----

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**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      DC  20549 **

**FORM      10-Q **

**(Mark      One) **

| **x**  | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES **EXCHANGE                ACT OF 1934****                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **For                the quarterly period ended June 30, 2007**                                                                                                                                                                                                                                                                                        |
|   | **OR**                                                                                                                                                                                                                                                                                                                                                 |
| **o**  | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES **EXCHANGE                ACT OF 1934****                                                                                                                                                                                                                    |
|   | **For                the transition period                from                     to                         ** |
|   | **Commission                file number: 000-51214**                                                                                                                                                                                                                                                                                                   |

**Prudential        Bancorp, Inc. of Pennsylvania**

| **Pennsylvania**                                                                   |   | **68-0593604**                                      |
|------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation or Organization)      |   | (I.R.S.                Employer Identification No.) |
|                                                                               |   |                                                |
| **1834                Oregon Avenue****Philadelphia,                Pennsylvania** |   | **19145**                                           |
| (Address                of Principal Executive Offices)                            |   | (Zip                Code)                           |

**(215)        755-1500**

| Large                accelerated filer o | Accelerated                filer o | Non-accelerated                filer x |
|------------------------------------------|------------------------------------|----------------------------------------|

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**PRUDENTIAL      BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES**

**TABLE      OF CONTENTS**

|                                             |                                                                                                                                                                                                  | PAGE   |
|--------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                             |                                                                                                                                                                                                  |   |
| **PART                I FINANCIAL INFORMATION:** |
|                                             |                                                                                                                                                                                                  |   |
| Item                1.                           | Condensed                Financial Statements                                                                                                                                                         |   |
|                                             |                                                                                                                                                                                                  |   |
|                                             | Unaudited                Consolidated Statements of Financial Condition at June 30, 2007 and                September 30, 2006                                                                        | 2      |
|                                             |                                                                                                                                                                                                  |   |
|                                             | Unaudited                Consolidated Statements of Income for the Three and Nine Months Ended                June 30, 2007 and 2006                                                             | 3      |
|                                             |                                                                                                                                                                                                  |   |
|                                             | Unaudited                Consolidated Statement of Changes in Stockholders’ Equity and                Comprehensive Income for the Nine Months Ended June 30, 2007 and                2006 | 4      |
|                                             |                                                                                                                                                                                                  |   |
|                                             | Unaudited                Consolidated Statements of Cash Flows for the Nine Months Ended June                30, 2007 and 2006                                                                   | 5      |
|                                             |                                                                                                                                                                                                  |   |
|                                             | Notes                to Consolidated Unaudited Financial Statements                                                                                                                                   | 6      |
|                                             |                                                                                                                                                                                                  |   |
| Item                2.                           | Management's                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                   | 19     |
|                                             |                                                                                                                                                                                                  |   |
| Item                3.                           | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                             | 28     |
|                                             |                                                                                                                                                                                                  |   |
| Item                4.                           | Controls                and Procedures                                                                                                                                                                | 31     |
|                                             |                                                                                                                                                                                                  |   |
| **PART                II OTHER INFORMATION**     |
|                                             |                                                                                                                                                                                                  |   |
| Item                1.                           | Legal                Proceedings                                                                                                                                                                      | 32     |
|                                             |                                                                                                                                                                                                  |   |
| Item                1A.                          | Risk                Factors                                                                                                                                                                           | 32     |
|                                             |                                                                                                                                                                                                  |   |
| Item                2.                           | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                            | 32     |
|                                             |                                                                                                                                                                                                  |   |
| Item                3.                           | Defaults                Upon Senior Securities                                                                                                                                                        | 33     |
|                                             |                                                                                                                                                                                                  |   |
| Item                4.                           | Submission                of Matters to a Vote of Security Holders                                                                                                                                    | 33     |
|                                             |                                                                                                                                                                                                  |   |
| Item                5.                           | Other                Information                                                                                                                                                                      | 33     |
|                                             |                                                                                                                                                                                                  |   |
| Item                6.                           | Exhibits                                                                                                                                                                                              | 33     |
|                                             |                                                                                                                                                                                                  |   |
| SIGNATURES                                       | 34                                                                                                                                                                                                    |

