<PAGE>


                               FORM 10-Q

                  SECURITIES AND EXCHANGE COMMISSION

                       Washington, D.C.  20549

                           ________________

             Quarterly Report Under Section 13 or 15 (d)
               of the Securities Exchange Act of 1934

<TABLE>
<S>                                     <C>
     For the quarter ended               SEC Commission File
      September 30, 1995                Docket Number 0-15334
</TABLE>
                           ________________

                             PALFED, INC.
    (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
           SOUTH CAROLINA                            57-0821295
  (State or other jurisdiction of                  (IRS Employer
   incorporation or organization)             identification number)

   107 CHESTERFIELD STREET SOUTH
        AIKEN, SOUTH CAROLINA                          29801
(Address of principal executive office)              (Zip Code)

</TABLE>

Registrant's telephone number, including area code: (803) 642-1400

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12  months (or for  such shorter  period that  the registrant was
required  to  file such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                              Yes [X]      NO [ ]

There were 5,101,064 shares of Common Stock outstanding on September 30, 1995.


<PAGE>

                                    PALFED, INC.

                           Quarterly Report on Form 10-Q
                    For The Quarter Ended SEPTEMBER 30, 1995

                                 TABLE OF CONTENTS
<TABLE>

PART I - FINANCIAL INFORMATION

<S>  <C>                                                         <C>
ITEM                                                              Page
                                                                  ----
1.  Financial Statements

      Consolidated Statements of Financial
      Condition as of September 30, 1995
      and December 31, 1994.                                       3

      Consolidated Statements of Income
      for the Three and Nine Months Ended
      September 30, 1995 and 1994.                                 4

      Consolidated Statements of Cash
      Flows for the Nine Months Ended
      September 30, 1995 and 1994.                                 5

      Notes to Consolidated Financial Statements                   6

2.  Management's Discussion and Analysis of
      Financial Condition and Results of
      Operations                                                  12

PART II - OTHER INFORMATION

ITEM

4.  Submission of Matters To a Vote of
      Security Holders                                            21

5.  Other Information                                             21

6.  (a) Exhibits                                                  21
    (b) Reports on Form 8-K                                       21

SIGNATURES                                                        22

</TABLE>


                                      2


<PAGE>


PALFED, Inc and Subsidiaries
Consolidated Statements of Financial Condition
(Unaudited)

<TABLE>
<CAPTION>
September 30 and December 31                          1995            1994
---------------------------------------------------------------------------
(in thousands, except share data)
<S>                                                <C>            <C>
ASSETS
Cash and due from banks                            $  8,895       $ 11,277
Interest and due from banks                           5,473          7,054
Investment and mortgage-backed securities:
 Available-for-sale                                  22,306         33,020
 Held-to-maturity                                   108,319        119,070
Loans receivable, net                               456,489        447,991
Investment in real estate, net                       14,403         14,720
Investment in Federal Home Loan Bank
 Stock                                               10,884         10,884
Premises and equipment, net                           5,327          5,157
Goodwill and intangible value of branch
 network, net                                         2,725          2,932
Accrued interest, net of allowance of
 $1,064 and $1,309, respectively                      3,918          3,710
Other assets                                          4,125          6,610
                                                   -----------------------
                                                   $642,864       $662,425
                                                   =======================

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
 Noninterest bearing accounts                      $ 28,858       $ 26,381
  Savings and NOW accounts                           96,755        109,864
 Certificates of deposit                            365,721        341,360
 Accrued interest payable                             6,880            644
                                                   -----------------------
    Total deposits                                  498,214        478,249
                                                   -----------------------
Federal Home Loan Bank advances                      88,800        135,800
Advance payments by borrowers for taxes
 and insurance                                        1,840            622
Other liabilities                                     3,914          2,598
                                                   -----------------------
   Total liabilities                                592,768        617,269

Commitments and contingencies

Stockholders' equity:
 Common stock, $1.00 par value; authorized
  10,000,000 shares; issued 5,146,166 shares;
  5,101,064 and 5,077,166 shares outstanding,
    respectively                                      5,142          5,142
 Additional paid-in capital                          26,872         26,938
 Retained earnings                                   19,535         16,481
 Unrealized loss on debt securities, net
  of income tax benefit of $644 and $1,505,
  respectively                                       (1,149)        (2,925)
 Treasury stock, at cost (41,102 and 65,000
  shares, respectively)                                (304)          (480)
                                                   -----------------------
 Total stockholders' equity                          50,096         45,156
                                                   -----------------------
                                                   $642,864       $662,425
                                                   =======================
</TABLE>

            The accompanying notes are an integral part of these
                     consolidated financial statements

                                       3


<PAGE>


PALFED, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)

<TABLE>
<CAPTION>

For the Three and Nine Months Ended
September 30                                   1995     1994     1995      1994
---------------------------------------------------------------------------------
(in thousands)

<S>                                          <C>      <C>       <C>      <C>
Interest income:
  Loans receivable                           $10,407  $ 9,497   $30,267  $28,090
  Mortgage-backed securities                   1,524    1,535     4,962    4,652
  Investment securities                          795      745     2,385    2,010
  Other interest income                           94       34       278       98
                                             -------  -------   -------  -------
    Total interest income                     12,820   11,811    37,892   34,850
                                             -------  -------   -------  -------

Interest expense:
  Deposits                                     6,188    4,618    17,578   13,920
  Other borrowings                             1,538    1,932     5,391    5,714
                                             -------  -------   -------  -------
    Total interest expense                     7,726    6,550    22,969   19,634
                                             -------  -------   -------  -------

Net interest income                            5,094    5,261    14,923   15,216
Provision for estimated loan losses              451      607       898    1,936
                                             -------  -------   -------  -------

  Net interest income after provision
    for estimated loan losses                  4,643    4,654    14,025   13,280
                                             -------  -------   -------  -------

Noninterest income:
  Checking transaction fees                      638      757     1,972    2,081
  Financial services fees                        217      132       635      555
  Late charge and other fees                     116       90       396      289
  Profit on sales of investment and
   mortgage-backed securities and loans          172       44       253      138
  Real  estate operations                       (342)    (601)     (863)  (1,800)
  Other                                          191      283       608    1,628
                                             -------  -------   -------  -------
    Total noninterest income                     992      705     3,001    2,891
                                             -------  -------   -------  -------

