avg. no. of diluted
  common shares                   13,349,234   13,509,140   13,700,349
 Diluted earnings per
  common share                    $     0.23   $     0.26   $     0.30

 Return on average common equity        9.87%       11.09%       13.12%

 Return on average assets               0.56%        0.65%        0.79%

 Average total assets             $2,184,365   $2,137,449   $2,087,261

 Average earning assets           $2,111,183   $2,066,915   $2,017,484

 Yield on average interest-
  earning assets                        5.51%        5.46%        5.47%
 Cost of average interest-
  bearing liabilities                   3.90%        3.70%        3.55%
                                  ----------   ----------   ----------
 Net interest rate spread               1.61%        1.76%        1.92%
                                  ==========   ==========   ==========

 Net interest margin                    1.74%        1.89%        2.05%

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

 Loan originations and purchases:
  One- to four-family mortgage
   loans                          $   64,637   $   73,061   $  118,229
  Commercial and multi-family
   real estate loans                   7,005       14,387        8,315
  Consumer loans                      36,791       27,996       30,470
                                  ----------   ----------   ----------
  Total loan originations
   and purchases                  $  108,433   $  115,444   $  157,014
                                  ==========   ==========   ==========    


                                             For the three months ended  
                                              ------------------------
                                               Jun. 30,      Mar. 31,            
                                                 2005          2005                
                                              ----------    ----------
 Selected Operating Data:

 Interest and dividend income                 $   26,751    $   26,167
 Interest expense                                 16,290        15,300
                                              ----------    ----------
  Net interest and dividend income                10,461        10,867
 Provision for loan losses                             0             0
                                              ----------    ----------
 Net interest and dividend income after
  provision for loan losses                       10,461        10,867
 Non-interest income:
  Service charges                                    800           703
  Net gain (loss) from real estate operations         (1)            0
  Net gain on sales of loans                         128           172
  Income on BOLI                                     224           217
  Other                                              146           152
                                              ----------    ----------
  Total non-interest income                        1,297         1,244
 Non-interest expenses:
  Compensation & employee benefits                 2,856         3,135
  Net occupancy expense                              578           643
  Equipment                                          546           516
  Advertising                                        170           155
  Amortization of intangible assets                    0           454
  Federal deposit insurance premium                   44            44
  Extinguishment of debt                               0             0
  Other                                            1,534         1,196
                                              ----------    ----------
  Total non-interest expenses                      5,728         6,143
                                              ----------    ----------
 Income before income taxes                        6,030         5,968
 Income tax expense                                2,158         2,114
                                              ----------    ----------
 Net income                                   $    3,872    $    3,854
                                              ==========    ==========

 Weighted avg. no. of diluted common shares   13,742,337    13,959,738
 Diluted earnings per common share            $     0.28    $     0.28

 Return on average common equity                   12.50%        12.44%

 Return on average assets                           0.76%         0.78%

 Average total assets                         $2,029,268    $1,985,274

 Average earning assets                       $1,959,481    $1,913,274

 Yield on average interest-earning assets           5.46%         5.48%
 Cost of average interest-bearing liabilities       3.44%         3.34%
                                              ----------    ----------
 Net interest rate spread                           2.02%         2.14%
                                              ==========    ==========

 Net interest margin                                2.14%         2.26%

 Non-interest exp. as a % of avg. assets            1.13%         1.24%
 Efficiency ratio                                  48.71%        46.97%

 Loan originations and purchases:
  One- to four-family mortgage loans          $  107,521    $   63,610
  Commercial and multi-family real
   estate loans                                    8,470         8,110
  Consumer loans                                  29,301        23,681
                                              ----------    ----------
  Total loan originations and purchases       $  145,292    $   95,401
                                              ==========    ==========

                   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
                                  ------------------------------------
                                   Mar. 31,     Dec. 31,     Sep. 30,
                                     2006         2005         2005
                                  ----------   ----------   ----------
 Reported net income              $    3,049   $    3,454   $    4,132

 Adjustments:
  Commercial loan prepayment
   premium                                 0            0       (2,688)
  Prepayment penalty on FHLB
   advances                                0            0        1,351
  Acceleration of depreciation on
   branch automation system software       0            0          372
  Increase in obligation under
   certain long-term benefit plans         0            0          259
  Additional Sarbanes Oxley
   compliance costs                        0            0            0
  Net tax effect                           0            0          247
                                  ----------   ----------   ----------
  Adjustments, net of taxes                0            0         (459)
                                  ----------   ----------   ----------
 "Adjusted" net income            $    3,049   $    3,454   $    3,673
                                  ==========   ==========   ==========

 Weighted avg. no. of diluted
  common shares                   13,349,234   13,509,140   13,700,349
 Diluted earnings per
  common share                    $     0.23   $     0.26   $     0.27

 Return on average common equity        9.87%       11.09%       11.66%

 Return on average assets               0.56%        0.65%        0.70%

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


                                            For the three months ended
                                            --------------------------
                                              Jun. 30,       Mar. 31,
                                                2005           2005
                                             ----------     ----------
 Reported net income                         $    3,872     $    3,854

 Adjustments:
  Commercial loan prepayment premium                  0              0
  Prepayment penalty on FHLB advances                 0              0
  Acceleration of depreciation on branch
   automation system software                         0              0
  Increase in obligation under certain
   long-term benefit plans                            0              0
  Additional Sarbanes Oxley compliance costs        208              0
  Net tax effect                                    (73)             0
                                             ----------     ----------
  Adjustments, net of taxes                         135              0
                                             ----------     ----------
 "Adjusted" net income                       $    4,007     $    3,854
                                             ==========     ==========

 Weighted avg. no. of diluted
  common shares                              13,742,337     13,959,738
 Diluted earnings per common share           $     0.29     $     0.28

 Return on average common equity                  12.93%         12.44%

 Return on average assets                          0.79%          0.78%

 Non-interest exp. as a % of avg. assets           1.09%          1.24%
 Efficiency ratio                                 46.94%         46.97%

            

Contact Data