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| **PRUDENTIAL                  BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES**                                                |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                          |   |
| **UNAUDITED                  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**                                                 |   |
|                                                                                                                          |   |   |   |   |   |
|                                                                                                                          |   | **June                  30,** |   | **September                  30,** |   |
|                                                                                                                          |   | **2007** |   | **2006** |   |
|                                                                                                                          |   | **(Dollars                  in Thousands)** |   |
| **ASSETS**                                                                                                                    |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |
| Cash                  and amounts due from depository institutions                                                            |   | $ | 4,758 |   | $ | 5,743 |   |
| Interest-bearing                  deposits                                                                                    |   |   | 6,291 |   |   | 7,685 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| Total                  cash and cash equivalents                                                                              |   |   | 11,049 |   |   | 13,428 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| Investment                  securities held to maturity (estimated fair value—June 30, 2007,                  $131,795; |   |   |   |   |   |   |   |
| September                  30, 2006, $129,593)                                                                                |   |   | 135,215 |   |   | 132,084 |   |
| Investment                  securities available for sale (amortized cost—June 30, 2007, $38,007;                       |   |   |   |   |   |   |   |
| September                  30, 2006, $38,007)                                                                                 |   |   | 38,372 |   |   | 38,747 |   |
| Mortgage-backed                  securities held to maturity (estimated fair value—                                     |   |   |   |   |   |   |   |
| June                  30, 2007, $45,046; September 30, 2006, $49,526)                                                         |   |   | 47,164 |   |   | 50,360 |   |
| Mortgage-backed                  securities available for sale (amortized cost—                                         |   |   |   |   |   |   |   |
| June                  30, 2007, $5,929; September 30, 2006, $4,535)                                                           |   |   | 5,917 |   |   | 4,615 |   |
| Loans                  receivable—net of allowance for loan losses (June 30, 2007, $671;                                |   |   |   |   |   |   |   |
| September                  30, 2006, $618)                                                                                    |   |   | 223,526 |   |   | 219,418 |   |
| Accrued                  interest receivable:                                                                                 |   |   |   |   |   |   |   |
| Loans                  receivable                                                                                             |   |   | 1,260 |   |   | 1,251 |   |
| Mortgage-backed                  securities                                                                                   |   |   | 221 |   |   | 236 |   |
| Investment                  securities                                                                                        |   |   | 2,150 |   |   | 1,708 |   |
| Federal                  Home Loan Bank stock—at cost                                                                   |   |   | 2,438 |   |   | 2,217 |   |
| Office                  properties and equipment—net                                                                    |   |   | 2,103 |   |   | 1,721 |   |
| Prepaid                  expenses and other assets                                                                            |   |   | 7,993 |   |   | 6,596 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| TOTAL                  ASSETS                                                                                                 |   | $ | 477,408 |   | $ | 472,381 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                     |   |   |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| LIABILITIES:                                                                                                                  |   |   |   |   |   |   |   |
| Deposits:                                                                                                                     |   |   |   |   |   |   |   |
| Noninterest-bearing                                                                                                           |   | $ | 4,711 |   | $ | 6,035 |   |
| Interest-bearing                                                                                                              |   |   | 349,341 |   |   | 341,257 |   |
| Total                  deposits                                                                                               |   |   | 354,052 |   |   | 347,292 |   |
| Advances                  from Federal Home Loan Bank                                                                         |   |   | 32,753 |   |   | 31,784 |   |
| Accrued                  interest payable                                                                                     |   |   | 2,473 |   |   | 2,893 |   |
| Advances                  from borrowers for taxes and insurance                                                              |   |   | 1,926 |   |   | 1,230 |   |
| Accounts                  payable and accrued expenses                                                                        |   |   | 2,918 |   |   | 1,117 |   |
| Accrued                  dividend payable                                                                                     |   |   | 556 |   |   | 464 |   |
| Deferred                  income taxes, net                                                                                   |   |   | 77 |   |   | 153 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| Total                  liabilities                                                                                            |   |   | 394,755 |   |   | 384,933 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES (Note 8)                                                                       |   |   |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| STOCKHOLDERS'                  EQUITY:                                                                                        |   |   |   |   |   |   |   |
| Preferred                  stock, $.01 par value, 10,000,000 shares authorized, none                  issued                  |   |   | - |   |   | - |   |
| Common                  stock, $.01 par value, 40,000,000 shares authorized, issued                  12,563,750;              |   |   |   |   |   |   |   |
| outstanding                  - 11,614,166 at June 30, 2007; 12,064,320 at September 30,                  2006                 |   |   | 126 |   |   | 126 |   |
| Additional                  paid-in capital                                                                                   |   |   | 54,860 |   |   | 54,798 |   |
| Unearned                  ESOP shares                                                                                         |   |   | (3,959 | ) |   | (4,127 | ) |
| Treasury                  stock, at cost: 949,584 shares at June 30, 2007;                                                    |   |   |   |   |   |   |   |
| 499,430                  shares at September 30, 2006                                                                         |   |   | (12,570 | ) |   | (6,422 | ) |
| Retained                  earnings                                                                                            |   |   | 43,963 |   |   | 42,539 |   |
| Accumulated                  other comprehensive income                                                                       |   |   | 233 |   |   | 534 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| Total                  stockholders' equity                                                                                   |   |   | 82,653 |   |   | 87,448 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY                                                                   |   | $ | 477,408 |   | $ | 472,381 |   |
|                                                                                                                          |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.                                                    |   |   |   |   |   |   |   |

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| **PRUDENTIAL                  BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES** |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |
| **UNAUDITED                  CONSOLIDATED STATEMENTS OF INCOME**               |   |
|                                                                           |   |