General and administrative expenses:
  Compensation and employee benefits           2,148    1,960     6,531    6,033
  Occupancy and equipment                        667      664     1,946    1,916
  Federal insurance premiums and
   assessments                                   355      380     1,039    1,219
  Professional and outside service fees          260      324       859    1,233
  Data processing                                222      199       659      598
  Advertising and public relations                69       80       567      359
  Other                                          227      270       708      753
                                             -------  -------   -------  -------
    Total general and administrative
      expenses                                 3,948    3,877    12,309   12,111
                                             -------  -------   -------  -------

Income before provision for income taxes       1,687    1,482     4,717    4,060
Provision for income taxes                       619      379     1,663    1,263
                                             -------  -------   -------  -------
Net income                                   $ 1,068  $ 1,103   $ 3,054  $ 2,797
                                             =======  =======   =======  =======
Earnings per share                           $  0.21  $  0.21   $  0.59  $  0.54
                                             =======  =======   =======  =======
</TABLE>

            The accompanying notes are an integral part of these
                     consolidated financial statements

                                       4


<PAGE>

PALFED, Inc and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)

<TABLE>

For the nine months ended September 30,              1995            1994
---------------------------------------------------------------------------
(in thousands)
<S>                                                <C>            <C>

Operating Activities:
 Cash flows from operating activities:
  Net income                                       $  3,054       $  2,797
  Adjustments to reconcile net income to cash
   provided by operations:
  Depreciation                                          589            530
  Amortization of goodwill and intangibles,
   loan fees, deferred income, and premiums and
   discounts                                            149            236
  Provision for estimated losses on loans, real
   estate and accrued interest receivable             2,125          3,802
  Stock dividends on FHLB stock                                       (135)
  Profit on sales of real estate                       (297)           (66)
  Profit on sales of loans                             (346)          (138)
  Loss on sale of assets available-for-sale              93
  Changes in:
   Accrued interest receivable, net                  (1,188)          (874)
   Accrued interest payable                           6,237          3,623
   Other assets                                       1,570          2,904
   Other liabilities (excluding deferred income)      1,436         (1,958)
  Other, net                                            158            677
                                                   -----------------------
   Net cash provided by operating activities         13,580         11,398
                                                   -----------------------
Investing activities:
 Cash flows from investing activities:
  Purchases of investment and mortgage-backed
   securities                                                      (11,040)
  Principal payments and maturities of investment
   and mortgage-backed securities                    10,781         13,169
  Purchases of assets available-for-sale             (9,754)       (41,828)
  Principal collections on assets available-
   for-sale                                           3,458          5,851
  Proceeds from sales of assets available-
   for-sale                                          50,023         55,924
  Loans originated (net of payments received)       (41,822)       (48,500)
  Proceeds from sales of foreclosed real estate       2,683          6,830
  Purchase of premises and equipment                   (749)        (1,319)
  Other, net                                           (215)             0
                                                   -----------------------
 Net cash provided (used) by investing
    activities                                       14,405        (20,913)
                                                   -----------------------
Financing Activities:
 Cash flows from financing activities:
  Net increase (decrease) in deposit accounts        13,729        (10,516)
  Proceeds from FHLB advances and other
   borrowed money                                    35,000        124,400
  Repayments of FHLB advances and other
   borrowed money                                   (82,000)      (113,659)
  Other, Net                                          1,323          1,552
                                                   -----------------------
   Net cash provided (used) by financing
    activities                                      (31,948)         1,777
                                                   -----------------------

Net decrease in cash and cash equivalents            (3,963)        (7,738)
Cash and cash equivalents, beginning of
 period                                              18,331         20,224
                                                   -----------------------
Cash and cash equivalents, end of period           $ 14,368       $ 12,486
                                                   =======================
Interest paid, net of amounts capitalized          $ 16,732       $ 16,011
                                                   =======================
Income taxes paid                                  $    800       $      0
                                                   =======================
</TABLE>

            The accompanying notes are an integral part of these
                     consolidated financial statements

                                       5


<PAGE>

                          PALFED, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

The  accounting and  reporting policies  of PALFED,  Inc. and  Subsidiaries (the
"Company") conform to  generally accepted accounting  principles and to  general
practice within the thrift industry.  They reflect all adjustments which, in the
opinion of  management, are necessary to a fair presentation of the consolidated
financial  position and results of operations for the interim periods presented.
These adjustments  are of  a normal  and recurring  nature.   These consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements,  the  related  notes,  and  the   report  of  independent
accountants included in the Company's Annual Report to Shareholders for the year
ended  December 31,  1994.   The year  end  consolidated statement  of financial
condition  data  was derived  from audited  financial  statements, but  does not
include all  disclosures required  by generally accepted  accounting principles.
The results of operations for the three and nine months ended September 30, 1995
are not necessarily indicative of the results to be expected for a full year.

STATEMENTS OF CASH FLOWS

Cash and cash equivalents  include cash and due from banks  and interest-bearing
deposits  with  other  banks.    The  following  table  summarizes  the  noncash
transactions for the nine months ended September 30:

<TABLE>
<CAPTION>
                                                 1995      1994
                                                 ----      ----
                                                  (in millions)
<S>                                             <C>        <C>
Securitizations of mortgage loans               $19.9      $31.8
Loan foreclosures                                 7.5        2.8
Financed sales of real estate                     5.4        2.3
Transfers of investment and mortgage-backed
  securities from available-for-sale to
  held-to-maturity                                          91.5
</TABLE>

LOANS RECEIVABLE

The Company  adopted Statement  of Financial  Accounting Standards  ("SFAS") No.
114, "Accounting By Creditors  for Impairment of a Loan", as amended by SFAS No.
118, "Accounting By Creditors For Impairment of a Loan -  Income Recognition and
Disclosures, an Amendment  of SFAS No. 114", on January 1,  1995.  Under the new
standard,  a loan  is  considered impaired,  based  on current  information  and
events, if  it is  probable  that the  Company will  be  unable to  collect  the
scheduled  payments  of  principal  and  interest  when  due  according  to  the
contractual terms of the loan agreement.


                                        6


<PAGE>


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company uses several factors in determining if a loan is impaired under SFAS
No.  114.   The  quarterly asset  classification  procedures include  a thorough
review  of  significant  loans  and   lending  relationships  and  include   the
accumulation of related data. This data includes loan payment status, borrowers'
financial  data and borrowers' operating  factors such as  cash flows, operating
income or loss, etc.

