UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - October 26, 2006
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PENNFED FINANCIAL SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 0-24040 22-3297339
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 669-7366
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N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On October 26, 2006, PennFed Financial Services, Inc. (the Company)
issued the press release attached hereto as Exhibit 99.1 announcing its first
quarter earnings.
The press release includes non-GAAP financial measures which exclude
the effects of a prepayment premium received on a commercial loan, the payment
of a penalty associated with the prepayment of certain advances from the Federal
Home Loan Bank of New York, the acceleration of depreciation on branch
automation software and an increase in the Company's obligation under certain
long-term benefit plans.
Management uses these non-GAAP financial measures because it believes
these measures facilitate comparisons of the Company's historical financial
results.
These non-GAAP financial measures are not prepared in accordance with
generally accepted accounting principles and may be different from non-GAAP
financial measures used by other companies. Non-GAAP financial measures should
not be considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP.
Item 7.01. Regulation FD Disclosure
On October 26, 2006, PennFed Financial Services, Inc. (the Company)
will hold its Annual Meeting of Stockholders. The script of the financial
presentation at such meeting is set forth below.
PennFed Financial Services, Inc.
2006 Annual Meeting
Thursday, October 26, 2006
SLIDE 1 (COVER SLIDE)
SLIDE 2 (DISCLAIMER)
Before we begin, I am required to remind you of our disclaimer on
forward-looking statements, which is presented on the screen.
(PAUSE)
To begin this portion of the presentation, I'll spend just a little time
discussing our fiscal year that ended June 30, 2006. Then I'll turn the
presentation over to our president, Joseph LaMonica.
SLIDE 3 (FISCAL 2006)
A year ago, we spoke about what an exceptional year fiscal 2005 had been. In
fact, earnings per share for fiscal 2005 represented the highest level in the
Company's history. For fiscal 2006 - there were no lack of challenges for our
Company as well as our industry. Most notably, PennFed, like the rest of the
banking community, experienced significant margin compression caused by a
persistently flat to inverted yield curve and an extremely competitive deposit
and lending market in New Jersey.
SLIDE 4 (EPS)
Earnings for the year ended June 30, 2006 were $1.00 per diluted share, a
decline when compared to $1.11 per diluted share for the prior year, but still
more than all other prior years as a public company.
SLIDE 5 (ROE)
Return on equity for fiscal 2006 of 10.78% also represented a decline when
compared to a record ROE of 12.64% reported in fiscal 2005.
SLIDE 6 (Total Assets)
During fiscal 2006 assets grew over $250 million representing an increase of
nearly 12.5% when compared with total assets at June 30, 2005.
SLIDE 7 (Net Loans Receivable)
Growth in assets was fueled by the 15% growth in our loan portfolio. The growth
was principally seen in shorter duration second mortgage loans as well as ARM
and biweekly one- to four-family loan products. Second mortgage originations
totaled $127 million, with nearly 31% found in variable rate lines of credit.
One- to four-family loan originations in fiscal 2006 reflected 43% in biweekly
products, and another 23% in 3/1 and 5/1 ARMs. Commercial real estate and
multi-family loan originations, principally adjustable rate, totaled $42M.
SLIDE 8 (Non-Performing Loans)
Although loan growth was significant, credit quality was not sacrificed. We
continue to maintain our strict underwriting standards. We are rewarded with low
non-performing assets - which totaled only $1.8 million, or 0.08% of total
assets. When you compare our ratio of loans past due and loans in foreclosure to
those published by the Mortgage Bankers Association survey, Penn's percentage of
less than 1% compared favorably to 4.3% for New Jersey loans past due and loans
in foreclosure.
SLIDE 9 (Retail Deposits)
Since June 30, 2005, total deposits have increased $75 million, or 5.6%.
However, the shift in the mix of deposits continues as checking and savings
account customers move "parked" funds to other higher yielding alternatives,
including money market accounts, the balances of which have grown significantly
over the year.
SLIDE 10 (Expense Ratio)
Expenses are something we can and do control. The fiscal 2006 expense ratio of
1.12% represents the lowest in the Company's 12-year history.
SLIDE 11 (Stock Repurchases)
Since we have historically updated you every year, I just wanted to briefly
mention our stock repurchase activity for fiscal 2006. Over the course of the
last fiscal year, the Company repurchased another 626,300 shares at prices
ranging from $17.10 to $19.75. Since the IPO, over 14 million of the 24 million
shares originally issued have been repurchased at an average price of $8.23 per
share.
Now, let me turn the presentation over to Mr. LaMonica.
Joe...
Thank you Bill.
SLIDE 12 (Areas of focus)
This morning we issued our earnings release for the 3 months ended September 30,
2006. Actual reported earnings for the quarter ended September 30, 2006 were
$0.17 per share compared to $0.21 reported for the quarter ended June 30, 2006.
Copies of the release will be available on the table outside as you leave.
While current market and economic conditions provide plenty of reasons for
near-term concern, we've weathered all storms during our years as a public
company. Someone once said to me that with Penn Federal - "what you see is what
you get." Put simply - Penn Federal is uncomplicated, clean and lean.
We are a financial institution dedicated to community-focused banking and
believe that we can better service most consumers. Admittedly, in this interest
rate environment, there are many challenges from an earnings perspective.
However, we have been through all sorts of interest rate environments in our 12
years as a public company. We believe that, absent future rate hikes, our net
interest margin will stabilize. While we are cautiously optimistic that interest
rate hikes are over, actual improvement in the margin would probably not begin
to occur until the yield curve steepens.