|                                                                         |   | **Three                    Months Ended****June                    30,**                     |   | **Nine                    Months Ended****June                    30,**                      |   |
|------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|
|                                                                         |   | **2007**                                                                                     |   | **2006**                                                                                     |   | **2007** |   | **2006** |   |
|                                                                         |   | **(Dollars                    in Thousands Except Per****Share                    Amounts)** |   | **(Dollars                    in Thousands Except Per****Share                    Amounts)** |   |
| INTEREST                    INCOME:                                          |   |                                                                                         |   |                                                                                         |   |   |   |   |   |
| Interest                    on loans                                         |   | $                                                                                            | 3,792  |                                                                                         | $      | 3,380 |   | $ | 11,402 |   | $ | 9,335 |   |
| Interest                    on mortgage-backed securities                    |   |                                                                                         | 692    |                                                                                         |   | 769 |   |   | 2,105 |   |   | 2,421 |   |
| Interest                    and dividends on investments                     |   |                                                                                         | 2,262  |                                                                                         |   | 2,086 |   |   | 6,613 |   |   | 6,187 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Total                    interest income                                     |   |                                                                                         | 6,746  |                                                                                         |   | 6,235 |   |   | 20,120 |   |   | 17,943 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| INTEREST                    EXPENSE:                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Interest                    on deposits                                      |   |                                                                                         | 3,355  |                                                                                         |   | 2,816 |   |   | 9,807 |   |   | 7,804 |   |
| Interest                    on borrowings                                    |   |                                                                                         | 387    |                                                                                         |   | 294 |   |   | 1,102 |   |   | 680 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Total                    interest expense                                    |   |                                                                                         | 3,742  |                                                                                         |   | 3,110 |   |   | 10,909 |   |   | 8,484 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NET                    INTEREST INCOME                                       |   |                                                                                         | 3,004  |                                                                                         |   | 3,125 |   |   | 9,211 |   |   | 9,459 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| PROVISION                    (RECOVERY) FOR LOAN LOSSES                      |   |                                                                                         | (20    | )                                                                                            |   | 30 |   |   | 55 |   |   | 30 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NET                    INTEREST INCOME AFTER PROVISION                       |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| FOR                    LOAN LOSSES                                           |   |                                                                                         | 3,024  |                                                                                         |   | 3,095 |   |   | 9,156 |   |   | 9,429 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NON-INTEREST                    INCOME:                                      |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Fees                    and other service charges                            |   |                                                                                         | 165    |                                                                                         |   | 137 |   |   | 463 |   |   | 415 |   |
| Gain                    on sale of real estate owned                         |   |                                                                                         | -      |                                                                                         |   | - |   |   | - |   |   | 100 |   |
| Other                                                                        |   |                                                                                         | 97     |                                                                                         |   | 72 |   |   | 331 |   |   | 164 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Total                    non-interest income                                 |   |                                                                                         | 262    |                                                                                         |   | 209 |   |   | 794 |   |   | 679 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NON-INTEREST                    EXPENSE:                                     |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Salaries                    and employee benefits                            |   |                                                                                         | 1,173  |                                                                                         |   | 1,111 |   |   | 3,436 |   |   | 3,328 |   |
| Data                    processing                                           |   |                                                                                         | 117    |                                                                                         |   | 113 |   |   | 370 |   |   | 354 |   |
| Professional                    services                                     |   |                                                                                         | 17     |                                                                                         |   | 174 |   |   | 460 |   |   | 401 |   |
| Office                    occupancy                                          |   |                                                                                         | 85     |                                                                                         |   | 86 |   |   | 267 |   |   | 236 |   |
| Depreciation                                                                 |   |                                                                                         | 54     |                                                                                         |   | 60 |   |   | 173 |   |   | 180 |   |
| Payroll                    taxes                                             |   |                                                                                         | 61     |                                                                                         |   | 59 |   |   | 208 |   |   | 203 |   |
| Director                    compensation                                     |   |                                                                                         | 60     |                                                                                         |   | 67 |   |   | 198 |   |   | 206 |   |
| Other                                                                        |   |                                                                                         | 286    |                                                                                         |   | 338 |   |   | 885 |   |   | 933 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Total                    non-interest expense                                |   |                                                                                         | 1,853  |                                                                                         |   | 2,008 |   |   | 5,997 |   |   | 5,841 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| INCOME                    BEFORE INCOME TAXES                                |   |                                                                                         | 1,433  |                                                                                         |   | 1,296 |   |   | 3,953 |   |   | 4,267 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| INCOME                    TAXES:                                             |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Current                                                                      |   |                                                                                         | 501    |                                                                                         |   | 260 |   |   | 1,065 |   |   | 1,215 |   |
| Deferred                    (benefit) expense                                |   |                                                                                         | (45    | )                                                                                            |   | 154 |   |   | 50 |   |   | 128 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Total                    income tax                                          |   |                                                                                         | 456    |                                                                                         |   | 414 |   |   | 1,115 |   |   | 1,343 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NET                    INCOME                                                |   | $                                                                                            | 977    |                                                                                         | $      | 882 |   | $ | 2,838 |   | $ | 2,924 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| BASIC                    EARNINGS PER SHARE                                  |   | $                                                                                            | 0.09   |                                                                                         | $      | 0.07 |   | $ | 0.25 |   | $ | 0.24 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| DILUTED                    EARNINGS PER SHARE                                |   | $                                                                                            | 0.09   |                                                                                         | $      | 0.07 |   | $ | 0.25 |   | $ | 0.24 |   |
|                                                                         |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| See                    notes to unaudited consolidated financial statements. |   |                                                                                         |   |                                                                                         |   |   |   |   |   |   |   |   |   |