The measurement  of impaired loans  is generally based  on the present  value of
expected future cash flows discounted at the historical effective interest rate,
except that collateral dependent  loans are measured for impairment at  the fair
value of the collateral.  The adoption of SFAS No. 114 resulted in no additional
provision for credit losses at January 1, 1995.

Also  under this  standard,  loans  which  are  considered  to  be  in-substance
foreclosed continue to be measured at the fair value of the collateral, however,
these  loans are classified  as loans receivable rather  than as foreclosed real
estate, as was  the case  previously.  Therefore,  in-substance foreclosures  of
$3.2 million at December 31, 1994 have been reclassified from investment in real
estate to loans receivable.

Loans,  including impaired loans, are generally classified as nonaccrual if they
are past due in  excess of 90 days.  Loans that are  on a current payment status
or less than 90 days past due may also  be classified as nonaccrual if repayment
in full of interest and principal is in doubt.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No.
121,  "Accounting for  the Impairment  of Long-Lived  Assets and  for Long-Lived
Assets  To Be Disposed  Of".  SFAS  No. 121 requires that  long-lived assets and
certain identifiable  intangibles to be held and used by the Company be reviewed
for impairment whenever  events or  changes in circumstances  indicate that  the
carrying amount of an asset may not be recoverable.  If  the future undiscounted
cash  flows  expected to  result  from the  use of  the  asset and  its eventual
disposition  are less than the carrying amount  of the asset, an impairment loss
is recognized.   Otherwise, an impairment loss is not recognized. This statement
also  requires that long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower  of carrying amount or fair value less cost
to sell, except  for assets that are covered by  accounting standards related to
business segments and  unusual and infrequently occurring events.   SFAS No. 121
is  effective for the Company for the  year ending December 31, 1996. Management
is reviewing SFAS No. 121 to determine its effect on the financial condition and
results of operations of the Company.


                                        7


<PAGE>


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In May  1995, the FASB issued  SFAS No. 122, "Accounting  for Mortgage Servicing
Rights".   SFAS No. 122 requires that a mortgage banking enterprise recognize as
assets  rights to  service mortgage  loans for  others, however  those servicing
rights  are  acquired.   A mortgage  banking  enterprise that  acquires mortgage
servicing  rights through either the  purchase or origination  of mortgage loans
and  sells  or securitizes  those loans  with  servicing rights  retained should
allocate the total cost of the mortgage  loans to the loans and to the  mortgage
servicing rights based upon their relative fair values.  This statement requires
the capitalized mortgage servicing  rights be evaluated for impairment  based on
the fair  value of those rights  by stratifying the rights  based on predominant
risk characteristics of the underlying loans.  SFAS No. 122 is effective for the
Company  for the  year ending December  31, 1996,  although earlier  adoption is
encouraged.  Management is reviewing SFAS No. 122 to determine its effect on the
financial condition and results of operations of the Company.

In  October  1995, the  FASB issued  SFAS No.  123, "Accounting  for Stock-Based
Compensation".   SFAS No. 123 establishes accounting and reporting standards for
stock-based employee compensation plans  including stock purchase, stock option,
restricted stock  and stock appreciation  right plans.   SFAS No. 123  defines a
fair value  based method of accounting  for an employee stock  option or similar
equity   instrument  and  encourages  all  entities  to  adopt  that  method  of
accounting.    However,  it  also  allows  an  entity  to  continue  to  measure
compensation  cost  using  the  intrinsic   value  based  method  of  accounting
prescribed  by Accounting Principles Board opinion No. 25, "Accounting for Stock
Issued  To Employees".   Entities  electing  to remain  with  the accounting  in
Opinion  25 must make pro forma disclosures of net income and earnings per share
as  if the  fair value  method of accounting  defined in  SFAS No.  123 had been
applied.   SFAS  No. 123 is  generally effective  for the  Company for  the year
ending December 31, 1996, although earlier adoption is permitted.  Management is
reviewing  SFAS  No. 122  to determine  the effects  of the  two methods  on the
financial condition and results of operations of the Company.

In November  1995, the FASB  will issue a  Special Report entitled, "A  Guide to
Implementation of Statement 115, 'Accounting For Certain Investments in Debt and
Equity  Securities'".   The  FASB added  certain  transition provisions  to  the
Special  Report,  including the  provision  allowing  all  entities  a  one-time
opportunity  to  reconsider  their ability  and  intent  to  hold securities  to
maturity  and  be  allowed  to  transfer  securities  from  held-to-maturity  to
available-for-sale   without   "tainting"   their   remaining   held-to-maturity
securities.   Entities  would be  allowed  to make  transfers from  the date  of
issuance  of  the  Special Report  (mid-November  1995)  to  December 31,  1995.
Management is presently analyzing its portfolio  in anticipation of transferring
certain held-to-maturity securities to available-for-sale by December 31, 1995.


                                        8


<PAGE>


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


RECLASSIFICATIONS

Certain amounts in the 1994 consolidated financial statements have been
reclassified to conform to the 1995 presentation.

2.  EARNINGS PER COMMON SHARE

The following tables  illustrate the calculation of earnings per share for
the three and nine months ended September 30:

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:

<TABLE>
<CAPTION>
                                      Quarters Ended   Nine Months Ended
                                       September 30,     September 30,
                                      --------------   -----------------
                                       1995    1994     1995      1994
                                       ----    ----     ----      ----
<S>                                   <C>     <C>      <C>       <C>
Income before provision for
  income taxes ...................... $ 0.33  $ 0.32   $ 0.91    $ 0.82
Provision for income taxes ..........   0.12    0.11     0.32      0.28
                                      ------  ------   ------    ------
Earnings per share .................. $ 0.21  $ 0.21   $ 0.59    $ 0.54
                                      ======  ======   ======    ======
</TABLE>

CALCULATION OF COMMON AND COMMON EQUIVALENT SHARES:

<TABLE>
<CAPTION>
                                            Quarters Ended  Nine Months Ended
                                             September 30,    September 30,
                                            --------------  -----------------
                                                      (in thousands)
<S>                                          <C>    <C>         <C>    <C>
 1995
-----
Weighted average shares outstanding.........        5,101              5,094
Stock options outstanding...................   184               184
Shares assumed repurchased..................   107     77        124      60
                                               ---  -----        ---   -----
Average common and common equivalent shares.        5,178              5,154
                                                    =====              =====

