Pennfed Financial Services 8-K Pennfed Financial Services, Inc. Reports

EXHIBIT 99.1

FOR IMMEDIATE RELEASE	Contact:	Claire M. Chadwick, CFO
		973-669-7366, ext. 267

PENNFED FINANCIAL SERVICES, INC. REPORTS

SECOND QUARTER EARNINGS

ANNOUNCES A NEW STOCK REPURCHASE PROGRAM

WEST ORANGE, NJ, January 25, 2006 - PennFed Financial Services, Inc. (NASDQ:PFSB), the $2.2 billion holding company for New Jersey-based Penn Federal Savings Bank, announced earnings of 26 cents per diluted share for its second fiscal quarter ended December 31, 2005. Earnings for the comparable prior year quarter were 28 cents per diluted share.

For the first six months of fiscal 2006, PennFed reported earnings of 56 cents per diluted share, compared to 55 cents per diluted share for the comparable six months ended December 31, 2004.

“Earnings have been impacted by the challenging operating environment and the resulting pressure on net interest margin,” said Joseph L. LaMonica, PennFed’s President and Chief Executive Officer. As expected, as a result of the continuing rise in short term rates and the further flattening of the yield curve, net interest margin contracted to 1.89% for the current quarter from 2.05% last quarter and 2.33% a year ago. The expectation is that the yield curve will remain flat in the near term.

“Nevertheless,” LaMonica stated, “PennFed will not relax underwriting standards for the sake of improving margin.” “To counter some of the negative impact on earnings from a lower net interest margin, asset quality and expense

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PennFed 2Q-2006

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management remain priorities,” said LaMonica. While non-performing assets showed a slight increase in the quarter, the Company’s actual charge-off experience continues to be minimal. Furthermore, the Company’s current quarter non-interest expense ratio of just 1.01% was very strong, compared to 1.26% for the three months ended December 31, 2004. 

Total assets at December 31, 2005 of $2.161 billion reflected growth of approximately 11% on an annualized basis from June 30, 2005. Loans receivable showed 14% growth annualized.

Total loan production was $115 million for the December 2005 quarter. "Given the difficult interest rate environment, we remain focused on the origination of home equity loans and commercial real estate loans in addition to one to four-family mortgage loans," said LaMonica. For the quarter just ended, PennFed’s consumer loan originations totaled $28.0 million - a 39% increase from the prior year quarter. The Company’s commercial and multi-family real estate loan production of $14.4 million for the current quarter was strong compared to $8.3 million for the linked quarter and $16.2 million for the comparable prior year quarter.

Deposits grew to $1.386 billion at December 31, 2005 compared to $1.339 billion at June 30, 2005 - equating to an annualized growth rate of 7%. The Company continues to see a shift in deposit mix as savings account customers move “parked” funds to other higher yielding alternatives. Checking and money market balances have increased by over 17% since June 30, 2005. Due to the continued rise in short term rates and very strong competitive deposit pricing, the rate paid on interest bearing liabilities increased 15 basis points over the linked quarter.

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PennFed 2Q-2006

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During the three months ended December 31, 2005, the Company repurchased 256,600 shares of common stock for a total cost of $4.8 million. Stock repurchases continue to be utilized as a means of managing capital.

The Company announced that that it completed all repurchases under its 5% Stock Repurchase Program previously authorized in February 2005 and that its Board of Directors authorized a new 5% Stock Repurchase Program.

LaMonica indicated that under the completed program, the Company had repurchased 675,000 shares from February 28, 2005 through January 24, 2006 at prices ranging from $13.30 to $19.75 per share. After completion of these repurchases, the Company had 12,989,650 shares of common stock outstanding.

Under the new program, the Company may repurchase up to 5% of its outstanding shares over the next 18 months, subject to market conditions and other factors.

PennFed stockholders of record as of February 10, 2006 will be paid a cash dividend of $0.07 per share on February 24, 2006. The Company’s dividend policy will continue to be reviewed on a regular basis.

Penn Federal Savings Bank maintains 25 New Jersey branch offices. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation.