----

| **PRUDENTIAL                  BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES**                                                           |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                     |   |
| **UNAUDITED                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND                  COMPREHENSIVE INCOME** |   |

|                                              |   |                                    |   |           |   |         |   |         |   |         |   | **Accumulated**   |   |              |   |              |   |
|---------------------------------------------------|--------|-----------------------------------------|--------|----------------|--------|--------------|--------|--------------|--------|--------------|--------|-------------------|--------|-------------------|--------|-------------------|--------|
|                                              |   |                                    |   | **Additional** |   | **Unearned** |   |         |   |         |   | **Other**         |   | **Total**         |   |              |   |
|                                              |   | **Common**                              |   | **Paid-In**    |   | **ESOP**     |   | **Treasury** |   | **Retained** |   | **Comprehensive** |   | **Stockholders'** |   | **Comprehensive** |   |
|                                              |   | **Stock**                               |   | **Capital**    |   | **Shares**   |   | **Stock**    |   | **Earnings** |   | **Income**        |   | **Equity**        |   | **Income**        |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |
|                                              |   | (Dollars                  in thousands) |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |
| BALANCE,                  OCTOBER 1, 2006         |   | $                                       | 126    |           | $      | 54,798       |   | $            | (4,127 | )            | $      | (6,422            | )      | $                 | 42,539 |              | $      | 534 |   | $ | 87,448 |   |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income:            |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Net                  income                       |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              | 2,838  |              |   |   |   |   | 2,838 |   |   | 2,838 |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Net                  unrealized holding loss on   |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| available                  for sale securities    |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| arising                  during the period, net   |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| of                  income tax benefit of $166    |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   | (301 | ) |   | (301 | ) |   | (301 | ) |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income             |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   | $ | 2,537 |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Treasury                  stock purchased         |   |                                    |   |           |   |         |   |         |   |         |   | (6,148            | )      |              |   |              |   |   |   |   | (6,148 | ) |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Cash                  dividends declared          |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| ($.14                  per share)                 |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              | (1,586 | )                 |   |   |   |   | (1,586 | ) |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Cumulative                  adjustment related to |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| the                  adoption of SAB 108          |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              | 172    |              |   |   |   |   | 172 |   |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| ESOP                  shares committed to         |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| be                  released                      |   |                                    | -      |           |   | 62           |   |         | 168    |         |   | -                 |   |              | -      |              |   | - |   |   | 230 |   |   |   |   |
|                                              |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| BALANCE,                  June 30, 2007           |   | $                                       | 126    |           | $      | 54,860       |   | $            | (3,959 | )            | $      | (12,570           | )      | $                 | 43,963 |              | $      | 233 |   | $ | 82,653 |   |   |   |   |

|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   | **Accumulated**   |   |              |   |              |   |
|---------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------|--------|--------------|--------|--------------|--------|--------------|--------|-------------------|--------|-------------------|--------|-------------------|--------|
|                                                                      |   |                                    |   | **Additional** |   | **Unearned** |   |         |   |         |   | **Other**         |   | **Total**         |   |              |   |
|                                                                      |   | **Common**                              |   | **Paid-In**    |   | **ESOP**     |   | **Treasury** |   | **Retained** |   | **Comprehensive** |   | **Stockholders'** |   | **Comprehensive** |   |
|                                                                      |   | **Stock**                               |   | **Capital**    |   | **Shares**   |   | **Stock**    |   | **Earnings** |   | **Income**        |   | **Equity**        |   | **Income**        |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |
|                                                                      |   | (Dollars                  in thousands) |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |
| BALANCE,                  OCTOBER 1, 2005                                 |   | $                                       | 126    |           | $      | 54,734       |   | $            | (4,350 | )            | $      | (655              | )      | $                 | 40,595 |              | $      | 375 |   | $ | 90,825 |   |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income:                                    |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Net                  income                                               |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              | 2,924  |              |   |   |   |   | 2,924 |   |   | 2,924 |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Net                  unrealized holding loss on                           |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| available                  for sale securities                            |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| arising                  during the period, net                           |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| of                  income tax benefit of $102                            |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   | (189 | ) |   | (189 | ) |   | (189 | ) |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income                                     |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   | $ | 2,735 |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Treasury                  stock purchased                                 |   |                                    |   |           |   |         |   |         |   |         |   | (3,476            | )      |              |   |              |   |   |   |   | (3,476 | ) |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| Cash                  dividends declared                                  |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| ($.12                  per share)                                         |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              | (1,428 | )                 |   |   |   |   | (1,428 | ) |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| ESOP                  shares committed to                                 |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| be                  released                                              |   |                                    | -      |           |   | 45           |   |         | 167    |         |   | -                 |   |              | -      |              |   | - |   |   | 212 |   |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| BALANCE,                  June 30, 2006                                   |   | $                                       | 126    |           | $      | 54,779       |   | $            | (4,183 | )            | $      | (4,131            | )      | $                 | 42,091 |              | $      | 186 |   | $ | 88,868 |   |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                                    |   |           |   |         |   |         |   |         |   |              |   |              |   |              |   |   |   |   |   |   |   |   |   |

