SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
PennFed Financial Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
September 24, 2004
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of PennFed Financial
Services, Inc., we cordially invite you to attend the Annual Meeting of
Stockholders of the Company. The Meeting will be held at 10:00 a.m., local time,
on Wednesday, October 27, 2004, at Mayfair Farms, located at 481 Eagle Rock
Avenue, West Orange, New Jersey.
An important aspect of the annual meeting process is the annual
stockholder vote on corporate business items. I urge you to exercise your rights
as a stockholder to vote and participate in this process. Stockholders are being
asked to consider and vote upon (i) the election of two directors of the Company
and (ii) the ratification of the appointment of the Company's independent
auditors. In addition, the Meeting will include management's report to you on
the Company's fiscal 2004 financial and operating performance.
We encourage you to attend the Meeting in person. Whether or not you plan
to attend, however, please read the enclosed proxy statement and then complete,
sign and date the enclosed proxy card and return it in the accompanying postpaid
return envelope as promptly as possible. If your shares are held through a bank
or broker, check your proxy card to see if you can also vote by telephone or via
the internet. Voting as early as possible will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the Meeting.
Your Board of Directors and management are committed to the continued
success of PennFed Financial Services, Inc., and the enhancement of your
investment. As President, I want to express my appreciation for your confidence
and support.
Very truly yours,
/s/ Joseph L. LaMonica
Joseph L. LaMonica
President and Chief
Executive Officer
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 27, 2004
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of PennFed Financial Services, Inc. (the "Company") will be held at
Mayfair Farms, located at 481 Eagle Rock Avenue, West Orange, New Jersey, at
10:00 a.m., local time, on Wednesday, October 27, 2004.
A proxy card and a proxy statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. the election of two directors of the Company;
2. the ratification of the appointment of KPMG LLP as independent
auditors for the Company for the fiscal year ending June 30,
2005;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
September 3, 2004 are the stockholders entitled to vote at the Meeting and any
adjournments or postponements thereof.
You are requested to complete and sign the enclosed proxy card, which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. If you hold your shares through a bank or broker, check your
proxy card to see whether you can also vote by telephone or via the internet.
Your proxy will not be used if you attend and vote at the Meeting in person.
By Order of the Board of Directors
/s/ William C. Anderson
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 24, 2004
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
PROXY STATEMENT
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
ANNUAL MEETING OF STOCKHOLDERS
October 27, 2004
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of PennFed Financial Services, Inc. (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Meeting"), which will be held at Mayfair Farms, located at 481
Eagle Rock Avenue, West Orange, New Jersey, on Wednesday, October 27, 2004, at
10:00 a.m., local time, and all adjournments or postponements of the Meeting.
The accompanying Notice of Annual Meeting and form of proxy and this Proxy
Statement are first being mailed to stockholders on or about September 24, 2004.
Certain of the information provided in this Proxy Statement relates to Penn
Federal Savings Bank ("Penn Federal" or the "Bank"), a wholly owned subsidiary
of the Company.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of two directors of the Company and (ii) the
ratification of the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending June 30, 2005.
Vote Required and Proxy Information
All shares of the Company's common stock represented at the Meeting by
properly executed proxies received prior to or at the Meeting, and not revoked,
will be voted at the Meeting in accordance with the instructions thereon. If no
instructions are indicated, properly executed proxies will be voted for the
election of the nominees named in this Proxy Statement and for the ratification
of the appointment of KPMG LLP. The Company does not know of any matters, other
than as described in the Notice of Annual Meeting of Stockholders, that are to
come before the Meeting. If any other matters are properly presented at the
Meeting for action, the Board of Directors, as proxy for the stockholder, will
have the discretion to vote on such matters in accordance with its best
judgment.
Directors will be elected by a plurality of the votes cast. The
ratification of the appointment of KPMG LLP as the Company's independent
auditors requires the affirmative vote of a majority of the votes cast on the
matter. In the election of directors, stockholders may either vote "FOR" both
nominees for election or withhold their votes from either nominee or both
nominees for election. Votes that are withheld and shares held by a broker, as
nominee, that are not voted (so-called "broker non-votes") in the election of
directors will not be included in determining the number of votes cast. On the
proposal to ratify the appointment of the independent auditors, stockholders may
vote "FOR," "AGAINST" or "ABSTAIN" with respect to this proposal. Abstentions
will have the same effect as votes against this proposal and broker non-votes
will have no effect on this proposal. The holders of at least one-third of the
outstanding shares of the common stock, present in person or represented by
proxy, will constitute a quorum for purposes of the Meeting. Proxies marked to
abstain, votes withheld (in the election of directors) and broker non-votes will
be counted for purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by stockholders of record by: (i)
filing with the Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than the proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of a proxy). Any written notice revoking a proxy should be
delivered to Patrick D. McTernan, Secretary, PennFed Financial Services, Inc.,
622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989. A person holding
shares through a bank, broker or other nominee must follow the instructions of
the bank, broker or other nominee in order to revoke a proxy.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on September 3, 2004
will be entitled to one vote for each share then held. As of that date, the
Company had 6,912,500 shares of common stock issued and outstanding. The
following table sets forth, as of September 3, 2004, information regarding share
ownership of: (i) those persons or entities known by management to beneficially
own more than five percent of the Company's common stock; (ii) each of the
executive officers of the Company and the Bank who do not beneficially own more
than five percent of the common stock but who are named in the "Summary
Compensation Table" below; and (iii) all directors and executive officers of the
Company and the Bank as a group. For information regarding the beneficial
ownership of common stock by directors of the Company, see "Proposal I. Election
of Directors--General."
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ---------------------------------------- ------------ -------
PennFed Financial Services, Inc. 861,915(1) 12.47%
Employee Stock Ownership Plan
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
Private Capital Management, L.P. 680,450(2) 9.84%
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Boulevard
Naples, Florida 34108
Tontine Partners, L.P. 539,000(3) 7.80%
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
Tontine Overseas Associates, L.L.C.
Jeffrey L. Gendell
55 Railroad Avenue
3rd Floor
Greenwich, Connecticut 06830
John Hancock Financial Services, Inc. 370,500(4) 5.36%
John Hancock Life Insurance Company and
John Hancock Subsidiaries LLC
P.O. Box 111
Boston, Massachusetts 02117
and
The Berkeley Financial Group and
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
William C. Anderson 384,381(5) 5.38%
Chairman of the Board of Directors
2
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ---------------------------------------- ------------ -------
Joseph L. LaMonica 446,832(6) 6.36%
President and Chief
Executive Officer
Patrick D. McTernan 139,966(6) 2.02%
Senior Executive Vice President,
General Counsel and Secretary
Jeffrey J. Carfora 82,070(6) 1.18%
Senior Executive Vice President and
Chief Operating Officer
Claire M. Chadwick 28,739(6) 0.42%
Executive Vice President and
Chief Financial Officer
Maria F. Magurno 19,911(6) 0.29%
Executive Vice President and
Residential Lending Group Executive of the Bank
Directors and executive officers 1,474,988(7) 19.94%
of the Company and the Bank
as a group (10 persons)
footnotes follow
- ----------
(1) The amount reported represents shares held by the PennFed Financial
Services, Inc. Employee Stock Ownership Plan (the "ESOP"), all of which
have been allocated to accounts of participants. Pursuant to the terms of
the ESOP, participants in the ESOP have the right to direct the voting of
shares allocated to their accounts.
(2) As reported by Private Capital Management, L.P. ("PCM"), Bruce S. Sherman
and Gregg J. Powers in an amendment to a Schedule 13G filed with the
Securities and Exchange Commission (the "SEC") on March 10, 2004. Mr.
Sherman is the Chief Executive Officer of PCM and Mr. Gregg is the
President of PCM. With respect to the 680,450 shares listed, PCM and Mr.
Gregg each reported shared voting and dispositive powers over 658,150
shares, and Mr. Sherman reported sole voting and dispositive powers over
22,300 shares and shared voting and dispositive powers over 658,150
shares.