 1994
-----
Weighted average shares outstanding.........        5,142              5,141
Stock options outstanding...................   136               136
Shares assumed repurchased..................    89     47        104      32
                                               ---  -----        ---   -----
Average common and common equivalent shares.        5,189              5,173
                                                    =====              =====
</TABLE>

3. INVESTMENT AND MORTGAGE-BACKED SECURITIES

Investment and mortgage-backed securities are summarized as follows:

<TABLE>
<CAPTION>
                                 September 30, 1995     December 31, 1994
                                 ------------------     -----------------
                                             Available-for-sale
                                 ----------------------------------------
                                 Amortized   Fair     Amortized    Fair
                                    Cost     Value      Cost       Value
                                 ---------   -----    ---------    -----
                                            (in thousands)
<S>                              <C>        <C>        <C>        <C>
Investment securities            $ 4,404    $ 4,417    $ 6,986    $ 6,709
Mortgage-backed securities        17,785     17,889     28,292     26,311
                                 -------    -------    -------    -------
                                 $22,189    $22,306    $35,278    $33,020
                                 =======    =======    =======    =======
</TABLE>


                                        9


<PAGE>


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                              Held-to-maturity
                                 ---------------------------------------
                                 Amortized   Fair      Amortized   Fair
                                    Cost     Value       Cost      Value
                                 ---------   -----     ---------   -----
                                             (in thousands)
<S>                              <C>       <C>         <C>       <C>
Investment securities            $ 37,014  $ 36,375    $ 39,108  $ 36,073
Mortgage-backed securities         73,163    71,954      82,134    75,598
Unrealized loss on securities
  transferred from available-
  for-sale                         (1,858)               (2,172)
                                 --------  --------    --------  --------
                                 $108,319  $108,329    $119,070  $111,671
                                 ========  ========    ========  ========
</TABLE>

4. ACTIVITY IN THE ALLOWANCE FOR ESTIMATED LOAN LOSSES

Changes in the allowance for estimated loan losses are summarized as follows for
the quarters and nine months ended September 30:

<TABLE>
<CAPTION>
                                      Quarters           Nine months
                                    1995      1994      1995      1994
                                  -----------------   -----------------
                                              (in thousands)
<S>                               <C>       <C>       <C>      <C>
Balance, beginning of period      $ 8,077   $ 9,358   $ 8,212  $ 9,884
Provisions                            451       607       898    1,936
Charge-offs                          (432)   (1,727)   (1,255)  (3,909)
Recoveries                            124        89       496      416
Reclassifications                     131
                                  -------   -------   -------  -------
Balance, end of period            $ 8,351   $ 8,327   $ 8,351  $ 8,327
                                  =======   =======   =======  =======
</TABLE>

At September 30, 1995, the recorded investment in loans for which impairment has
been recognized in  accordance with  SFAS No. 114  totalled approximately  $10.8
million, of which $6.2 million  related to loans with a corresponding  valuation
allowance  of $1.1  million.   The impaired  loans at  September 30,  1995, were
measured  for impairment using the fair value of the collateral as substantially
all of  these  loans were  collateral  dependent.   For  the nine  months  ended
September  30, 1995,  the  average recorded  investment  in impaired  loans  was
approximately $11.1 million.   The interest income recognized on  impaired loans
during the  nine months ended September  30, 1995 was $435,000.   Impaired loans
are summarized as follows at September 30:

<TABLE>
<CAPTION>
                                      1995
                                      ----
                                 (in thousands)
<S>                              <C>
Construction loans                  $   535
Land loans                            3,147
Residential mortgage loans              230
Commercial real estate loans          6,875
                                    -------
                                    $10,787
                                    =======
</TABLE>

                                        10


<PAGE>


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5. COMMITMENTS AND CONTINGENCIES

At June 30, 1995, the  purchaser of the lots at the Woodside  Plantation project
had  defaulted on  2  scheduled payments  under  the membership  agreement  with
Woodside Plantation Country  Club.  See  "Nonperforming Assets and  Restructured
Loans".


6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The  amounts of financial instruments with off-balance-sheet risk are as follows
at the dates indicated:

<TABLE>
<CAPTION>
                                     September 30  December 31
                                          1995         1994
                                     ------------  -----------
                                         (in thousands)
<S>                                 <C>             <C>
Financial instruments whose contract
  amounts represent credit risk:

  Commitments to originate loans       $ 22,741     $ 13,690
                                       ========     ========
  Unused lines of credit               $ 31,520     $ 31,522
                                       ========     ========
  Standby letters of credit            $    653     $    816
                                       ========     ========
</TABLE>


                                        11


<PAGE>


ITEM 2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS
GENERAL

The Company's  net earnings for the  three months ended September  30, 1995 were
$1.1 million or $0.21 per common share, unchanged from the 1994 comparable third
quarter.   The net earnings  for the nine  months ended September 30,  1995 were
$3.1 million or $0.59  per common share  compared to $2.8  million or $0.54  per
common  share  for  the comparable  period  in  1994.   Quarterly  income before
provision for income taxes increased by  $205,000 or 13.8% primarily as a result
of  a 25.7%  decrease in  the provision  for estimated  loan losses and  a 40.7%
increase  in  noninterest income.    However, this  increase  was  offset by  an
increase of $240,000 or 63.3% in provision for income taxes.  The 1994 quarterly
income  tax  provision  included  state  income  tax  refunds  of  approximately
$178,000, thereby lowering  the effective tax  rate to 25.6%.   The increase  in
year-to-date  earnings resulted  primarily from  a decrease  of $1.0  million or
53.6% in the provision for estimated losses on  loans and a decrease of $937,000
or 52.1%  in losses from  real estate operations,  offset by a  decrease of $1.0
million or  62.3% in  other noninterest  income and an  increase of  $400,000 or
31.7% in provision for income taxes.

In October  1995,  the Secretary  of Energy  announced the  Savannah River  Site
("SRS") as  the "preferred  location"  for a  new site  for tritium  production.
While this  is positive  news  for the  local economy,  many  details are  still
unresolved, such as  the decision to use existing reactor  technology or the new
linear  accelerator technology.   Additionally, no construction  is scheduled to
begin for three  years, therefore, additional layoffs  at SRS are possible,  and
will  depend on Congressional appropriation  of environmental clean  up funds at
SRS.