----

| **PRUDENTIAL                  BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES** |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |
| **UNAUDITED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**           |   |
|                                                                           |   |

|                                                                                                           |   | **Nine                    Months Ended****June                    30,** |      |
|----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|-----------|
|                                                                                                           |   | **2007**                                                                |      | **2006** |   |
|                                                                                                           |   | (Dollars                    in thousands)                               |      |
| OPERATING                    ACTIVITIES:                                                                       |   |                                                                    |      |   |   |
| Net                    income                                                                                  |   | $                                                                       | 2,838     |   | $ | 2,924 |   |
| Adjustments                    to reconcile net income to net cash provided by (used in)                       |   |                                                                    |      |   |   |   |   |
| operating                    activities:                                                                       |   |                                                                    |      |   |   |   |   |
| Provision                    for loan losses                                                                   |   |                                                                    | 55        |   |   | 30 |   |
| Depreciation                                                                                                   |   |                                                                    | 173       |   |   | 180 |   |
| Net                    accretion of premiums/discounts                                                         |   |                                                                    | (54       | ) |   | (36 | ) |
| Net                    accretion of deferred loan fees and costs                                               |   |                                                                    | (269      | ) |   | (241 | ) |
| Amortization                    of ESOP                                                                        |   |                                                                    | 230       |   |   | 212 |   |
| Gain                    on sale of real estate owned                                                           |   |                                                                    | -         |   |   | (100 | ) |
| Income                    from bank owned life insurance                                                       |   |                                                                    | (158      | ) |   | (111 | ) |
| Deferred                    income tax expense                                                                 |   |                                                                    | 50        |   |   | 128 |   |
| Changes                    in assets and liabilities which (used) provided cash:                               |   |                                                                    |      |   |   |   |   |
| Accounts                    payable and accrued expenses                                                       |   |                                                                    | 1,693     |   |   | (1,227 | ) |
| Accrued                    interest payable                                                                    |   |                                                                    | (419      | ) |   | 175 |   |
| Prepaid                    expenses and other assets                                                           |   |                                                                    | (1,239    | ) |   | (3,820 | ) |
| Accrued                    interest receivable                                                                 |   |                                                                    | (436      | ) |   | (453 | ) |
| Net                    cash provided by (used in) by operating activities                                      |   |                                                                    | 2,464     |   |   | (2,339 | ) |
| INVESTING                    ACTIVITIES:                                                                       |   |                                                                    |      |   |   |   |   |
| Purchase                    of investment securities held to maturity                                          |   |                                                                    | (23,991   | ) |   | (6,227 | ) |
| Purchase                    of mortgage-backed securities held to maturity                                     |   |                                                                    | (1,992    | ) |   | - |   |
| Purchase                    of mortgage-backed securities available for sale                                   |   |                                                                    | (1,901    | ) |   | - |   |
| Loans                    originated or acquired                                                                |   |                                                                    | (54,093   | ) |   | (71,583 | ) |
| Principal                    collected on loans                                                                |   |                                                                    | 50,199    |   |   | 32,331 |   |
| Principal                    payments received on mortgage-backed securities:                                  |   |                                                                    |      |   |   |   |   |
| Held-to-maturity                                                                                               |   |                                                                    | 5,550     |   |   | 9,345 |   |
| Available                    for sale                                                                          |   |                                                                    | 507       |   |   | - |   |
| Proceeds                    from calls/maturities of investment securities held to                    maturity |   |                                                                    | 20,872    |   |   | 2,000 |   |
| Net                    purchase of Federal Home Loan Bank stock                                                |   |                                                                    | (221      | ) |   | (675 | ) |
| Proceeds                    from the sale of real estate owned                                                 |   |                                                                    | -         |   |   | 460 |   |
| Purchases                    of equipment                                                                      |   |                                                                    | (555      | ) |   | (179 | ) |
| Net                    cash used in investing activities                                                       |   |                                                                    | (5,625    | ) |   | (34,528 | ) |
| FINANCING                    ACTIVITIES:                                                                       |   |                                                                    |      |   |   |   |   |
| Net                    decrease in demand deposits, NOW accounts,                                              |   |                                                                    |      |   |   |   |   |
| and                    savings accounts                                                                        |   |                                                                    | (8,377    | ) |   | (12,705 | ) |
| Net                    increase in certificates of deposit                                                     |   |                                                                    | 15,136    |   |   | 20,142 |   |
| Net                    advances from Federal Home Loan Bank                                                    |   |                                                                    | 969       |   |   | 14,970 |   |
| Increase                    in advances from borrowers for taxes and insurance                                 |   |                                                                    | 696       |   |   | 778 |   |
| Cash                    dividends paid                                                                         |   |                                                                    | (1,494    | ) |   | (1,439 | ) |
| Purchase                    of treasury stock                                                                  |   |                                                                    | (6,148    | ) |   | (3,476 | ) |
| Net                    cash provided by financing activities                                                   |   |                                                                    | 782       |   |   | 18,270 |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
| NET                    DECREASE IN CASH AND CASH EQUIVALENTS                                                   |   |                                                                    | (2,379    | ) |   | (18,597 | ) |
|                                                                                                           |   |                                                                    |           |   |   |  |   |
| CASH                    AND CASH EQUIVALENTS—Beginning of year                                           |   |                                                                    | 13,428    |   |   | 26,815 |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
| CASH                    AND CASH EQUIVALENTS—End of year                                                 |   | $                                                                       | 11,049    |   | $ | 8,218 |   |
| SUPPLEMENTAL                    DISCLOSURES OF CASH FLOW                                                       |   |                                                                    |      |   |   |   |   |
| INFORMATION:                                                                                                   |   |                                                                    |      |   |   |   |   |
| Interest                    paid on deposits and advances from Federal                                         |   |                                                                    |      |   |   |   |   |
| Home                    Loan Bank                                                                              |   | $                                                                       | 11,329    |   | $ | 8,309 |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
| Income                    taxes paid                                                                           |   | $                                                                       | 978       |   | $ | 1,325 |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
| SUPPLEMENTAL                    DISCLOSURE OF NONCASH ITEMS:                                                   |   |                                                                    |      |   |   |   |   |
| Commitments                    to purchase investment securities                                               |   | $                                                                       | 1,000,000 |   | $ | - |   |
|                                                                                                           |   |                                                                    |      |   |   |   |   |
| See                    notes to unaudited consolidated financial statements.                                   |   |