(3) As reported by Tontine Partners, L.P. ("TP"), Tontine Financial Partners,
L.P. ("TF"), Tontine Management, L.L.C. ("TM"), Tontine Overseas
Associates, L.L.C. ("TO") and Jeffrey L. Gendell in an amendment to a
Schedule 13G filed with the SEC on February 10, 2004. TM is general
partner of TF and TP and Mr. Gendell serves as the managing member of TM
and TO. With respect to the 539,000 shares listed, TP reported shared
voting and dispositive powers over 80,840 shares, TF reported shared
voting and dispositive powers over 375,800 shares, TM reported shared
voting and dispositive powers over 456,640 shares, TO reported shared
voting and dispositive powers over 82,360 shares and Mr. Gendell reported
shared voting and dispositive powers over all 539,000 shares.
(4) As reported by John Hancock Financial Services, Inc. ("JHFS"), JHFS's
wholly-owned subsidiary, John Hancock Life Insurance Company ("JHLIC"),
JHLIC's wholly-owned subsidiary, John Hancock Subsidiaries, LLC ("JHS"),
JHS's wholly-owned subsidiary, The Berkeley Financial Group ("TBFG"), and
TBFG's wholly-owned subsidiary, John Hancock Advisers, Inc., ("JHA") in an
amendment to a Schedule 13G filed with the SEC on February 4, 2002. JHFS,
JHLIC, JHS, and TBFG reported indirect beneficial ownership of these
shares. JHA reported sole voting and dispositive powers as to all of such
shares.
(5) Includes 228,570 shares which Mr. Anderson has the right to acquire
pursuant to stock options that are currently exercisable.
(6) Includes shares held directly, as well as shares held jointly with family
members, in retirement accounts, in a fiduciary capacity, by certain
members of the officers' families, by trusts of which the officer is a
trustee or substantial beneficiary, with respect to which the officer may
be deemed to have sole or shared voting and/or dispositive powers. Also
includes 110,520, 27,084, 18,084, 11,000 and 10,000 shares which Mr.
LaMonica, Mr. McTernan, Mr. Carfora, Ms. Chadwick and Ms. Magurno,
respectively, have the right to acquire pursuant to stock options that are
currently exercisable, and 26,980, 26,980, 23,107, 14,194 and 9,605 shares
allocated to the ESOP accounts of Mr. LaMonica, Mr. McTernan, Mr. Carfora,
Ms. Chadwick and Ms. Magurno, respectively.
(7) This amount includes shares held directly, shares allocated to the
accounts of executive officers under the ESOP, as well as shares held
jointly with family members, in retirement accounts, in a fiduciary
capacity, by certain of the group members' families, by certain related
entities or by trusts of which the group member is a trustee or
substantial beneficiary, with respect to which shares the group member may
be deemed to have sole or shared voting and/or dispositive powers. This
amount also includes an aggregate of 483,242 shares which directors and
executive officers as a group have the right to acquire pursuant to stock
options that are currently exercisable, and excludes 15,000 shares of
which Amadeu L. Carvalho, a director of the Company, disclaims beneficial
ownership.
3
PROPOSAL I. ELECTION OF DIRECTORS
General
The Company's Board of Directors consists of six members, each of whom is
also a director of the Bank. Each of the current directors of the Company has
served in such capacity since the Company's formation in March 1994. The Board
is divided into three classes, each of which contains one-third of the Board.
One-third of the directors are elected annually. Directors of the Company are
generally elected to serve for three-year terms or until their respective
successors are elected and qualified.
The following table sets forth certain information, as of September 3,
2004, regarding the composition of the Company's Board of Directors, including
each director's term of office. The Board of Directors, acting on the
recommendations of the Nominating Committee, approved the nominees identified in
the following table. It is intended that the proxies solicited on behalf of the
Board of Directors (other than proxies in which the vote is withheld as to a
nominee) will be voted at the Meeting FOR the election of the nominees
identified below. If a nominee is unable to serve, the shares represented by all
valid proxies will be voted for the election of such substitute nominee as may
be determined by the Board of Directors. At this time, the Board of Directors
knows of no reason why either nominee may be unable to serve, if elected. Except
as disclosed in this Proxy Statement, there are no arrangements or
understandings between the nominee and any other person pursuant to which the
nominee was selected.
Shares of
Common Stock Percent
Position(s) Held Director Term to Beneficially of
Name Age in the Company Since(1) Expire Owned(2) Class
- --------------------- ----- ---------------- -------- ------- ------------ -------
NOMINEES
William C. Anderson 56 Chairman of the Board 1979 2007 384,381 5.38%
Amadeu L. Carvalho 75 Director 1990 2007 68,131(3) 0.98%
DIRECTORS CONTINUING IN OFFICE
Patrick D. McTernan 52 Director, Senior Executive 1989 2005 139,966 2.02%
Vice President, General
Counsel and Secretary
Marvin D. Schoonover 54 Director 1990 2005 66,340 0.96%
Joseph L. LaMonica 54 Director, President and 1987 2006 446,832 6.36%
Chief Executive Officer
Mario Teixeira, Jr. 68 Director 1971 2006 167,885 2.42%
- ----------
(1) Includes service as a director of the Bank prior to the formation of the
Company.
(2) Amounts include shares held directly, as well as shares held jointly with
family members, in retirement accounts, in a fiduciary capacity, by
certain members of the directors' families, by certain related entities or
by trusts of which the director is a trustee or substantial beneficiary,
with respect to which shares the respective director may be deemed to have
sole or shared voting and/or dispositive powers. Amounts also include
228,570, 20,000, 27,084, 20,000, 110,520 and 19,900 shares which Messrs.
Anderson, Carvalho, McTernan, Schoonover, LaMonica and Teixeira,
respectively, have the right to acquire pursuant to stock options that are
currently exercisable. With respect to Messrs. McTernan and LaMonica,
amounts also include 26,980 shares which have been allocated to each of
their respective accounts under the ESOP.
(3) Amount excludes 15,000 shares of which Mr. Carvalho disclaims beneficial
ownership.
4
The principal occupation of each director of the Company and each of the
nominees for director is set forth below. All directors and nominees have held
their present principal occupation for at least five years unless otherwise
indicated.
William C. Anderson--Mr. Anderson has been Chairman of the Board of the
Company since its formation in March 1994 and Chairman of the Board of Penn
Federal since 1988. Mr. Anderson is also the Chairman of the Board and President
of John Young Company, Inc., a real estate agency located in Caldwell, New
Jersey.
Amadeu L. Carvalho--Mr. Carvalho, retired Controller of the Singer
Company, currently is in private accounting practice in Elizabeth, New Jersey.
His practice includes tax services and business and strategic planning for small
and medium size companies.
Patrick D. McTernan--Mr. McTernan has been General Counsel and Secretary
of the Company since its formation in March 1994. He joined Penn Federal in 1989
as Senior Vice President and General Counsel, and was named Senior Executive
Vice President in 1999. Mr. McTernan is a member of the New Jersey State Bar
Association and the Legal Committee of the New Jersey League of Community
Bankers.
Marvin D. Schoonover--Mr. Schoonover is a Senior Account Executive with
the EMAR Group, Inc., an insurance agency located in Livingston, New Jersey, and
is responsible for the marketing, sales and servicing of commercial property and
casualty insurance. Mr. Schoonover first joined the EMAR Group, Inc. in 1980.
Joseph L. LaMonica--Mr. LaMonica has been President and Chief Executive
Officer of the Company since its formation in March 1994, and of Penn Federal
since 1988. Mr. LaMonica has served Penn Federal in various capacities since
joining the Bank in 1980. He also is a member of and serves as a director to
many charitable and philanthropic organizations.
Mario Teixeira, Jr.--Mr. Teixeira has been a licensed funeral director
since 1961. He is owner and President of the Buyus Funeral Home in Newark and
owns the Bernauer Funeral Home and the Rucki Funeral Home, both located in
Newark, as well as the Shaw-Buyus Home for Services, located in Kearny, New
Jersey.