This release contains forward-looking statements that are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates and demand for loans in the Company’s market area, the relationship of short-term interest rates to long-term interest rates, competition and terrorist acts that could cause

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PennFed 2Q-2006

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actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above, as well as other factors, could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

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NOTE: SEE FINANCIAL TABLES

PennFed Financial Services, Inc.
(Holding Company for Penn Federal Savings Bank)
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
	December 31,			September 30,			June 30,			December 31,
	2005			2005			2005			2004
Selected Financial Condition Data:
Cash and cash equivalents	$	17,988		$	17,838		$	15,220		$	14,829
Investments, net		425,405			425,412			410,509			422,159
Mortgage-backed securities, net		68,978			73,270			78,201			87,879
Loans held for sale		242			937			4,826			2,580
Loans receivable:
One- to four-family mortgage loans		1,222,023			1,195,924			1,143,663			1,075,831
Commercial and multi-family real estate loans		170,653			165,882			169,765			168,092
Consumer loans		166,723			156,894			144,423			124,402
Allowance for loan losses		(5,913	)		(5,916	)		(6,050	)		(6,064	)
Other, net		9,592			9,410			8,853			7,931
Loans receivable, net		1,563,078			1,522,194			1,460,654			1,370,192
FHLB stock		25,028			24,586			22,391			22,102
Other intangible assets		0			0			0			454
Other assets		60,546			59,450			58,750			59,293
Total assets	$	2,161,265		$	2,123,687		$	2,050,551		$	1,979,488
Deposits:
Checking and money market	$	266,674		$	243,457		$	227,031		$	199,297
Savings		335,367			360,488			385,360			430,203
Certificates of deposit and accrued interest		784,334			760,057			727,100			623,954
Total deposits		1,386,375			1,364,002			1,339,491			1,253,454
FHLB advances		450,465			425,465			415,465			425,465
Other borrowings		141,770			148,134			107,952			122,624
Junior subordinated debentures		42,104			42,093			42,082			42,059
Other liabilities		16,379			18,123			21,507			12,551
Stockholders' equity		124,172	(a)		125,870			124,054			123,335
Total liabilities and stockholders' equity	$	2,161,265		$	2,123,687		$	2,050,551		$	1,979,488
Book value per share	$	9.54		$	9.53		$	9.34		$	9.04
Equity to assets		5.75	%		5.93	%		6.05	%		6.23	%
Asset Quality Data:
Non-performing loans	$	2,718		$	1,998		$	2,619		$	1,776
Real estate owned, net		502			477			0			0
Total non-performing assets	$	3,220		$	2,475		$	2,619		$	1,776
Non-performing loans to total loans		0.17	%		0.13	%		0.18	%		0.13	%
Non-performing assets to total assets		0.15	%		0.12	%		0.13	%		0.09	%
Allowance for loan losses to non-performing loans		217.55	%		296.10	%		231.00	%		341.44	%
Allowance for loan losses to total gross loans		0.38	%		0.39	%		0.41	%		0.44	%
Regulatory Capital Ratios (of the Bank):
Tangible capital ratio (requirement - 1.50%)		7.80	%		8.02	%		8.28	%		8.56	%
Core capital ratio (requirement - 4.00%)		7.80	%		8.02	%		8.28	%		8.56	%
Risk-based capital ratio (requirement - 8.00%)		14.89	%		15.39	%		15.84	%		16.58	%
(a) Common shares outstanding as of December 31, 2005 totaled 13,015,782 shares.