----

| **PRUDENTIAL                    BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES** |   |
|----------------------------------------------------------------------------------|--------|
|                                                                             |   |
| **NOTES                    TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**      |   |
|                                                                             |   |

| **1.** | **BASIS                      OF PRESENTATION AND SIGNIFICANT ACCOUNTING                      POLICIES** |
|--------|---------------------------------------------------------------------------------------------------------|

***Use            of Estimates in the Preparation of Financial            Statements***
*—*

----

***Dividend            Payable***

***Employee            Stock Ownership Plan -***

***Treasury            Stock -***

***Comprehensive            Income***

***Recent            Accounting Pronouncements -***

----

----

| **2.** | **EARNINGS                      PER SHARE** |
|--------|---------------------------------------------|

|                                                               |   | **For                        the Quarter Ended****June                        30, 2007** |       | **For                        the Quarter Ended****June                        30, 2006** |   |
|--------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|--------|
|                                                               |   | **Basic**                                                                                |       | **Diluted**                                                                              |   | **Basic** |   | **Diluted** |   |
|                                                               |   | **(Dollars                        in thousands except per share data)**                  |       |
| Net                        income                                  |   | $                                                                                        | 977        |                                                                                     | $      | 977 |   | $ | 882 |   | $ | 882 |   |
|                                                               |   |                                                                                     |       |                                                                                     |   |   |   |   |   |   |   |   |   |
| Weighted                        average shares outstanding used in |   |                                                                                     |       |                                                                                     |   |   |   |   |   |   |   |   |   |
| basic                        earnings per share computation        |   |                                                                                     | 11,325,265 |                                                                                     |   | 11,325,265 |   |   | 11,866,046 |   |   | 11,866,046 |   |
| Effect                        of CSEs                              |   |                                                                                     | -          |                                                                                     |   | - |   |   | - |   |   | - |   |
| Adjusted                        weighted average shares used in    |   |                                                                                     |       |                                                                                     |   |   |   |   |   |   |   |   |   |
| diluted                        earnings per share computation      |   |                                                                                     | 11,325,265 |                                                                                     |   | 11,325,265 |   |   | 11,866,046 |   |   | 11,866,046 |   |
|                                                               |   |                                                                                     |       |                                                                                     |   |   |   |   |   |   |   |   |   |
| Earnings                        per share - basic and diluted      |   | $                                                                                        | 0.09       |                                                                                     | $      | 0.09 |   | $ | 0.07 |   | $ | 0.07 |   |
|                                                               |   |                                                                                     |       |                                                                                     |   |   |   |   |   |   |   |   |   |

|                                                               |   | **For                        the Nine Months Ended****June                        30, 2007** |       | **For                        the Nine Months Ended****June                        30, 2006** |   |
|--------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|--------|
|                                                               |   | **Basic**                                                                                    |       | **Diluted**                                                                                  |   | **Basic** |   | **Diluted** |   |
|                                                               |   | **(Dollars                        in thousands except per share data)**                      |       |
| Net                        income                                  |   | $                                                                                            | 2,838      |                                                                                         | $      | 2,838 |   | $ | 2,924 |   | $ | 2,924 |   |
|                                                               |   |                                                                                         |       |                                                                                         |   |   |   |   |   |   |   |   |   |
| Weighted                        average shares outstanding used in |   |                                                                                         |       |                                                                                         |   |   |   |   |   |   |   |   |   |
| basic                        earnings per share computation        |   |                                                                                         | 11,498,527 |                                                                                         |   | 11,498,527 |   |   | 11,984,754 |   |   | 11,984,754 |   |
| Effect                        of CSEs                              |   |                                                                                         | -          |                                                                                         |   | - |   |   | - |   |   | - |   |
| Adjusted                        weighted average shares used in    |   |                                                                                         |       |                                                                                         |   |   |   |   |   |   |   |   |   |
| diluted                        earnings per share computation      |   |                                                                                         | 11,498,527 |                                                                                         |   | 11,498,527 |   |   | 11,984,754 |   |   | 11,984,754 |   |
|                                                               |   |                                                                                         |       |                                                                                         |   |   |   |   |   |   |   |   |   |
| Earnings                        per share - basic and diluted      |   | $                                                                                            | 0.25       |                                                                                         | $      | 0.25 |   | $ | 0.24 |   | $ | 0.24 |   |