Director Independence
The Company's Board of Directors has determined that Directors Anderson,
Carvalho, Teixeira and Schoonover are "independent directors," as that term is
defined in Rule 4200 of the Marketplace Rules of the National Association of
Securities Dealers, Inc. (the "NASD"). These directors constitute a majority of
the Board.
5
Meetings and Committees of the Board of Directors
Meetings and Committees of the Company. Meetings of the Company's Board of
Directors are generally held on a monthly basis. For the fiscal year ended June
30, 2004, the Board of Directors met 20 times. During fiscal 2004, no incumbent
director of the Company attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he served. The Board of Directors of the
Company has standing Executive, Audit, Nominating and Compensation Committees.
The Executive Committee is comprised of all members of the Board. The
Executive Committee meets on an as needed basis and exercises the power of the
Board of Directors between Board meetings, to the extent permitted by law. This
Committee did not meet during fiscal 2004.
The Audit Committee is comprised of Chairman Anderson (Chairman) and
Directors Carvalho and Teixeira. The Audit Committee functions under a written
charter adopted by the Company's Board of Directors, a copy of which is attached
to this Proxy Statement as Appendix A. The Audit Committee is appointed by the
Company's Board of Directors to provide assistance to the Board in fulfilling
its oversight responsibility relating to the integrity of the Company's
consolidated financial statements and the financial reporting processes, the
systems of internal accounting and financial controls, compliance with legal and
regulatory requirements, the independent auditors' qualifications and
independence, the annual independent audit of the Company's consolidated
financial statements, the performance of the Company's internal audit function
and independent auditors and any other areas of potential financial risks to the
Company specified by its Board of Directors. The Audit Committee also is
responsible for hiring, retaining and terminating the Company's independent
auditors. The Audit Committee met six times in fiscal 2004. For additional
information on the Company's Audit Committee, see "Audit Committee Matters"
below.
During fiscal 2004, the full Board of Directors acted as a nominating
committee for the selection of nominees for election as directors and met one
time for this purpose. In July 2004, the Board of Directors appointed a separate
Nominating Committee, comprised of Directors Anderson, Carvalho, Schoonover and
Teixeira, each of whom is an "independent director," as that term is defined in
the NASD Marketplace rules. The Nominating Committee is responsible for
identifying and recommending director candidates to serve on the Board of
Directors. Final approval of director nominees is determined by the full Board,
based on the recommendations of the Nominating Committee. The nominees for
election at the Meeting identified in this Proxy Statement were recommended to
the Board by the newly appointed Nominating Committee.
The Nominating Committee operates under a formal written charter adopted
by the Board, a copy of which is attached to this Proxy Statement as Appendix B,
under which the Nominating Committee has the following responsibilities:
(i) recommend to the Board the appropriate size of the Board and assist
in identifying, interviewing and recruiting candidates for the
Board;
(ii) recommend candidates (including incumbents) for election and
appointment to the Board of Directors, subject to the provisions set
forth in the Company's charter and bylaws relating to the nomination
or appointment of directors, based on the following criteria:
business experience, education, integrity and reputation,
independence, conflicts of interest, diversity, age, number of other
directorships and commitments (including charitable organizations),
tenure on the Board, attendance at Board and committee meetings,
stock ownership, specialized knowledge (such as an understanding of
banking, accounting, marketing, finance, regulation and public
policy) and a commitment to the Company's communities and shared
values, as well as overall experience in the context of the needs of
the Board as a whole;
6
(iii) review nominations submitted by stockholders, which have been
addressed to the Company's Secretary, and which comply with the
requirements of the Company's charter and bylaws. Nominations from
stockholders will be considered and evaluated using the same
criteria as all other nominations;
(iv) annually recommend to the Board committee assignments and committee
chairs on all committees of the Board, and recommend committee
members to fill vacancies on committees as necessary; and
(v) perform any other duties or responsibilities expressly delegated to
the Committee by the Board.
Pursuant to the Company's bylaws, nominations for directors by
stockholders must be made in writing and delivered to the Secretary of the
Company no earlier than 120 days prior to the meeting date and no later than 90
days prior to the meeting date. If, however, less than 100 days' notice of the
date of the meeting is given or made to stockholders by public notice or mail,
nominations must be received by the Company not later than the close of business
on the tenth day following the earlier of the day on which notice of the date of
the meeting was mailed or public announcement of the date of the meeting was
first made. In addition to meeting the applicable deadline, nominations must be
accompanied by certain information specified in the Company's bylaws.
The Compensation Committee is comprised of Directors Carvalho (Chairman)
and Teixeira. The Compensation Committee discharges the Board of Directors'
responsibilities relating to the compensation of the Company's executive
officers and other key management personnel, and makes recommendations to the
Board regarding director compensation. This Committee also is responsible for
administering the Company's 1994 Stock Option and Incentive Plan (the "Stock
Option Plan"). This Committee acts as the compensation committee for the Company
and the Bank. This Committee met one time during the fiscal year ended June 30,
2004.
Meetings and Committees of the Bank. The Bank's Board of Directors
generally meets twice per month and may have additional special meetings upon
the written request of the Chairman of the Board, the President or at least
three directors. The Bank's Board of Directors met 25 times during the fiscal
year ended June 30, 2004. During fiscal 2004, no incumbent director of the Bank
attended fewer than 75% of the aggregate of the total number of Board meetings
and the total number of meetings held by the committees of the Board of
Directors on which he served. The Bank has standing Audit and Human Resources
Committees, as well as other committees which meet periodically. Set forth below
is a description of certain committees of the Bank.
The Audit Committee is responsible for the oversight of the Bank's
Internal Audit Department and for the review of the Bank's annual audit report
prepared by the Bank's independent auditors. The current members of the
committee are Chairman Anderson (Chairman) and Directors Carvalho and Teixeira.
The Audit Committee met five times during fiscal 2004.
The Bank's Human Resources Committee is responsible for the review and
approval of the numerous personnel policies of the Bank. This Committee
addresses, among other things, the Bank's benefit programs and plans and
affirmative action plan. The current members of the Human Resources Committee
are Directors Teixeira (Chairman), Schoonover and LaMonica. The Committee met
one time during fiscal 2004.
7
Stockholder Communications with Directors
Stockholders may communicate directly with the Board of Directors by
writing to: Patrick D. McTernan, Secretary, PennFed Financial Services, Inc.,
622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989.
Board Member Attendance at Annual Stockholder Meetings
Although the Company does not have a formal policy regarding director
attendance at annual stockholder meetings, directors are expected to attend
these meetings absent extenuating circumstances. Every director of the Company
attended last year's annual meeting of stockholders.
Audit Committee Matters
Audit Committee Report. The Audit Committee of the Company's Board of
Directors has issued the following report with respect to the audited financial
statements of the Company for the fiscal year ended June 30, 2004:
o The Audit Committee has reviewed and discussed with the Company's
management the Company's fiscal 2004 audited financial statements;
o The Audit Committee has discussed with the Company's independent
auditors for fiscal 2004, Deloitte & Touche LLP, the matters
required to be discussed by Statement on Auditing Standards No. 61;
o The Audit Committee has received the written disclosures and letter
from the independent auditors required by Independence Standards
Board No. 1 (which relates to the auditors' independence from the
Company) and has discussed with the auditors their independence from
the Company; and
o Based on the review and discussions referred to in the three items
above, the Audit Committee recommended to the Board of Directors
that the fiscal 2004 audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 2004.
Submitted by the Audit Committee of the Company's Board of Directors:
William C. Anderson
Amadeu L. Carvalho
Mario Teixeira, Jr.
Independence of Members and Audit Committee Financial Expert. Each of
Messrs. Anderson, Carvalho and Teixeira is "independent," as independence for
audit committee members is defined in the NASD Marketplace Rules. The Company's
Board of Directors has determined that Director Carvalho is an "audit committee
financial expert," as defined in the rules of the Securities and Exchange
Commission.