PennFed Financial Services, Inc.
(Holding Company for Penn Federal Savings Bank)
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
	For the three months ended						For the six months ended
	December 31,						December 31,
	2005			2004			2005			2004
Selected Operating Data:
Interest and dividend income	$	28,350		$	25,999		$	56,033		$	51,804
Interest expense		18,715			15,060			36,206			29,794
Net interest and dividend income		9,635			10,939			19,827			22,010
Provision for loan losses		0			0			0			0
Net interest and dividend income
after provision for loan losses		9,635			10,939			19,827			22,010
Non-interest income:
Service charges		704			867			4,174			1,593
Net gain (loss) from real estate operations		2			157			(1	)		157
Net gain on sales of loans		21			70			143			94
Income on BOLI		219			121			435			249
Other		153			140			334			362
Total non-interest income		1,099			1,355			5,085			2,455
Non-interest expenses:
Compensation & employee benefits		3,067			3,079			6,326			6,272
Net occupancy expense		594			559			1,179			1,098
Equipment		538			543			1,509			1,078
Advertising		165			227			299			394
Amortization of intangible assets		0			454			0			907
Federal deposit insurance premium		45			43			87			84
Extinguishment of debt		0			0			1,351			0
Other		979			1,276			2,390			2,467
Total non-interest expenses		5,388			6,181			13,141			12,300
Income before income taxes		5,346			6,113			11,771			12,165
Income tax expense		1,892			2,133			4,185			4,397
Net income	$	3,454		$	3,980		$	7,586		$	7,768
Weighted avg. no. of diluted common shares		13,509,140			14,114,728			13,604,862			14,187,618
Diluted earnings per common share	$	0.26		$	0.28		$	0.56		$	0.55
Return on average common equity		11.09	%		12.97	%		12.11	%		12.80	%
Return on average assets		0.65	%		0.81	%		0.72	%		0.79	%
Average total assets	$	2,137,449		$	1,966,796		$	2,112,355		$	1,954,909
Average earning assets	$	2,066,915		$	1,901,002		$	2,042,199		$	1,891,056
Yield on average interest-earning assets		5.46	%		5.45	%		5.47	%		5.46	%
Cost of average interest-bearing liabilities		3.70	%		3.25	%		3.63	%		3.23	%
Net interest rate spread		1.76	%		2.20	%		1.84	%		2.23	%
Net interest margin		1.89	%		2.33	%		1.97	%		2.35	%
Non-interest exp. as a % of avg. assets		1.01	%		1.26	%		1.24	%		1.26	%
Efficiency ratio		50.20	%		47.19	%		52.75	%		46.87	%
Loan originations and purchases:
One- to four-family mortgage loans	$	73,061		$	55,899		$	191,290		$	179,143
Commercial and multi-family real estate loans		14,387			16,217			22,702			22,032
Consumer loans		27,996			20,121			58,466			37,826
Total loan originations and purchases	$	115,444		$	92,237		$	272,458		$	239,001

PennFed Financial Services, Inc.
(Holding Company for Penn Federal Savings Bank)
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
CALCULATION OF ADJUSTED NET INCOME
	For the three months ended						For the six months ended
	December 31,						December 31,
	2005			2004			2005			2004
Reported net income	$	3,454		$	3,980		$	7,586		$	7,768
Adjustments:
Commercial loan prepayment
premium		0			0			(2,688	)		0
Prepayment penalty on FHLB
advances		0			0			1,351			0
Acceleration of depreciation on branch
automation system software		0			0			372			0
Increase in obligation under certain
long-term benefit plans		0			0			259			0
Net tax effect		0			0			247			0
Adjustments, net of taxes		0			0			(459	)		0
"Adjusted" net income	$	3,454		$	3,980		$	7,127		$	7,768
Weighted avg. no. of diluted common shares		13,509,140			14,114,728			13,604,862			14,187,618
Diluted earnings per common share	$	0.26		$	0.28		$	0.52		$	0.55
Return on average common equity		11.09	%		12.97	%		11.38	%		12.80	%
Return on average assets		0.65	%		0.81	%		0.67	%		0.79	%
Non-interest exp. as a % of avg. assets		1.01	%		1.26	%		1.06	%		1.26	%
Efficiency ratio		50.20	%		47.19	%		50.21	%		46.87	%