----

| **3.** | **INVESTMENT                      SECURITIES** |
|--------|------------------------------------------------|

|                                                              |   | **June                        30, 2007**          |    |
|-------------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                              |   |                                              |    | **Gross** |   | **Gross** |   | **Estimated** |   |
|                                                              |   | **Amortized**                                     |    | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                                              |   | **Cost**                                          |    | **Gains** |   | **Losses** |   | **Value** |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |
|                                                              |   | **(Dollars                        in thousands)** |    |
| Securities                        held to maturity:               |   |                                              |    |   |   |   |   |   |   |
| Debt                        securities - U.S. Treasury securities |   |                                              |    |   |   |   |   |   |   |
| and                        securities of U.S. Government agencies |   | $                                                 | 132,330 |   | $ | 6 |   | $ | (3,352 | ) | $ | 128,984 |   |
| Debt                        securities - Municipal bonds          |   |                                              | 2,885   |   |   | - |   |   | (74 | ) |   | 2,811 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity          |   | $                                                 | 135,215 |   | $ | 6 |   | $ | (3,426 | ) | $ | 131,795 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale:             |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Debt                        securities - U.S. Treasury securities |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| and                        securities of U.S. Government agencies |   | $                                                 | 2,999   |   | $ | - |   | $ | (81 | ) | $ | 2,918 |   |
| FNMA                        stock                                 |   |                                              | -       |   |   | 8 |   |   | - |   |   | 8 |   |
| Mutual                        fund                                |   |                                              | 34,982  |   |   | - |   |   | (1,141 | ) |   | 33,841 |   |
| FHLMC                        preferred stock                      |   |                                              | 26      |   |   | 1,579 |   |   | - |   |   | 1,605 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Total                        securities available for sale        |   | $                                                 | 38,007  |   | $ | 1,587 |   | $ | (1,222 | ) | $ | 38,372 |   |

|                                                              |   | **September                        30, 2006**     |    |
|-------------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                              |   |                                              |    | **Gross** |   | **Gross** |   | **Estimated** |   |
|                                                              |   | **Amortized**                                     |    | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                                              |   | **Cost**                                          |    | **Gains** |   | **Losses** |   | **Value** |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |
|                                                              |   | **(Dollars                        in thousands)** |    |
| Securities                        held to maturity:               |   |                                              |    |   |   |   |   |   |   |
| Debt                        securities - U.S. Treasury securities |   |                                              |    |   |   |   |   |   |   |
| and                        securities of U.S. Government agencies |   | $                                                 | 129,199 |   | $ | - |   | $ | (2,459 | ) | $ | 126,740 |   |
| Debt                        securities - Municipal bonds          |   |                                              | 2,885   |   |   | 6 |   |   | (38 | ) |   | 2,853 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity          |   | $                                                 | 132,084 |   | $ | 6 |   | $ | (2,497 | ) | $ | 129,593 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale:             |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Debt                        securities - U.S. Treasury securities |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| and                        securities of U.S. Government agencies |   | $                                                 | 2,999   |   | $ | - |   | $ | (64 | ) | $ | 2,935 |   |
| FNMA                        stock                                 |   |                                              | -       |   |   | 6 |   |   | - |   |   | 6 |   |
| Mutual                        fund                                |   |                                              | 34,982  |   |   | - |   |   | (930 | ) |   | 34,052 |   |
| FHLMC                        preferred stock                      |   |                                              | 26      |   |   | 1,728 |   |   | - |   |   | 1,754 |   |
|                                                              |   |                                              |    |   |   |   |   |   |   |   |   |   |   |
| Total                        securities available for sale        |   | $                                                 | 38,007  |   | $ | 1,734 |   | $ | (994 | ) | $ | 38,747 |   |

----

|                                                         |   | **Less                        than 12 months** |   | **More                        than 12 months** |   |
|--------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                         |   | **Gross**                                      |   | **Estimated**                                  |   | **Gross** |   | **Estimated** |   |
|                                                         |   | **Unrealized**                                 |   | **Fair**                                       |   | **Unrealized** |   | **Fair** |   |
|                                                         |   | **Losses**                                     |   | **Value**                                      |   | **Losses** |   | **Value** |   |
|                                                         |   | (Dollars                        in thousands)  |   |
| Securities                        held to maturity:          |   |                                           |   |                                           |   |   |   |   |   |
| U.S.                        Treasury and Government agencies |   | $                                              | 379    |                                           | $      | 23,612 |   | $ | 2,973 |   | $ | 103,364 |   |
| Municipal                        bonds                       |   |                                           | -      |                                           |   | - |   |   | 74 |   |   | 1,566 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity     |   |                                           | 379    |                                           |   | 23,612 |   |   | 3,047 |   |   | 104,930 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale:        |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| U.S.                        Treasury and Government agencies |   |                                           | -      |                                           |   | - |   |   | 81 |   |   | 2,918 |   |
| Mutual                        fund                           |   |                                           | -      |                                           |   | - |   |   | 1,141 |   |   | 33,841 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities available for sale   |   |                                           | -      |                                           |   | - |   |   | 1,222 |   |   | 36,759 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                                                        |   | $                                              | 379    |                                           | $      | 23,612 |   | $ | 4,269 |   | $ | 141,689 |   |