In  September 1995,  management and  the owners  of the  lots and  outparcels at
Woodside Plantation  completed the restructuring  of the debt  collateralized by
that property.  See NONPERFORMING ASSETS AND RESTRUCTURED LOANS.


COMPARISON OF 1995 AND 1994 OPERATING RESULTS

NET INTEREST INCOME

During the third quarter of 1995,  the net interest margin continued to contract
from the 1994 level.  Net interest income was $5.1 million for the quarter ended
September 30, 1995, a decrease of $167,000 or 3.2% compared to the quarter ended
September 30, 1994.  Total interest income increased $1.0 million  or 8.5% while
total interest expense increased $1.2 million or 18.0%.  The net interest margin
was 3.22% for the third quarter of 1995 compared to 3.40%  for the 1994 quarter.
The costs of liabilities increased faster than the increase in  yield on assets,
however, this effect was partially offset by a decline of $43.5 million or 31.9%
in average


                                        12


<PAGE>


Federal   Home   Loan  Bank  advances. For  the  nine  months   ended  September
30, 1995, net  interest income decreased  by $293,000 or  1.9% to $14.9  million
compared to  the nine months  ended September 30,  1994.  Total  interest income
increased  $3.0 million  or 8.7%,  while total  interest expense  increased $3.3
million or 17.0% from the 1994 period.  The net interest margin was 3.11% during
the nine months of 1995 compared to 3.29% during the nine months in 1994.

PROVISION FOR ESTIMATED LOSSES ON LOANS

Due  to reductions in nonperforming  and criticized assets,  the 1995 provisions
and charge-offs continue to be less  than the levels experienced in prior years.
The provision for estimated losses  on loans was $451,000 for the  quarter ended
September 30, 1995, compared to $607,000 for the 1994 quarter.   Net charge-offs
for the 1995 quarter were $308,000 or 0.07% of average loans receivable compared
to $1.6 million or 0.36% of average loans receivable for the 1994 quarter.   For
the  comparable  nine month  periods, the  provision  for estimated  loan losses
decreased from  $1.9 million in 1994  to $898,000 in 1995  while net charge-offs
decreased from  $3.5 million or  0.78% of  average loans receivable  in 1994  to
$759,000 or 0.17% of average loans receivable in 1995.   The resulting allowance
for estimated losses on  loans at September 30,  1995 and 1994 was  $8.4 million
and $8.3 million,  respectively.   While management  uses its  best judgment  in
establishing the  allowance for loan  losses, there is no  assurance that future
provisions and  charge-offs will not return  to the higher levels  seen in prior
years.  SEE NONPERFORMING ASSETS AND RESTRUCTURED LOANS.

NONINTEREST INCOME

Noninterest income was  $992,000 for the  quarter ended September  30, 1995,  an
increase of $287,000 or 40.7% over the 1994 quarter. Improvements in real estate
operations, profits on sales of securities and loans and financial services fees
exceeded declines in checking transaction fees and other noninterest income.

Real  estate operations losses decreased $259,000 during the comparable quarters
primarily as a  result of: an increase of $122,000 in  net profits on foreclosed
real estate;  a decrease  of $103,000  in expenses associated  with real  estate
acquired  for  development  and sale;  and  a  decrease of  $70,000  in expenses
associated with the maintenance and sale of foreclosed real estate.  The Company
experienced  profits of  $172,000  on sales  of  investment and  mortgage-backed
securities and  loans during the 1995  quarter compared to $44,000  for the 1994
quarter.   Financial services fees increased by  $85,000 to $217,000 in the 1995
quarter due  to increased  sales of tax  deferred annuities and  other financial
products.

These  improvements were  partially offset  by declines  in other  components of
noninterest income.  Checking transaction fees decreased by $119,000 or 15.7% to
$638,000 for the 1995 quarter.  The decrease was caused in part by a decrease in
certain low


                                        13


<PAGE>

balance   checking   accounts   which   generated  fee  income  in  1994.  Other
noninterest  income decreased  by $92,000  or 32.5%  to $191,000  in 1995.   The
decline was  caused by the  receipt in  1994 of $46,000  in interest on  federal
income tax  refunds and  by a  decrease of $38,000  in insurance  commissions on
consumer life policies.

For the  nine months ended September  30, 1995, noninterest income  increased by
$110,000  or 3.8% to $3.0 million from the 1994 period.  For the comparable nine
month  periods, financial services fees increased by  $80,000 or  14.4% and real
estate operations improved  by $937,000  or 52.1%.   However, other  noninterest
income decreased by $1.0  million or 62.7% from 1994  to 1995.  The  1994 amount
included the receipt of $767,000 in interest on federal income tax refunds.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $3.9  million for each of the  quarters
ended September  30, 1995 and  1994.   For the nine  months ended  September 30,
1995,  general and administrative expenses  increased $198,000 or  1.6% to $12.3
million.   Compensation and employee  benefits expense increased  by $188,000 or
9.6% and $498,000 or 8.3% during the three and nine month periods, respectively.
The  primary components of compensation  and employee benefits  are comprised as
follows:

<TABLE>
<CAPTION>
                              Three Months Ended  Nine Months Ended
                              Sept. 30  Sept. 30  Sept. 30  Sept. 30
                                1995      1994      1995      1994
                              --------  --------  --------  --------
                                        (in thousands)
<S>                           <C>       <C>       <C>       <C>
Salaries and commissions       $ 1,967  $ 1,836   $ 5,791   $ 5,625
Incentive programs                 127       74       339       280
Medical and retirement             170      214       620       683
Payroll and other taxes            132      126       466       445
Other expenses                      25       24        77        67
                               -------   ------   -------    ------
                                 2,421    2,274     7,293     7,100
Capitalized costs of loan
  originations                    (273)    (314)     (762)   (1,067)
                               -------    -----    ------    ------
                               $ 2,148  $ 1,960   $ 6,531   $ 6,033
                               ======   =======   =======   =======
</TABLE>

Salaries  and benefits  increased 6.5%  during the  quarter ended  September 30,
1995,  primarily due to an  increase of 7.1% in  salaries and commissions and an
increase of 71.6%  in incentive  programs.  Expenses  associated with  incentive
programs increased due to higher earnings in 1995.  Medical and retirement costs
declined  20.6% during the 1995 quarter resulting from decreased pension expense
caused  by discontinuing  life insurance  benefits within  the pension  plan and
changes  in actuarial assumptions.   The  decline of  13.1% in  capitalized loan
costs resulted  from decreased  loan  originations in  the comparable  quarters,
continuing the 1995 trend.