Director Compensation
Fees. Each director of the Company is also a director of the Bank. For
fiscal 2004, each non-employee director, other than the Chairman of the Board,
was paid a retainer of $33,000 for service on the Bank's Board of Directors and
a retainer of $2,000 for service on the Company's Board of Directors. For
8
the Chairman, these amounts were $75,000 and $10,000, respectively. During
fiscal 2004, each non-employee director other than the Chairman also received a
fee of $500 for each meeting of the Bank's Board attended and $350 for each
meeting of the Company's Board attended. For the Chairman, these fees were $750
and $350, respectively. In addition, during fiscal 2004, each non-employee
director received $400 for each Company Board committee meeting attended ($500
for the chairman of each committee) and $5,000 for the payment of an annual life
insurance premium ($10,000 for the Chairman of the Board). Each director who is
employed by the Company (Messrs. LaMonica and McTernan) was paid a fee of $350
for each meeting of the Company's Board attended during fiscal 2004.
Director's Retirement Plan. Effective as of March 1, 2003, the Company
adopted the PennFed Financial Services, Inc. Director's Retirement Plan (the
"Director's Retirement Plan") to provide for retirement benefits to directors
selected for participation in the Director's Retirement Plan. The Director's
Retirement Plan provides that upon the later of the date of the termination of
the participant's service as a director or advisory director and the
participant's attainment of age 65, the participant will receive an annual
benefit, payable in monthly installments over a ten-year period, equal to 70% of
the annual director fees payable by the Company and the Bank to the participant
as of the date of the participant's retirement. If a participant's service as a
director or advisory director is terminated for cause, no benefits will be paid
to him under the Director's Retirement Plan.
If a participant dies while still providing services as a director or
advisory director, no death benefit will be paid for the participant under the
Director's Retirement Plan. If a participant dies after he has begun to receive
retirement benefits under the Director's Retirement Plan, payment of these
benefits will cease following his death.
A participant becomes fully vested in his Director's Retirement Plan
benefits in accordance with the vesting schedule, if any, set forth in his
individual plan agreement. The current participants in the Director's Retirement
Plan are Directors Anderson and Schoonover, each of whom is fully vested in his
retirement benefits under the Director's Retirement Plan. The Director's
Retirement Plan is an unfunded plan. The Company has, however, obtained life
insurance policies on the lives of participants in the Director's Retirement
Plan as a means of offsetting some of the costs of providing the benefits under
the Director's Retirement Plan.
Consulting Agreements. Effective as of March 1, 2003, the Company entered
into consulting agreements ("Consulting Agreements") with each of Directors'
Carvalho and Teixeira for the purpose of ensuring the retention of the services
and expertise of these directors as consultants following the termination of
their service as directors. Each Consulting Agreement provides for a term
commencing on the date the consultant ceases to be a director for any reason
other than death (the "Retirement Date") and ending on the earlier of the date
ten years after the Retirement Date or the date the consultant dies. Each
Consulting Agreement calls for the consultant to provide expertise and services
regarding director matters, matters pertaining to the management and operation
of the Company and matters pertaining to publicly traded companies generally as
the Company shall reasonably request. During the term of his Consulting
Agreement, each consultant will be paid by the Company a monthly amount equal to
one-twelfth of 70% of the annual director fees that the consultant was receiving
from the Company and the Bank when he ceased providing services as a director of
the Company and the Bank.
9
Executive Compensation
The following table sets forth information regarding compensation paid to
the Company's Chief Executive Officer and to the four highest earning other
executive officers of the Company and the Bank, based on salary and bonus for
fiscal 2004 (the "Named Officers").
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
------------------------
Annual Compensation Awards
- ----------------------------------------------------------------------- ------------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Award(s) Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------
Joseph L. LaMonica, 2004 $494,828 $ --- --- --- $156,592 (1)
President and Chief 2003 450,000 187,500 --- --- 122,557
Executive Officer 2002 425,000 125,000 --- --- 113,429
Patrick D. McTernan, 2004 $225,421 $ --- --- --- $137,026 (1)
Senior Executive Vice 2003 205,000 75,000 --- --- 105,275
President, General Counsel and 2002 205,000 65,000 --- --- 94,340
Secretary
Jeffrey J. Carfora, 2004 $205,000 $ --- --- --- $114,733 (1)
Senior Executive Vice President 2003 205,000 75,000 --- --- 87,451
and Chief Operating Officer 2002 171,250 65,000 --- --- 75,867
Claire M. Chadwick, 2004 $137,500 $ --- --- --- $ 84,223 (1)
Executive Vice President 2003 127,404 37,500 --- --- 72,095
and Chief Financial Officer 2002 106,298 25,000 --- --- 53,156
Maria F. Magurno, 2004 $135,000 $ 10,000 --- --- $ 79,543 (1)
Executive Vice President 2003 118,414 20,000 --- --- 54,726
and Residential Lending 2002 103,221 22,500 --- --- 46,562
Group Executive
(1) Includes imputed income under the group term life insurance plan, income
attributable under whole-life insurance policy, imputed income under life
insurance policy obtained to provide additional death benefit under
Supplemental Executive Retirement Plan, employer contributions to Penn
Federal's 401(k) Plan, ESOP allocations, and fees for attending meetings
of the Company's Board of Directors, respectively, as follows: Mr.
LaMonica - $2,263, $32,894, $1,604, $3,250, $109,831 and $6,750; Mr.
McTernan - $1,242, $15,192, $1,263, $3,098, $109,831 and $6,400; Mr.
Carfora - $909, $0, $767, $2,200, $108,457 and $2,400; Ms. Chadwick -
$425, $0, $647, $2,627, $77,724 and $2,800; and Ms. Magurno - $940, $0,
$0, $0, $78,603 and $0.
10
The following table sets forth certain information concerning stock option
exercises during the last fiscal year and the number and value of stock options
held by the Named Officers as of June 30, 2004. No stock options were granted to
the Named Officers in fiscal 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
on Options at FY-End (#) FY-End ($)(1)
Exercise Value ----------------------------------------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Joseph L. LaMonica 147,201 $3,878,144 (2) 187,520 --- $4,051,184 ---
- ---------------------------------------------------------------------------------------------------------------------
Patrick D. McTernan 42,350 $ 997,951 (2) 69,434 --- $1,619,910 ---
- ---------------------------------------------------------------------------------------------------------------------
Jeffrey J. Carfora 17,850 $ 473,918 (2) 18,084 --- $ 291,088 ---
- ---------------------------------------------------------------------------------------------------------------------
Claire M. Chadwick --- --- 11,000 --- $ 178,233 ---
- ---------------------------------------------------------------------------------------------------------------------
Maria F. Magurno --- --- 10,000 --- $ 162,200 ---
- ---------------------------------------------------------------------------------------------------------------------
(1) Represents the aggregate market value (market price of the common stock
less the exercise price) of the in-the-money options based on the closing
price of the common stock on the Nasdaq National Market on June 30, 2004
($33.22). An option is in-the-money if the exercise price of the option is
less than the market value of the common stock.
(2) Represents the difference between the market value of the shares acquired
upon exercise at the time of exercise (the average of the high and low per
share prices of the common stock on the Nasdaq National Market on the date
of exercise) and the exercise price ($5.25 per share).
Employment Agreements
On November 28, 2000, the Company entered into new employment agreements
with Mr. LaMonica, Mr. McTernan and Mr. Carfora, replacing the existing
employment agreements between Penn Federal and these officers. Effective as of
August 12, 2003, the Company entered into an employment agreement with Ms.
Chadwick, and on September 14, 2004 (but effective as of November 28, 2004), the
Company entered into an employment agreement with Ms. Magurno. Each agreement is
for a five-year term and provides for extensions of one year, in addition to the
then-remaining term under the agreement, on each November 28th (beginning
November 28, 2005, in the case of Ms. Magurno's agreement), as long as (1) the
Company has not notified the officer at least 90 days in advance that the term
will not be extended further and (2) the officer has not received an
unsatisfactory performance review by the Board of Directors of the Company or
the Bank. Each agreement provides for an annual base salary not less than the
officer's current salary, discretionary and performance-based bonuses and
participation in benefit plans and the receipt of fringe benefits to the same
extent as the other executive officers of the Company and the Bank.
