Exhibit 10.5

RETENTION AGREEMENT

This Retention Agreement (the “Agreement”) is made and entered into on
November 2, 2006 (but effective at the time specified in Section 1 below) by and
between New York Community Bank (the “Bank”) and Patrick D. McTernan, an
individual (the “Employee”).

INTRODUCTORY STATEMENT

New York Community Bancorp, Inc. (“NYB”), the parent holding company of the Bank
and PennFed Financial Services, Inc. (“PFSI”), the parent holding company of
Penn Federal Savings Bank (“Penn Federal”) have entered into an Agreement and
Plan of Merger dated as of November 2, 2006 (the “Merger Agreement”). Employee
is a senior officer of Penn Federal. NYB considers the Employee’s continued
services important to the successful integration of the operation of Penn
Federal’s business with the Bank’s business and wishes to secure the Employee’s
continued services during a transition period following the Effective Time by
providing the Employee with a financial incentive to remain in the Bank’s
employ. The Employee, understanding the circumstances, has agreed to execute
this Agreement and observe its terms.

1. Term of Agreement.

This Agreement shall become effective and begin immediately following the
Effective Time (as such term is defined in the Merger Agreement) and shall
continue for nine (9) months thereafter (the “Term”).

2. Place of Employment and Extent of Services.

(a) The Employee’s principal place of employment shall be at the same location
as immediately before the Effective Time.

(b) During the Term, the Employee shall serve as an employee of the Bank,
performing such duties and having such position, title and authority as may be
assigned to him by the Bank. The Employee shall devote his full business time
and attention (other than during weekends, holidays, approved vacation periods
(which shall be not less than six weeks, which may be taken consecutively) and
periods of illness or approved leave of absence) to the business and affairs of
the Bank and shall use his best efforts to advance its best interests.

3. Compensation and Benefits.

In consideration for the services to be rendered by the Employee during the Term
pursuant to this Agreement, the Bank shall pay the Employee total retention
compensation of $310,000 (“Retention Compensation”), payable in substantially
equal installments over the Term in accordance with the Bank’s customary payroll
practices. The Employee shall be an employee of the Bank and shall be eligible
to participate in and receive benefits under any and all qualified or
non-qualified retirement, pension, savings, profit-sharing or stock bonus plans,
any and all group life, health (including hospitalization, medical and major
medical), dental, accident and long-term disability insurance plans, and any
other employee benefit plan as may from time to time be maintained by, or cover
employees of, the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and consistent with the Bank’s customary
practices.

--------------------------------------------------------------------------------

4. Termination of Employment During the Term.

The Employee’s employment with the Bank may be terminated during the Term at any
time and for any reason and, in such event:

(a) If such termination results from the Employee’s resignation or discharge for
cause (as hereinafter defined), the Bank shall pay to the Employee (or, in the
event of his death, to his estate) his earned but unpaid compensation
(including, without limitation, salary and all other items which constitute
wages under applicable law) as of the date of his termination of employment.
This payment shall be made at the time and in the manner prescribed by law
applicable to the payment of wages but in no event later than thirty (30) days
after the date of the Employee’s termination of employment.

(b) If such termination results from the Employee’s discharge by the Bank other
than for “cause” (as hereinafter defined), death, disability as a result of
which the Employee qualifies for disability insurance benefits under the Bank’s
group long-term disability insurance plan or under the federal Social Security
Act, the Bank shall pay the Employee the amount, if any, of the remaining amount
of Retention Compensation the Employee would have received over the Term but for
the early termination of the Agreement. The Bank shall pay such amount, if any,
in a single lump sum as soon as practicable following termination of employment.

The Bank shall have the right to discharge the Employee for “cause” if it
determines that the Employee has committed gross negligence in the performance
of, or continually neglects, after due notice, to perform his assigned duties;
has been convicted or entered a plea of guilty or nolo contendere to, the
commission of a felony or any other crime involving dishonesty, personal profit
or other circumstance likely, in the reasonable judgment of the Bank, to have a
material adverse effect on the Bank or its business, operations or reputation;
or has violated, in any material respect, any law, rule, regulation, written
agreement or final cease-and-desist order applicable to the Bank in his
performance of services for the Bank.

5. Termination After the Term.

Unless otherwise agreed by the parties, the expiration of the Term shall result
in a termination of the Employee’s employment with the Bank.

6. Successors and Assigns.

This Agreement will inure to the benefit of and be binding upon the Employee,
his legal representatives and testate or intestate distributes, and the Bank and
its successors and assigns, including any successor by merger or consolidation
or a statutory receiver or any other person or firm or corporation to which all
or substantially all of the assets and business of the Bank may be sold or
otherwise transferred.

7. Notices.

Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:

 

2

--------------------------------------------------------------------------------

if to the Employee, at the address on file in the Bank’s personnel records for
the Employer:

if to the Bank:

New York Community Bank

615 Merrick Avenue

Westbury, New York 11590

Attention: Joseph R. Ficalora, President and Chief Executive Officer

8. Severability.

A determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision hereof.

9. Waiver.

Failure to insist upon strict compliance with any of the terms or conditions
hereof shall not be deemed a waiver of such term or condition. A waiver of any
provision of this Agreement must be made in writing, designated as a waiver, and
signed by the party against whom its enforcement is sought. Any waiver or
relinquishment of any right or power hereunder at any one or more times shall
not be deemed a waiver or relinquishment of such right or power at any other
time or times.

10. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and all of which shall constitute one and the same
agreement.

11. Governing Law.

This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York applicable to contracts entered into and
to be performed entirely within the State of New York, except to the extent that
such laws are pre-empted by the federal laws of the United States.

12. Entire Agreement; Modifications.

This instrument contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this agreement shall be valid unless made in writing
and signed by the parties hereto.

13. Dispute Resolution.

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in New York, New York in accordance
with the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction.

 

3

--------------------------------------------------------------------------------

14. Effect of Failure to Complete the Merger.

The parties’ obligations to each other under this Agreement are conditioned on
the consummation of the transactions contemplated by the Merger Agreement. If
NYB or PFSI terminate the Merger Agreement, the parties shall have no obligation
to each other under this Agreement.

The Bank has caused this Retention Agreement to be executed and the Employee has
hereunto set his hand, all as of the day and year first above written.

 

NEW YORK COMMUNITY BANK By:  

/s/ Joseph R. Ficalora

Name:  

Joseph R. Ficalora

Title:  

President and Chief Executive Officer

/s/ Patrick D. McTernan

PATRICK D. MCTERNAN

 

4