During  the quarter ended September  30, 1995, professional  and outside service
fees  decreased  by $64,000  or  19.8% to  $260,000 in  1995.   The  decrease is
primarily  attributable to  a  decrease of


                                        14


<PAGE>


$49,000  or  36.0%  in  legal  costs,  especially   those   costs   incurred  in
connection  with bankruptcies and foreclosures. Other general and administrative
expenses  decreased  by  $43,000 or 15.9%  due  to decreases in insurance costs,
teller shortages, consumer loan recovery expenses and appraisal expenses, offset
by an increase in the amortization of goodwill and other intangibles.

During  the comparable nine month periods, professional and outside service fees
declined $374,000 or  30.03% due to decreased legal and consulting expenses, and
federal  deposit insurance  premiums declined  by $180,000  or 14.08%  due to  a
reduction  in the  risk based  premium from  31 cents  to 26  cents per  $100 of
deposits. Advertising  and public  relations increased  by $180,000  to $567,000
during  the  1995  period  due  to  the  new  television,  print  and  billboard
advertising in connection with  the new marketing campaign to  position Palmetto
Federal as "The Bank of Choice" in South Carolina.

LENDING ACTIVITIES

During  the quarter  ended  September 30,  1995,  the Company  originated  $43.3
million in loans compared  to $37.4 million during  the 1994 quarter.  The  1995
originations  included $21.9 million  in residential  mortgage, $8.1  million in
construction  and $13.3  million in  consumer and  commercial loans  compared to
$15.1 million, $6.1 million and $16.2 million, respectively, for the 1994  third
quarter.   The increase of 15.7%  in total originations reverses  the decline in
originations  experienced  during the  earlier  months of  1995,  however, total
originations  in 1995 of $116.1 million continues  to lag behind the 1994 figure
of $186.4 million.

ASSET/LIABILITY MANAGEMENT

Interest-earning  assets  were  $604.5  million  at  September  30,  1995, which
represented a  decline of 0.7%  from June 30, 1995,  and a decline  of 1.7% from
December  31,  1994.    Interest-bearing  liabilities  were  $587.0  million  at
September 30, 1995, which represented a decline of 1.9% from June 30, 1995 and a
decline of  4.4% from December 31, 1994.  During the  second quarter, management
continued its strategy  of repaying  maturing Federal Home  Loan Bank  Advances,
primarily short term variable  rate advances, through the use  of funds provided
by sales of loans and mortgage-backed  securities.  The controlled shrinkage  in
interest earning assets and  liabilities has decreased the Bank's  interest rate
risk  profile  as the  sensitivity measure  has dropped  from negative  1.89% at
December 31, 1994 to negative 1.38% at June 30, 1995 (the  latest date for which
information is  available).  For the  nine months ended September  30, 1995, the
ratio of average interest-earning assets to average interest-bearing liabilities
was 1.022 compared to 1.007 for the 1994 period.

The following table describes the extent to which changes in  interest rates and
changes in  volume of  interest-earning assets and


                                        15


<PAGE>


interest-bearing  liabilities  have  affected Palmetto Federal's interest income
and expense during the periods indicated.  For each category of interest-earning
asset  and  interest-bearing  liability,  information  is  provided  on  changes
attributable  to (1) change in volume (change in volume multiplied by old rate);
(2) change in rates (change in rate  multiplied by  old  volume); (3) change  in
rate-volume  (change in  rate multiplied by the change in volume).


<TABLE>
<CAPTION>
                                          For The Nine Months Ended
                                          Sept. 1995 vs. Sept. 1994
                                            Increase (Decrease)
                                   --------------------------------------
                                                       Rate/
                                   Volume     Rate    Volume    Total
                                   ------     ----    ------    -----
                                              (in thousands)
<S>                                <C>        <C>     <C>       <C>
Changes in:
     Interest income:
      Loans receivable............  $   394   $ 1,757   $  26    $  2,177
      Mortgage-backed securities..     (371)      739     (58)        310
      Investments and other.......      250       273      32         555
                                    -------   -------   -----    --------
     Total interest income........      273     2,769       0       3,042
                                    -------   -------   -----    --------
     Interest expense:
      Deposits....................      672     2,846     140       3,658
      FHLB advances and other
        borrowed money............   (1,176)    1,074    (221)       (323)
                                    -------   -------   -----    --------
     Total interest expense.......     (504)    3,920     (81)      3,335
                                    -------   -------   -----    --------
     Net interest income (expense)  $   777   $(1,151)  $  81    $   (293)
                                    =======   =======   =====    ========
</TABLE>

The increase in total interest income was caused primarily by an increase in the
average yield  on average interest-earning assets from 7.59% in 1994 to 8.20% in
1995.    Additionally, average  interest-earning  assets  increased from  $611.9
million in 1994 to  $616.1  million in  1995.  Total interest  expense increased
due  to a significant  increase in the average  cost of average interest-bearing
liabilities from 4.31%  in 1994 to 5.09%  in 1995 despite  a decline in  average
interest-bearing liabilities  from $607.8 million  in 1994 to $602.8  million in
1995.   The 1994 averages and yields have been recalculated by reclassifying in-
substance foreclosed  loans from real estate  to loans consistent with  the 1995
classification.

The  following table presents information  with respect to  interest income from
interest-earning assets and interest  expense from interest-bearing liabilities,
expressed in both dollars (in thousands) and rates, for the periods indicated.