Each agreement provides that if the officer's employment is involuntarily
terminated, then during the lesser period (referred to below as the "applicable
payout period") of the remaining term of the agreement or three years after the
date of termination, he or she will be entitled to receive (1) on a monthly
basis, 1/12th of his or her annual salary and 1/12th of the average annual
amount of cash bonus and cash incentive compensation for the two full fiscal
years preceding the date of termination, subject to reduction by the amount of
the officer's earned income during the applicable payout period; (2)
substantially the same life and disability insurance coverage and health and
dental benefits as he or she would have received if he or she had
11
remained employed, subject to reduction to the extent the officer receives
equivalent or better benefits from another employer; and (3) if the involuntary
termination occurs within the six months preceding, at the time of, or within 24
months after a change in control of the Company, an amount in cash equal to 299%
of the officer's "base amount" (as defined in Section 280G of the Internal
Revenue Code). The term "involuntary termination" is defined as termination of
the officer's employment by the Company or the Bank (other than for cause, or
due to death, disability or specified violations of law) without the officer's
consent or by the officer following a material reduction of or interference with
his or her duties, responsibilities or benefits without his or her consent.
Each agreement provides that to the extent the officer receives any
amounts or benefits that will constitute "excess parachute payments" under
Section 280G of the Internal Revenue Code and subject him or her to excise tax
under Section 4999 of the Internal Revenue Code, he or she will be paid an
additional amount that will offset the effect of any such excise tax. Each
agreement also provides that to the extent the officer's total compensation for
any taxable year exceeds the greater of $1,000,000 or the maximum amount of
compensation deductible by the Company under Section 162(m) of the Internal
Revenue Code (the greater of these two amounts referred to below as the "maximum
allowable amount"), the excess amount must be deferred, with interest at 8% per
annum compounded annually, to a taxable year in which the amount to be paid to
the officer in that year (including deferred amounts and interest) does not
exceed the maximum allowable amount.
Supplemental Executive Retirement Plan
Effective as of March 1, 2003, the Bank adopted the Penn Federal Savings
Bank Supplemental Executive Retirement Plan (the "SERP") to provide for
supplemental retirement benefits to a select group of senior officers. The SERP
provides that upon the later of the date of the termination of the participant's
employment or the participant's attainment of age 65, the participant will
receive an annual benefit, payable in monthly installments over a 15-year
period, equal to 70% of the average of the participant's aggregate cash
compensation (including pre-tax deferrals but excluding bonuses) during the two
Company fiscal years in the five fiscal year period immediately prior to the
termination of the participant's employment which results in the largest total
amount of cash compensation. The maximum annual benefit may not exceed $300,000.
A participant may elect to receive a discounted early retirement benefit under
the SERP beginning on the later of the date of the termination of the
participant's employment or the participant's attainment of age 55. A
participant whose employment is terminated for cause will not receive any
benefits under the SERP.
If a participant dies before receiving any retirement benefits under the
SERP, his or her designated beneficiary will receive a discounted lump sum
payment of the participant's retirement benefits. If a participant dies after he
or she has begun to receive retirement benefits under the SERP, the remaining
payments will continue to be made to the participant's designated beneficiary
for the rest of the payout period. In addition to the death benefit described in
the two preceding sentences, a participant's beneficiary will receive a lump sum
death benefit of $600,000.
A participant becomes fully vested in his or her SERP benefits after ten
years of service (with credit for years of service prior to the adoption of the
SERP). Following a change in control of the Company, the Company will be
required to pay to the participant a discounted lump sum payment of the
participant's retirement benefits unless the participant's individual plan
agreement provides otherwise (in which case the participant will have the option
of receiving the lump sum payment).
The current participants in the SERP are Mr. LaMonica, Mr. McTernan, Mr.
Carfora and Ms. Chadwick, each of whom is fully vested in his or her retirement
benefits under the SERP. Based on their
12
cash compensation for the last five fiscal years, the annual normal retirement
benefits payable under the SERP to Mr. LaMonica, Mr. McTernan, Mr. Carfora and
Ms. Chadwick would be $300,000, $150,647, $143,500 and $92,716, respectively.
The SERP is an unfunded plan. The Bank has, however, obtained life
insurance policies on the lives of participants in the SERP as a means of
offsetting the costs of providing the benefits under the SERP.
Supplemental Executive Life Insurance Plan
Effective March 1, 2003, the Bank adopted the Penn Federal Savings Bank
Supplemental Executive Life Insurance Plan (the "Supplemental Life Insurance
Plan") to provide supplemental life insurance benefits to a select group of
officers who do not participate in the SERP. The Supplemental Life Insurance
Plan provides that upon the death of a participant whose employment with the
Company after at least ten years of service was terminated for any reason
(including the participant's death while employed by the Bank) except cause, the
participant's designated beneficiary will receive a lump sum amount equal to the
participant's annual salary for the calendar year preceding the calendar year in
which the participant's employment was terminated.
The Supplemental Life Insurance Plan is an unfunded plan. The Bank has,
however, obtained life insurance policies on the lives of participants as a
means of offsetting the costs of providing the benefits under the Supplemental
Life Insurance Plan. Ms. Magurno is the only Named Officer who currently
participates in the Supplemental Life Insurance Plan.
Certain Transactions
The Bank has followed a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for consumer or business purposes. All loans by
the Bank to its senior officers and directors are subject to regulations of the
Office of Thrift Supervision restricting loans and other transactions with
affiliated persons of the Bank. Under applicable law, all loans or extensions of
credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public and must not involve
more than the normal risk of repayment or present other unfavorable features. In
this regard, all outstanding loans to the Bank's directors and senior officers
have been made in the ordinary course of business and on the same terms,
including collateral and interest rates, as those prevailing at the time for
comparable transactions and did not involve more than the normal risk of
collectibility.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors, which acts
as the compensation committee for the Company and the Bank, has furnished the
following report on executive compensation:
The Compensation Committee has responsibility for reviewing the
compensation policies and plans for the Company and its affiliates. The policies
and plans established are designed to enhance both short-term and long-term
operational performance of the Bank and to build stockholder value through
anticipated appreciation in the Company's common stock price.
13
One of the Committee's primary objectives is to develop and maintain
compensation plans which allow the Company to attract and retain quality
executives at competitive compensation levels and which enhance stockholder
value by aligning closely the financial interests of the executives of the
Company and the Bank with those of the Company's stockholders. In determining
compensation levels, plans and adjustments, the Committee takes into account,
among other things, compensation reviews made by third parties each year. These
studies primarily compare the compensation of the Bank's officers to officers of
other financial institutions.
With respect to Mr. LaMonica's base salary for the fiscal year ended June
30, 2004, the Committee took into account a comparison of salaries of chief
executive officers of local and regional financial institutions and financial
institutions comparable in size to the Bank. Likewise, each executive officer's
base salary was determined utilizing financial institution compensation surveys.
Mr. LaMonica's base salary for fiscal year 2004 was increased by $45,000 from
his base salary for fiscal year 2003 because the Committee determined that Mr.
LaMonica was undercompensated when compared to chief executive officers of other
institutions with asset size similar to the Bank and because of the Company's
numerous achievements during fiscal 2003 attributable to the performance of Mr.
LaMonica.
Effective July 1, 2001, the Company implemented a cash bonus program tied
to percentage growth in earnings per share. The plan has two principal
components, each providing for bonuses if the Company's earnings per share
growth exceeds a minimum threshold. The first component provides for
pre-determined bonus amounts payable quarterly to the Company's Chief Executive
Officer, General Counsel, Chief Operating Officer and Chief Financial Officer
depending on the quarterly increase, if any, in earnings per share on an
annualized basis. The second component provides for bonus amounts payable
annually to other personnel in the discretion of senior management. For fiscal
2004, the Company's earnings per share growth did not exceed the minimum
threshold. Therefore, no cash bonuses for 2004 were paid to Mr. LaMonica, the
Company's Chief Executive Officer, Mr. McTernan, the Company's General Counsel,
Mr. Carfora, the Company's Chief Operating Officer, or Ms. Chadwick, the
Company's Chief Financial Officer. Ms. Magurno was awarded a discretionary bonus
under the plan for fiscal 2004 of $10,000.