These days, every financial institution is hungry for deposits. While some may
remember that there once was a gas station on every corner, now it's a bank
branch on every corner. Although the number of bank branches seems to increase
daily, the amount of cash does not increase at the same level - so everyone is
fighting for the same funds. Since we truly believe that Penn has great products
and services, we are focused on new customer development and enhancing our
existing customer relationships.
SLIDE 12A
One of the first things we've spent a lot of time on in the past year is simple
- - we've stepped up the education and training of our employees. All employees
have been thoroughly educated on all the products and services Penn has to
offer. Training went further and centered on how to sell and cross-sell those
products. The sharing of success stories is now becoming a daily occurrence and
provides positive reinforcement. One aspect of the training stressed the
importance of follow-up. There's a clear understanding now that it's going to
take more than one visit or one phone call to win the accounts.
Education has also paid off for the Investment Services program. We are
experiencing significant improvement in sales and, as a result, have licensed
additional branch employees.
SLIDE 12B
Over the past year, we have increased our Business Development staff. We
currently have several individuals who are out on the streets, meeting with and
listening to potential customers and participating in various organizations.
They are focused on bringing in business and municipal relationships - for both
asset and liability products.
SLIDE 12C
Although education and training are ongoing, significant priorities remain in
place on establishing, monitoring and achieving goals - for both the branches
and the Business Development Officers. Realistic, measurable goals exist in all
areas. Again, it is very simple, but we're already seeing that by holding our
employees accountable to goals and tying incentive pay to those goals, results
follow.
SLIDE 12D
Core deposit growth, both personal and business, continues to be one of the most
important strategic goals at the Bank. To complement existing products and
services, the Bank has introduced the Business Intelligence line of products.
Our business checking products have been enhanced and new products have been
added, such as an unsecured line of credit, a reverse sweep feature, a business
money market account and a business credit card. We are confident that our
Business Intelligence line of products is one of the best out there. In addition
to the use of general advertising, the BDOs and Branch Managers reach out to
potential customers through daily contact and planned "business blitzes" in our
market areas.
SLIDE 12E
On the residential mortgage front, Penn Federal, like everyone else, is seeing a
slow down in application volumes. In general terms, we are aware that our asset
growth will be below the growth level of 2006. To supplement our own internal
originations, we entered into a correspondent relationship with a mortgage
banker. Through this relationship, the Bank purchases shorter duration one- to
four-family loans, primarily ARM and biweekly products. We also recently began
offering reverse mortgages. While these loans will not be placed in portfolio,
its just another product we can offer our customers and generate fee income.
SLIDE 12F
There is a significant focus on increasing consumer and commercial loan volumes.
On the consumer front, we continue to be very successful with pre-approved
direct mailings. Due to our investments in technology, both online applications
and loan-by-phone are offered, making applying and closing a consumer loan with
Penn Federal very easy. On the commercial front, our commercial loan officers,
working in concert with our Business Development Officers, keep the business
coming in, but, again, competition is fierce. One other fact worth mentioning,
many of our biweekly, consumer and commercial loans are opened with a core
deposit relationship and cross-sales activities are continually stressed.
SLIDE 12G
Looking at the liabilities from a true business perspective, there are times
when wholesale funding alternatives have been priced favorably to retail
deposits, especially given recent competitive pricing levels. When evaluating
deposit pricing, a review of wholesale options has been and will always be
considered.
We recognize its a challenging environment and while none of these areas of
focus are completely new, we feel that enhancing these areas of focus is
appropriate in this environment.
Now, I'd like to turn the podium back over to our Chairman who will review the
Company's stock performance with you.
SLIDE 13 (Stock Price Appreciation - Three Year)
As we've noted in the past, in the initial IPO, our stock was offered at $10 a
share, which, after adjusting for subsequent stock splits, equates to $2.50. We
are currently trading in the $17 to $18 range. PennFed's stock price has
increased over 100% since June 2000. As seen on this slide, over the past three
years, PennFed stock has performed just under the S&P 500, the S&P Bank index
and the Nasdaq Bank index and has outperformed a composite group of stocks. This
composite group represents publicly traded thrifts in the mid-Atlantic region
with assets of 1 to 3.5 billion dollars.
SLIDE 14 (Stock Price Appreciation - Five Yrs.)
Over the past five years, PennFed's stock outperformed all the comparative
indices. Clearly, PFSB has proven to be a valuable long-term investment.
SLIDE 15 (12 YRS EPS)
PennFed continues to be profitable. Since going public, our compounded growth
rate in EPS over the twelve-year period is over 12% annually.
Over its twelve-year history, PennFed has generated consistent, solid returns.
Under this Board of Directors and Management team, PennFed continues to be a
safe and secure company, both worthy and protective of your investment and
trust.
SLIDE 16 (CLOSING SLIDE)
As a closing to this presentation and before we read the results of the
inspector's report, I am pleased to announce the declaration of our quarterly
dividend. PennFed stockholders of record as of November 10, 2006 will be paid a
cash dividend of $0.07 per share on November 24, 2006.
Now, let's have the results of stockholder voting and then we'll have time for
your questions.
ANSWER QUESTIONS
At this time I will take your questions. As Chairman, I ask that your questions
be directed to me. I would also appreciate it if you would state your name and
affiliation.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PENNFED FINANCIAL SERVICES, INC.
Date: October 26, 2006 By: /s/ Joseph L. LaMonica
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Joseph L. LaMonica
President and Chief
Executive Officer