                                        16


<PAGE>


<TABLE>
<CAPTION>
                                                    Interest                      Interest
                                                    Income/     Yield/            Income/     Yield/
                                           1995     Expense     Rate      1994    Expense     Rate
                                           ----     --------    ------    ----    --------    ------
<S>                                      <C>        <C>         <C>     <C>       <C>         <C>
Average interest-earning assets:
   Interest bearing deposits             $  6,534   $   278      5.68%  $  4,158   $    98     3.14%
   Loans receivable                       455,519    30,267      8.86    449,690    28,090     8.44
   Mortgage-backed securities              99,714     4,962      6.63    108,336     4,652     5.73
   Total investments (taxable)             43,422     1,794      5.51     38,864     1,531     5.25
   FHLB stock                              10,884       591      7.23     10,870       479     5.87
                                         --------   -------      ----   --------   -------     ----
    Total                                 616,073    37,892      8.20%   611,918    34,850     7.59%
                                         --------   -------      ----   --------   -------     ----

Average interest-bearing liabilities:
   Retail savings deposits               $ 31,039   $   629      2.71%  $ 31,234   $   616     2.63%
   Brokered time deposits                                                  2,673       178     8.87
   Retail time deposits                   364,781    15,668      5.74    327,480    11,754     4.79
   Demand deposits                         98,785     1,281      1.73    110,427     1,372     1.66
   FHLB Advances                          108,235     5,391      6.66    135,990     5,714     5.60
   Other borrowed money                                                       56         0        0
                                         --------   -------      ----   --------   -------     ----
      Total                               602,840    22,969      5.09%   607,860    19,634     4.31%
                                         --------   -------      ----   --------   -------     ----
Net interest income                                 $14,923                        $15,216
                                                    =======                        =======
Interest rate spread                                             3.11%                         3.28%
                                                                 ====                          ====
Net yield                                                        3.23%                         3.32%
                                                                 ====                          ====
</TABLE>

In November  1995, the FASB  will issue a  Special Report entitled,  "A Guide to
Implementation of Statement 115, 'Accounting For Certain Investments in Debt and
Equity  Securities'".   The  FASB added  certain  transition provisions  to  the
Special  Report,  including  the  provision  allowing  all  entities a  one-time
opportunity  to  reconsider  their ability  and  intent  to  hold securities  to
maturity  and  be  allowed  to  transfer  securities  from  held-to-maturity  to
available-for-sale   without   "tainting"   their   remaining   held-to-maturity
securities.    Entities would  be allowed  to make  transfers  from the  date of
issuance  of  the  Special Report  (mid-November  1995)  to  December 31,  1995.
Management is  presently analyzing its portfolio in anticipation of transferring
certain held-to-maturity securities to available-for-sale by December 31, 1995.

NONPERFORMING ASSETS AND RESTRUCTURED LOANS

Nonperforming assets (nonaccrual  loans and foreclosed real estate  ("REO")) and
restructured  loans, net of specific allowances, decreased from $35.9 million or
5.4% of total  assets at  December 31, 1994  to $29.1 million  or 4.5% of  total
assets  at September  30, 1995.   The  decrease is  primarily attributable  to a
decrease  in   restructured  loans  due  to  sustained   performance  under  the
restructured terms.   The table below  sets forth the amounts  and categories of
Palmetto  Federal's nonperforming  assets and  restructured loans  at the  dates
indicated.


                                        17


<PAGE>


<TABLE>
<CAPTION>
                                     Sept. 30  June  30  Dec.  31  Sept. 30
                                       1995      1995      1994      1994
                                     --------  --------  --------  --------
                                          (dollars in thousands)
<S>                                  <C>        <C>       <C>       <C>
Nonaccrual loans                     $ 8,399    $ 9,021   $12,466   $11,708
Foreclosed real estate                 7,937      8,812     8,269     9,941
Restructured loans                    13,967     16,103    16,412    16,911
                                     -------    -------   -------   -------
                                      30,303     33,936    37,147    38,560
Less specific valuation
 allowances                           (1,219)      (897)   (1,288)   (1,166)
                                     -------    -------   -------   -------
                                     $29,084    $33,039   $35,859   $37,394
                                     =======    =======   =======   =======
General loan loss allowance
 as a percentage of the total          24.5%      21.1%     19.3%     19.1%
                                       =====      =====     =====     =====
Total as a percentage of loans
 receivable, net                        6.4%       7.2%      8.1%      8.4%
                                        ====       ====      ====      ====
Total as a percentage of total assets   4.5%       5.1%      5.4%      5.7%
                                        ====       ====      ====      ====
</TABLE>

Changes  in the components of nonperforming assets and restructured loans during
the three months ended September 30, 1995 were as follows:

<TABLE>
<CAPTION>
                                  Nonaccrual    REO     Restructured   Total
                                    Loans                  Loans
                                  ----------    ---     ------------   -----
                                                (in thousands)
<S>                               <C>         <C>         <C>         <C>
June 30, 1995                      $  9,021   $  8,812    $ 16,103    $33,936
Performing loans which
  became nonperforming                1,866        982       2,559      5,407
Upgrades due to performance          (2,048)                (4,344)    (6,392)
Sales                                           (2,241)                (2,241)
Net principal collections              (206)                   (29)      (235)
Charge-offs and write downs                       (172)                  (172)
Restructured loans which became
  nonaccrual                            468                   (468)
Nonaccrual loans which became
  restructured                         (146)                   146
Nonaccrual loans which became REO      (556)       556
                                   --------   --------    --------    -------
September 30, 1995                 $  8,399   $  7,937    $ 13,967    $30,303
                                   ========   ========    ========    =======
</TABLE>

The  $1.9 million of new  nonaccrual loans is comprised  of one loan of $466,000
and several  other  loans, none  of  which individually  exceed $162,000.    The
$466,000 loan is collateralized by commercial real estate, a personal residence,
a certificate of deposit and certain equipment.

The $2.2 million of REO sold consist of fifteen properties, the largest of which
is  a hunting preserve  of approximately 1,800  acres with a book  value of $1.2
million,  and a parcel  of 350  acres adjacent to  a subdivision  in south Aiken
County with a book value of $0.5 million.

The  $4.3 million of upgraded restructured loans  consists primarily of one loan
of  $3.6 million  collateralized by  an apartment  complex in  Charleston, South
Carolina.  The  restructuring occurred in 1993 and the  loan has performed under
the new terms since that time.