The Bank and the Company have also included stock option and restricted
stock awards as key elements in their total compensation package. Equity-based
compensation provides a long-term alignment of interests and results achieved
for stockholders with the compensation rewards provided to executive officers by
providing those executives and others on whom the continued success of the
Company most depends with a proprietary interest in the Company. All of the
Company's and the Bank's executive officers have received awards pursuant to the
Company's Stock Option Plan and Management Recognition Plan, and all shares
authorized for awards under these plans have been utilized for option and
restricted stock grants.
Through the compensation programs described above, a significant portion
of the Company's executive compensation is linked to corporate performance. The
Committee will continue to review all elements of compensation to ensure that
the compensation objectives and plans meet the Company's business objectives and
philosophy of linking executive compensation to stockholder interests in
corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code of 1986 to add Section
162(m) to limit the corporate deduction for compensation paid to a corporation's
five most highly compensated officers to $1.0 million per executive per year,
with certain exemptions. The Committee carefully reviewed the impact of this
legislation on the cost of the Company's and the Bank's current executive
compensation plans. Under the legislation and regulations adopted thereunder, it
is not expected that any portion of the Company's employee compensation will be
non-deductible in fiscal 2004 or in future years by reason of compensation paid
in fiscal 2004. The Committee intends to review the Company's executive
compensation policies on an ongoing basis, and propose appropriate
modifications, if the Committee deems them necessary, to these executive
compensation plans with a view toward implementing the Company's compensation
policies in a manner that
14
avoids or minimizes any disallowance of tax deductions under Section 162(m). In
this regard, each of the Company's employment agreements with the Named Officers
provides for mandatory deferral of compensation that would otherwise be
non-deductible by virtue of the limitations of Section 162(m). See "Employment
Agreements."
The foregoing report is furnished by the Compensation Committee of the
Board of Directors:
Amadeu L. Carvalho, Chairman
Mario Teixeira, Jr.
15
Stock Performance Presentation
The line graph below compares the cumulative total stockholder return on
the Company's common stock to the cumulative total return of a broad index (all
Nasdaq U.S. Stocks) and a savings and loan industry index for the period June
30, 1999 through June 30, 2004.
[GRAPHIC OMITTED]
Period Ending
-----------------------------------------------------------------------
Index 06/30/99 06/30/00 06/30/01 06/30/02 06/30/03 06/30/04
- ---------------------------------------------------------------------------------------------------------------
PennFed Financial Services, Inc. 100.00 90.70 149.86 182.85 184.61 223.86
NASDAQ - Total US 100.00 147.94 80.83 54.94 61.23 77.62
SNL $1B-$5B Thrift Index 100.00 81.42 138.87 196.72 231.41 284.66
16
PROPOSAL II. RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS
On August 24, 2004, the Company engaged KPMG LLP as its independent
auditors for the fiscal year ending June 30, 2005, and chose not to renew the
engagement of Deloitte & Touche LLP, the Company's independent auditors for the
fiscal year ended June 30, 2004. The decision to change accountants was approved
by the Audit Committee of the Company's Board of Directors, which subsequently
advised the Board of its decision.
In connection with the audits of the two fiscal years ended June 30, 2004,
and the subsequent interim period through August 27, 2004, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to their satisfaction, would have caused
them to make reference in connection with their opinion to the subject matter of
the disagreement. In connection with the audits of the two fiscal years ended
June 30, 2004, and the subsequent interim period through August 27, 2004, there
have been no reportable events (as defined in Regulation S-K Item 304 (a)(1)(v))
with Deloitte & Touche LLP. The audit reports of Deloitte & Touche LLP on the
consolidated financial statements of the Company as of and for the years ended
June 30, 2004 and 2003 did not contain any adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
The engagement of KPMG LLP as the Company's independent auditors for the
2005 fiscal year is subject to the ratification of the appointment by the
Company's stockholders at the Meeting. Representatives of KPMG LLP are expected
to attend the Meeting to respond to appropriate questions and will have an
opportunity to make statements if they so desire.
For the fiscal years ended June 30, 2004 and 2003, Deloitte & Touche LLP
provided various audit and non-audit services to the Company. Set forth below
are the aggregate fees billed for these services:
(a) Audit Fees: Aggregate fees billed for professional services rendered
for the audit of the Company's annual financial statements, for the
review of financial statements included in the Company's Quarterly
Reports on Form 10-Q and for a comfort letter issued in connection
with a trust preferred securities offering by the Company in fiscal
2003: $226,000 - 2004; $248,500 - 2003.
(b) Audit Related Fees: Aggregate fees billed for professional services
rendered related to audits of employee benefit plans: $16,500 -
2004; $16,500 - 2003.
(c) Tax Fees: Aggregate fees billed for professional services rendered
related to tax return preparation and tax consultations: $21,450 -
2004; $25,625 - 2003.
(d) All other fees: Aggregate fees billed for all other professional
services (consisting of employee benefit plan compliance work):
$1,680 - 2004; $0 - 2003.
The Audit Committee preapproves all audit and permissible non-audit
services to be provided by the independent auditors and the estimated fees for
these services. None of the services provided by Deloitte & Touche LLP described
in items (a)-(d) above was approved by the Audit Committee pursuant to a waiver
of the pre-approval requirements of the SEC's rules and regulations.
17
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2005.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's next
annual meeting must be received by its Secretary at the administrative office of
the Company, located at 622 Eagle Rock Avenue, West Orange, New Jersey
07052-2989, no later than May 27, 2005 to be eligible for inclusion in the
Company's proxy statement and form of proxy for the next annual meeting. Any
such proposal will be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended, and as with any
stockholder proposal (regardless of whether included in the Company's proxy
materials), the Company's charter and bylaws and applicable state law.
To be considered for presentation at the next annual meeting, but not for
inclusion in the Company's proxy statement and form of proxy for that meeting,
proposals must be received by the Company no later than July 29, 2005, and no
earlier than June 29, 2005. If, however, the date of the next annual meeting is
before October 7, 2005 or after December 26, 2005, proposals must instead be
received by the Company by the later of the 90th day before the date of the next
annual meeting or the tenth day following the day on which notice of the date of
the next annual meeting is mailed or public announcement of the date of the next
annual meeting is first made, and no earlier than the 120th day prior to the
date of the next annual meeting. If a stockholder proposal that is received by
the Company after the applicable deadline for presentation at the next annual
meeting is raised at the next annual meeting, the holders of the proxies for
that meeting will have the discretion to vote on the proposal in accordance with
their best judgment and discretion, without any discussion of the proposal in
the Company's proxy statement for the next annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons owning more than 10% of a
registered class of the Company's equity securities, to file periodic reports of
ownership and changes in ownership with the SEC and to provide the Company with
copies of such reports. Based solely upon information provided to the Company by
the directors and officers subject to Section 16(a), all Section 16(a) filing
requirements applicable to these persons were complied with during fiscal 2004.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement. If,
however, any other matter should properly come before the Meeting, it is
intended that the Board of Directors, as proxy for the stockholder, will act in
accordance with its best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's common stock. In addition to
solicitation by mail, directors, officers and regular employees of the Company
and/or the Bank may solicit proxies personally or by telephone without
additional compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William C. Anderson
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 24, 2004
18
APPENDIX A
PENNFED FINANCIAL SERVICES, INC.