PennFed Financial Services, Inc.
(Holding Company for Penn Federal Savings Bank)
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
				For the three months ended
	Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,
	2005			2005			2005			2005			2004
Selected Operating Data:
Interest and dividend income	$	28,350		$	27,683		$	26,751		$	26,167		$	25,999
Interest expense		18,715			17,491			16,290			15,300			15,060
Net interest and dividend income		9,635			10,192			10,461			10,867			10,939
Provision for loan losses		0			0			0			0			0
Net interest and dividend income
after provision for loan losses		9,635			10,192			10,461			10,867			10,939
Non-interest income:
Service charges		704			3,470			800			703			867
Net gain (loss) from real estate operations		2			(3	)		(1	)		0			157
Net gain on sales of loans		21			122			128			172			70
Income on BOLI		219			216			224			217			121
Other		153			181			146			152			140
Total non-interest income		1,099			3,986			1,297			1,244			1,355
Non-interest expenses:
Compensation & employee benefits		3,067			3,259			2,856			3,135			3,079
Net occupancy expense		594			585			578			643			559
Equipment		538			971			546			516			543
Advertising		165			134			170			155			227
Amortization of intangible assets		0			0			0			454			454
Federal deposit insurance premium		45			42			44			44			43
Extinguishment of debt		0			1,351			0			0			0
Other		979			1,411			1,534			1,196			1,276
Total non-interest expenses		5,388			7,753			5,728			6,143			6,181
Income before income taxes		5,346			6,425			6,030			5,968			6,113
Income tax expense		1,892			2,293			2,158			2,114			2,133
Net income	$	3,454		$	4,132		$	3,872		$	3,854		$	3,980
Weighted avg. no. of diluted common shares		13,509,140			13,700,349			13,742,337			13,959,738			14,114,728
Diluted earnings per common share	$	0.26		$	0.30		$	0.28		$	0.28		$	0.28
Return on average common equity		11.09	%		13.12	%		12.50	%		12.44	%		12.97	%
Return on average assets		0.65	%		0.79	%		0.76	%		0.78	%		0.81	%
Average total assets	$	2,137,449		$	2,087,261		$	2,029,268		$	1,985,274		$	1,966,796
Average earning assets	$	2,066,915		$	2,017,484		$	1,959,481		$	1,913,274		$	1,901,002
Yield on average interest-earning assets		5.46	%		5.47	%		5.46	%		5.48	%		5.45	%
Cost of average interest-bearing liabilities		3.70	%		3.55	%		3.44	%		3.34	%		3.25	%
Net interest rate spread		1.76	%		1.92	%		2.02	%		2.14	%		2.20	%
Net interest margin		1.89	%		2.05	%		2.14	%		2.26	%		2.33	%
Non-interest exp. as a % of avg. assets		1.01	%		1.49	%		1.13	%		1.24	%		1.26	%
Efficiency ratio		50.20	%		54.67	%		48.71	%		46.97	%		47.19	%
Loan originations and purchases:
One- to four-family mortgage loans	$	73,061		$	118,229		$	107,521		$	63,610		$	55,899
Commercial and multi-family real estate loans		14,387			8,315			8,470			8,110			16,217
Consumer loans		27,996			30,470			29,301			23,681			20,121
Total loan originations and purchases	$	115,444		$	157,014		$	145,292		$	95,401		$	92,237

PennFed Financial Services, Inc.
(Holding Company for Penn Federal Savings Bank)
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
CALCULATION OF ADJUSTED NET INCOME
				For the three months ended
	Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,
	2005			2005			2005			2005			2004
Reported net income	$	3,454		$	4,132		$	3,872		$	3,854		$	3,980
Adjustments:
Commercial loan prepayment
premium		0			(2,688	)		0			0			0
Prepayment penalty on FHLB
advances		0			1,351			0			0			0
Acceleration of depreciation on branch
automation system software		0			372			0			0			0
Increase in obligation under certain
long-term benefit plans		0			259			0			0			0
Additional Sarbanes Oxley
compliance costs		0			0			208			0			0
Net tax effect		0			247			(73	)		0			0
Adjustments, net of taxes		0			(459	)		135			0			0
"Adjusted" net income	$	3,454		$	3,673		$	4,007		$	3,854		$	3,980
Weighted avg. no. of diluted common shares		13,509,140			13,700,349			13,742,337			13,959,738			14,114,728
Diluted earnings per common share	$	0.26		$	0.27		$	0.29		$	0.28		$	0.28
Return on average common equity		11.09	%		11.66	%		12.93	%		12.44	%		12.97	%
Return on average assets		0.65	%		0.70	%		0.79	%		0.78	%		0.81	%
Non-interest exp. as a % of avg. assets		1.01	%		1.11	%		1.09	%		1.24	%		1.26	%
Efficiency ratio		50.20	%		50.21	%		46.94	%		46.97	%		47.19	%