The  $2.6  million in  new  restructured loans  consists primarily  of  loans to
Woodside  Development Limited  Partnership  (the "Purchaser")  with a  principal
balance of $2.3 million, which financed the


                                        18


<PAGE>


December 1993 sale  of the remaining developed lots and seven  outparcels at the
Woodside Development  project, along with   the  development  and  sales offices
at Woodside Plantation. The restructuring included the following terms:  (1) the
Company received 35 lots in return for a $492,000 reduction of the debt; (2) the
Company agreed to pay up to $330,000 toward  joint  marketing efforts over three
years related to the lots it owns; (3) the Company agreed to make the  third and
fourth  quarter  1995  payments  under  the  membership  agreement  to  Woodside
Plantation Country Club  ("WPCC") in the amount of $184,500; (4) agreed to grant
a  two  year  extension  until  December  31,  1997 of the Purchaser's option to
purchase  the  remaining  undeveloped  acreage  and; (5) the Purchaser agreed to
bring  the membership  obligation current by payment of $189,000. Management has
accrued the marketing expenses related to the restructuring and the liability of
$184,500 related to memberships.

The  Purchaser's principal  source  of repayment  of  the restructured  debt  is
homesite sales  at the Woodside Plantation  project which to date  have not been
sufficient  to  service all  the  Purchaser's obligations.    The  terms of  the
restructuring are  intended to improve the  cash flow of the  project.  However,
there are no assurances that home  site sales will be sufficient to service  the
restructured debt.   The  Company remains  contingently liable  to WPCC  for any
unpaid amounts due under the membership agreement.  See Note 11 to the Company's
Consolidated Financial Statements for the year ended December 31, 1994.

The $1.0  million of performing loans  which became REO consists of   six loans,
the  largest of  which  is the  Woodside  Development Limited  Partnership  loan
discussed above.

Potential  problem  loans represent  loans  that are  current  as to  payment of
principal and interest,  but where  management has doubts  about the  borrower's
ability to comply with present repayment terms.  These loans are not included in
the above  table of nonperforming assets  and restructured loans.   These loans,
primarily commercial real estate loans, totalled approximately $10.4  million at
September 30, 1995.

The  Bank's  total  criticized  assets  include  its  nonperforming  assets  and
restructured loans  of $29.1 million as  well as its potential  problem loans of
$10.4 million.   The following table summarizes the Bank's  criticized assets as
of the dates indicated:

<TABLE>
<CAPTION>
                       Sept. 30   June 30   Dec.  31   Sept. 30
                         1995       1995      1994       1994
                       --------   -------   --------   --------
                                   (in thousands)
<S>                    <C>        <C>       <C>         <C>
Special mention         $ 8,194   $ 3,664   $11,050     $ 6,173
Substandard              29,903    31,881    30,138      33,620
Doubtful                     15         0         0           0
Loss                      1,366     1,243     1,822       3,160
                        -------   -------   -------     -------
                        $39,478   $36,788   $43,010     $42,953
                        =======   =======   =======     =======
</TABLE>


                                        19


<PAGE>


LIQUIDITY

Palmetto  Federal's principal  sources of  funds are deposits,  loan repayments,
proceeds from sales and  principal payments of invest- ment  and mortgage-backed
securities and loans,  FHLB advances, other  borrowings, and retained  earnings.
The liquidity of Palmetto Federal's operations is measured by the  ratio of cash
and  short-term investments  as defined  by the  OTS regulations  to the  sum of
savings and borrowings payable in one year,  less loans on savings.  The  Bank's
average liquidity level for September  1995 was 7.8% which was in excess  of the
required amount of 5.0%.

REGULATORY MATTERS

The  Office of  Thrift  Supervision ("OTS")  began  its regular  examination  of
PALFED, Inc.  and the Bank in  July 1995.  Management  received the confidential
Report of Examination during the quarter ending September 30, 1995.

The  OTS regulatory  capital  regulations specify  three  capital standards  for
thrifts:   a core capital requirement of 3.0%; a tangible capital requirement of
1.5%;  and a  risk-based  capital  requirement  of  8.0%.    Palmetto  Federal's
regulatory capital  as of September 30,  1995, was 6.6% tangible  capital,  6.6%
core  capital, and 11.3%  risk-based capital, and  therefore the Bank  meets the
well-capitalized standard  under the  FDIC prompt corrective  action guidelines.
Because of  uncertainties regarding the  insurance fund recapitalization  and to
help maintain well-capitalized  status PALFED, Inc. made a  capital contribution
of $1.5 million to Palmetto Federal during the quarter ended September 30, 1995.

Under current law, banks and thrifts pay FDIC insurance premiums of  at least 23
cents per $100 of deposits until the Bank Insurance Fund ("BIF") and the Savings
Association Insurance Fund  ("SAIF") attain a required 1.25% reserve  level.  On
August 8, 1995, the FDIC  reduced deposit insurance premiums paid by  most banks
but  kept  existing assessment  rates intact  for savings  associations, thereby
placing  thrifts at a competitive disadvantage.  Several alter-natives are being
discussed to  both alleviate  this disparity  and still rapidly  build the  SAIF
reserve to  1.25%.  The Administration  has proposed a plan  to recapitalize the
SAIF by  January 1, 1996, under which thrifts will  pay a one-time assessment of
85 to 90  cents per  $100 of deposits.   Based on  insurable deposits of  $500.0
million, this proposed assessment  would cost the Company between  $4.25 million
and  $4.5 million.   However,  management expects this  assessment to  result in
decreased  deposit  insurance premiums  in  the  future.   Management  presently
anticipates the  one-time assessment will not  cause the Bank to  fall below the
well capitalized regulatory capital standard.


                                        20


<PAGE>


Part II.  Other Information

Item 4.  Submission of Matters To a Vote of Security Holders

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

     Exhibit 11.1  Statement regarding computation of per share data is included
     in Item 1 and incorporated herein by reference.

     Exhibit 27  Financial Data Schedule.

     (b)  Reports on Form 8-K.
     The Company  did not file any reports  on Form 8-K during  the three months
     ended September 30, 1995.


                                          21


<PAGE>


                                   SIGNATURES


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.


                                        PALFED, Inc.
                                        ----------------------------------------
                                        (Registrant)



Date:    November 10, 1995              /S/  JOHN C. TROUTMAN
         -----------------------       -----------------------------------------
                                       John C. Troutman
                                       President and Chief
                                       Executive Officer



Date:    November 10, 1995             /S/  DARRELL R. RAINS
         ----------------------        -----------------------------------------
                                       Darrell R. Rains
                                       Executive Vice President
                                       and Chief Financial Officer



Date:    November 10, 1995             /S/  MICHAEL B. SMITH
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                                       Michael B. Smith
                                       Senior Vice President
                                       and Controller