--------------------------------
AUDIT COMMITTEE CHARTER
-----------------------
I. Statement of Policy
-------------------
The Audit Committee ("Committee") is appointed by the Board of Directors
of PennFed Financial Services, Inc. (the "Company") to assist the Board of
Directors in fulfilling its oversight responsibility relating to the integrity
of the Company's financial statements and the financial reporting processes; the
systems of internal accounting and financial controls; compliance with legal and
regulatory requirements; the independent auditors' qualifications and
independence; the annual independent audit of the Company's financial
statements; the performance of the Company's internal audit function and
independent auditors; and any other areas specified by the Board of Directors of
potential financial risks to the Company. The Committee shall annually prepare a
report to shareholders as required by the Securities and Exchange Commission
(the "SEC") for inclusion in the Company's annual proxy statement. The Committee
is empowered to investigate any matter, with full access to all necessary books,
records, facilities and personnel of the Company, and has the authority to
retain at the Company's expense legal, accounting or other advisors, consultants
or experts as it deems appropriate.
It is recognized that members of the Committee are not full-time employees
of the Company. The Company's management is responsible for preparing the
Company's financial statements. The independent auditors are responsible for
auditing the Company's annual financial statements and reviewing the Company's
quarterly financial statements prior to the filing of the Company's annual and
quarterly reports on Forms 10-K and 10-Q with the SEC. It is not the duty or
responsibility of the Committee or its members to conduct auditing or accounting
reviews or procedures or determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles ("GAAP") and applicable rules and regulations.
These are the responsibilities of management and the independent auditors. Each
member of the Committee shall be entitled to rely on the integrity of those
persons and organizations within and outside the Company that it receives
information from and the accuracy of the financial and other information
provided to the Committee by such persons or organizations, absent actual
knowledge to the contrary (which shall be promptly reported to the Board of
Directors).
II. Committee Composition and Meetings
----------------------------------
The Committee shall be comprised of three or more directors appointed by
the Board of Directors, after considering the recommendation of the Nominating
Committee, each of whom shall be an independent director qualified to serve on
the Committee under applicable law, the rules and regulations of the SEC and the
rules of The Nasdaq Stock Market, and each of whom shall be free from any
relationship that would interfere with the exercise of his or her independent
judgment. A chairperson may be designated by the Board of Directors or may be
chosen by a majority of the full Committee membership. Each Committee member
shall be financially literate, as such qualification is interpreted by the Board
of Directors in its business judgment. At least one member of the Committee must
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
The Company will seek to have at least one member of the Committee who is
an "audit committee financial expert," as that term is defined in the SEC's
regulations and as the Board of Directors interprets such term in its business
judgment. Committee members shall not simultaneously serve on the
A-1
audit committees of more than two other public companies. The Board of Directors
shall have the power at any time to change the membership of the Committee and
to fill vacancies, subject to the qualification requirements of this Charter.
The Committee shall meet at least quarterly. The Committee chairperson
shall prepare and/or approve an agenda in advance of each meeting. If the
chairperson is not available for a meeting, the other members of the Committee
may appoint a temporary chairperson for such meeting. The Committee may ask
members of management or others to attend meetings and provide pertinent
information as necessary. The Committee will meet privately in executive session
at such times as the Committee may determine, and shall meet with management,
the chief internal auditor, the independent auditors, regulatory examiners and
as a committee to discuss any matters that the Committee or each of these groups
believes should be discussed.
III. Committee Duties, Responsibilities and Processes
------------------------------------------------
The following shall be the principal duties, responsibilities and
recurring processes of the Committee in carrying out its oversight role. The
processes are set forth as a guide with the understanding that the Committee may
supplement them as appropriate. The Committee will cause to be kept adequate
minutes of all its proceedings, and will report its actions at the next meeting
of the Board of Directors. Committee members will be furnished with copies of
the minutes of each meeting and any action taken by unanimous consent. The
Committee is governed by the same rules regarding meetings (including meetings
by conference telephone or similar communications equipment), action without
meetings, notice, waiver of notice, and quorum and voting requirements as are
applicable to the Board of Directors. The Committee is authorized and empowered
to adopt its own rules of procedure not inconsistent with (a) any provision of
this Charter, (b) any provision of the Bylaws of the Company, or (c) the laws of
its jurisdiction of incorporation.
As part of its oversight responsibility, the Committee shall:
Review Procedures
-----------------
1. Review and discuss the form of presentation and type of information
to be contained in earnings press releases. The Committee need not
discuss in advance each earnings release or each instance in which
the Company may provide earnings guidance.
2. Prior to the filing of quarterly and annual reports on Forms 10-Q
and 10-K with the SEC, review and discuss with management and the
independent auditors: (i) the Company's quarterly and annual
consolidated financial statements; (ii) matters that affect the
Company's consolidated financial statements, including disclosures
under "Management's Discussion and Analysis of Financial Condition
and Results of Operations;" (iii) the results of the independent
auditors' interim reviews, annual audit and report, and any other
matters required to be communicated to the Committee by the
independent auditors, as well as discussions regarding qualitative
judgments of the independent auditors about the appropriateness, not
just the acceptability, of the Company's accounting principles, and
the clarity of the financial statements; (iv) all critical
accounting policies and practices to be used; (v) any matters
required to be communicated to the Committee by the independent
auditors in accordance with SAS Nos. 61 and 71 or any other SAS; and
(vi) other material written communications between the independent
auditors and management. Prior to the filing of the Company's Annual
Report on Form 10-K, recommend to the Board of Directors whether the
audited financial statements should be included in the Form 10-K.
A-2
3. Regularly review with the independent auditors any problems or
difficulties encountered in the course of the audit work and
management's response, including any restrictions on the scope of
activities or access to requested information and any significant
disagreements with management.
4. Review: (i) any major issues regarding accounting principles and
financial statement presentations, including any significant changes
in the Company's selection or application of accounting principles,
and any major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of any
material control deficiencies; (ii) analyses prepared by management
and/or the independent auditor setting forth significant financial
reporting issues and judgments made in connection with the
preparation of the financial statements, including analyses of the
effects of alternative GAAP methods on the financial statements; and
(iii) the effect of regulatory and accounting initiatives, as well
as off-balance sheet structures, on the Company's financial
statements. In consultation with management, the independent
auditors and the internal auditors, monitor the integrity and
effectiveness of the Company's financial reporting processes and
systems of internal controls, including reviewing significant
financial risk exposures and the steps management has taken to
monitor, control and report such exposures; review significant
findings relating to the foregoing prepared by the independent
auditors or the internal auditors, together with management's
responses and follow-up to these reports. Monitor changes to
commitment dates for correcting audit findings.
5. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls and auditing matters and for the confidential
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters. Such procedures have been
established by the Committee and are set forth in the Company's Code
of Conduct.
Independent Auditors and Other External Services
------------------------------------------------
6. The Committee is directly responsible for the appointment,
compensation, retention and oversight of the work of the independent
auditors, including resolution of disagreements between management
and the independent auditors regarding financial reporting. The
independent auditors shall report directly to the Committee.
7. Pre-approve the engagement letters and the fees to be paid to the
independent auditors. Pre-approve, except as permitted by law, all
audit and non-audit services to be provided by the independent
auditors and consider the possible effect that these services could
have on the independence of such auditors. The Committee may
delegate to one or more of its members pre-approval authority of
non-audit services in accordance with applicable law, provided that
any delegated pre-approvals are reported to the Committee at its
next scheduled meeting.
8. On an annual basis, review and discuss with the independent auditors
their qualifications, performance and independence and all
significant relationships they have with the Company that could
impair the auditors' objectivity and independence and receive the
written disclosures and letter from the independent auditors
required by Independence Standards Board Standard No. 1. Ensure the
rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law and the rotation of any other
audit partner whose rotation is required by the regulations of the
SEC.
A-3
9. Review the audit plan of the independent auditors -- discuss scope,
staffing, timing, estimated and actual fees, reliance upon
management and internal audit and general audit approach.
10. Establish clear and appropriate hiring policies for employees or
former employees of the independent auditors who participated in any
capacity in the audit of the Company.
Internal Audit Function
-----------------------
11. Review the budget, program, changes in program, activities,
strategies, organizational structure and qualifications of the
internal audit function, as needed, it being understood that the
internal audit function reports directly to the Committee. Evaluate
whether the internal audit function operation and structure permits
unrestricted access by internal auditors to records, personnel and
physical properties relevant to the performance of its
responsibilities and to top management, the Committee, and the Board
of Directors. Assess the appropriateness of the resources allocated
to internal auditing. Evaluate the effectiveness of the internal
audit function.
12. Review the appointment, performance and replacement of the
individual heading the internal audit function. Decisions regarding
hiring or termination of this person require endorsement by the
Committee. The chairperson of the Committee will also be involved in
performance evaluation and compensation decisions related to this
person.
13. Review significant issues presented by the internal audit function
together with management's response and follow-up to these reports.
Other Committee Responsibilities
--------------------------------
14. Review and reassess the adequacy of this Charter at least annually,
and recommend any proposed changes to the Board of Directors for its
approval. Ensure the publication of this Charter in accordance with
SEC regulations.
15. Maintain minutes of meetings and periodically report to the Board of
Directors on results of the foregoing activities.
16. Conduct an appropriate review of and approve all related party
transactions on an ongoing basis, as required by the rules of the
Nasdaq Stock Market. For these purposes, the term "related party
transactions" shall refer to transactions required to be disclosed
pursuant to SEC Regulation S-K, Item 404.
17. Review with the Company's counsel: (i) any significant legal matter
that could have a material impact on the Company's financial
statements; (ii) legal compliance matters, including corporate
securities trading policies and material notices to or inquiries
received from governmental agencies; and (iii) reports of evidence
of a material violation of securities laws or breaches of fiduciary
duty.
18. Review disclosures made to the Committee by the Company's CEO and
CFO during their certification processes for the Forms 10-K and 10-Q
with respect to the financial statements and about any significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting and any fraud, whether or
not material, involving
A-4
management or other employees who have a significant role in the
Company's internal control over financial reporting.
19. Ensure required certifications are made to Nasdaq: (i) that a formal
written charter has been adopted for the Committee and that the
Committee has reviewed and reassessed the adequacy of the charter on
an annual basis; and (ii) as to the independence of the members of
the Committee.
20. Perform any other activities consistent with this Charter, the
Company's Bylaws or governing law as the Committee or the Board of
Directors deems necessary or appropriate.
IV. Funding
-------
The Company shall provide the Committee with appropriate funding, as
determined by the Committee, in its capacity as a committee of the Board of
Directors, for payment of: (i) compensation to the independent auditors engaged
by the Committee; (ii) compensation to any advisors engaged by the Committee;
and (iii) ordinary administrative expenses of the Committee that are necessary
or appropriate in carrying out its duties.
A-5
APPENDIX B
PENNFED FINANCIAL SERVICES, INC.
--------------------------------
NOMINATING COMMITTEE CHARTER
----------------------------
I. Statement of Policy
-------------------
The Nominating Committee (the "Committee") shall be appointed by the Board
of Directors (the "Board") of PennFed Financial Services, Inc. (the "Company")
for the purpose of (i) identifying individuals qualified to serve as Board
members, consistent with criteria approved by the Board; and (ii) recommending
to the Board the director nominees for election or appointment to the Board of
Directors.
II. Committee Composition and Meetings
----------------------------------
The Committee shall be comprised of three or more directors (including a
chairperson) as appointed annually by the Board, each of whom shall be an
independent director as defined by the Nasdaq Stock Market (the "Nasdaq")
listing standards and each of whom shall be free from any relationship that
would interfere with the exercise of his or her independent judgment. The Board
shall have the power at any time to change the membership of the Committee and
to fill vacancies, subject to the qualification requirements of this Charter.
III. Committee Duties, Responsibilities and Process
----------------------------------------------
The Committee will cause to be kept adequate minutes of all its
proceedings, and will report its actions at the next meeting of the Board.
Committee members will be furnished with copies of the minutes of each meeting
and any action taken by unanimous consent. The Committee is governed by the same
rules regarding meetings (including meetings by conference telephone or similar
communications equipment), action without meetings, notice, waiver of notice,
and quorum and voting requirements as are applicable to the Board. The Committee
is authorized and empowered to adopt its own rules of procedure not inconsistent
with (a) any provision of this Charter, (b) any provision of the Bylaws of the
Company, or (c) the laws of its jurisdiction of incorporation.
The Committee may request that any directors, officers or employees of the
Company, or other persons whose advice and counsel are sought by the Committee,
attend any meeting of the Committee to provide such pertinent information as the
Committee requests.
The Committee shall have the following responsibilities:
1. Recommend to the Board the appropriate size of the Board and assist
in identifying, interviewing and recruiting candidates for the
Board.
2. Recommend candidates (including incumbents) for election and
appointment to the Board of Directors, subject to the provisions set
forth in the Company's Articles or Certificate of Incorporation and
Bylaws relating to the nomination or appointment of directors, based
on the following criteria: business experience, education, integrity
and reputation, independence, conflicts of interest, diversity, age,
number of other directorships and commitments (including charitable
obligations), tenure on the Board, attendance at Board and committee
meetings, stock ownership, specialized knowledge (such as an
understanding of banking, accounting, marketing, finance, regulation
and public policy) and a commitment to the Company's communities and
shared values, as well as overall experience in the context of the
needs of the Board as a whole.
B-1
3. Review nominations submitted by stockholders, which have been
addressed to the corporate secretary, and which comply with the
requirements of the Articles or Certificate of Incorporation and the
Bylaws. Nominations from stockholders will be considered and
evaluated using the same criteria as all other nominations.
4. Annually recommend to the Board committee assignments and committee
chairs on all committees of the Board, and recommend committee
members to fill vacancies on committees as necessary.
5. Perform any other duties or responsibilities expressly delegated to
the Committee by the Board.
IV. Investigations and Studies; Outside Advisers
--------------------------------------------
The Committee may conduct or authorize studies of or investigations into
matters within the Committee's scope of responsibilities, and may retain, at the
Company's expense, such counsel or other advisers as it deems necessary (which
may, if the Committee deems it appropriate, be the Company's regular counsel or
advisers). The Committee shall have the authority to retain or terminate one or
more search firms to assist the Committee in carrying out its responsibilities,
including authority to approve the firm's fees and retention terms, which fees
shall be borne by the Company.
B-2
REVOCABLE PROXY
PENNFED FINANCIAL SERVICES, INC.
[X]PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 27, 2004
The undersigned hereby appoints the Board of Directors of PennFed
Financial Services, Inc. (the "Company"), and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Company's Annual Meeting of Stockholders (the "Meeting"), to be held on
Wednesday, October 27, 2004 at Mayfair Farms, located at 481 Eagle Rock Avenue,
West Orange, New Jersey, at 10:00 a.m., local time, and at any and all
adjournments or postponements thereof, as follows:
With- For All
For hold Except
I. The election of the following directors for [_] [_] [_]
three-year terms:
William C. Anderson
Amadeu L. Carvalho
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
For Against Abstain
II. The ratification of the appointment of KPMG LLP as [_] [_] [_]
independent auditors for the Company for the fiscal
year ending June 30, 2005.
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
The Board of Directors recommends a vote "FOR" the election of the
nominees named herein and "FOR" the ratification of the appointment of KPMG LLP.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED HEREIN AND FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP. IF ANY OTHER BUSINESS IS PRESENTED
AT THE MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY THE BOARD OF DIRECTORS
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- --------------------------------------------------------------------------------
- ---Stockholder sign above---------------------Co-holder (if any) sign above-----
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage-paid envelope provided.
PENNFED FINANCIAL SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.
The above signor(s) acknowledge(s) receipt from the Company, prior to the
execution of this Proxy, of a Notice of the Meeting, a Proxy Statement and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2004.
Please sign exactly as your name appears above on this card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL
THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
- ----------------------------
- ----------------------------
- ----------------------------