|                                                         |   | **Less                        than 12 months** |   | **More                        than 12 months** |   |
|--------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                         |   | **Gross**                                      |   | **Estimated**                                  |   | **Gross** |   | **Estimated** |   |
|                                                         |   | **Unrealized**                                 |   | **Fair**                                       |   | **Unrealized** |   | **Fair** |   |
|                                                         |   | **Losses**                                     |   | **Value**                                      |   | **Losses** |   | **Value** |   |
|                                                         |   | (Dollars                        in thousands)  |   |
| Securities                        held to maturity:          |   |                                           |   |                                           |   |   |   |   |   |
| U.S.                        Treasury and Government agencies |   | $                                              | 76     |                                           | $      | 8,919 |   | $ | 2,383 |   | $ | 114,821 |   |
| Municipal                        bonds                       |   |                                           | -      |                                           |   | - |   |   | 38 |   |   | 1,601 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity     |   |                                           | 76     |                                           |   | 8,919 |   |   | 2,421 |   |   | 116,422 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale:        |   |                                           |   |                                           |   |   |   |   |  |   |   |   |   |
| U.S.                        Treasury and Government agencies |   |                                           | -      |                                           |   | - |   |   | 64 |   |   | 2,935 |   |
| Mutual                        fund                           |   |                                           | -      |                                           |   | - |   |   | 930 |   |   | 34,052 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities available for sale   |   |                                           | -      |                                           |   | - |   |   | 994 |   |   | 36,987 |   |
|                                                         |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                                                        |   | $                                              | 76     |                                           | $      | 8,919 |   | $ | 3,415 |   | $ | 153,409 |   |

----

----

|                                                    |   | **June                        30, 2007**      |    |
|---------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                    |   | **Held                        to Maturity**   |    | **Available                        for Sale** |   |
|                                                    |   |                                          |    | **Estimated** |   |   |   | **Estimated** |   |
|                                                    |   | **Amortized**                                 |    | **Fair** |   | **Amortized** |   | **Fair** |   |
|                                                    |   | **Cost**                                      |    | **Value** |   | **Cost** |   | **Value** |   |
|                                                    |   | (Dollars                        in thousands) |    |
| Due                        within one year              |   | $                                             | 6,000   |   | $ | 5,961 |   | $ | - |   | $ | - |   |
| Due                        after one through five years |   |                                          | 26,001  |   |   | 25,634 |   |   | - |   |   | - |   |
| Due                        after five through ten years |   |                                          | 39,292  |   |   | 38,431 |   |   | 1,000 |   |   | 993 |   |
| Due                        after ten years              |   |                                          | 63,922  |   |   | 61,769 |   |   | 1,999 |   |   | 1,925 |   |
|                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
| Total                                                   |   | $                                             | 135,215 |   | $ | 131,795 |   | $ | 2,999 |   | $ | 2,918 |   |

|                                                    |   | **September                        30, 2006** |    |
|---------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                    |   | **Held                        to Maturity**   |    | **Available                        for Sale** |   |
|                                                    |   |                                          |    | **Estimated** |   |   |   | **Estimated** |   |
|                                                    |   | **Amortized**                                 |    | **Fair** |   | **Amortized** |   | **Fair** |   |
|                                                    |   | **Cost**                                      |    | **Value** |   | **Cost** |   | **Value** |   |
|                                                    |   | (Dollars                        in thousands) |    |
| Due                        within one year              |   | $                                             | 13,085  |   | $ | 13,034 |   | $ | - |   | $ | - |   |
| Due                        after one through five years |   |                                          | 33,084  |   |   | 32,601 |   |   | - |   |   | - |   |
| Due                        after five through ten years |   |                                          | 39,986  |   |   | 39,356 |   |   | 1,000 |   |   | 985 |   |
| Due                        after ten years              |   |                                          | 45,929  |   |   | 44,602 |   |   | 1,999 |   |   | 1,950 |   |
|                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
| Total                                                   |   | $                                             | 132,084 |   | $ | 129,593 |   | $ | 2,999 |   | $ | 2,935 |   |

| **4.** | **MORTGAGE-BACKED                      SECURITIES** |
|--------|-----------------------------------------------------|

|                                                       |   | **June                        30, 2007**      |   |
|------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                       |   |                                          |   | **Gross** |   | **Gross** |   | **Estimated** |   |
|                                                       |   | **Amortized**                                 |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                                       |   | **Cost**                                      |   | **Gains** |   | **Losses** |   | **Value** |   |
|                                                       |   | (Dollars                        in thousands) |   |
| Securities                        held to maturity         |   |                                          |   |   |   |   |   |   |   |
| GNMA                        pass-through certificates      |   | $                                             | 44,015 |   | $ | 8 |   | $ | (2,015 | ) | $ | 42,008 |   |
| FNMA                        pass-through certificates      |   |                                          | 1,425  |   |   | - |   |   | (83 | ) |   | 1,342 |   |
| FHLMC                        pass-through certificates     |   |                                          | 1,724  |   |   |   |   |   | (28 | ) |   | 1,696 |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity   |   | $                                             | 47,164 |   | $ | 8 |   | $ | (2,126 | ) | $ | 45,046 |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| FNMA                        pass-through certificates      |   | $                                             | 5,929  |   | $ | 16 |   | $ | (28 | ) | $ | 5,917 |   |
| Total                        securities available for sale |   | $                                             | 5,929  |   | $ | 16 |   | $ | (28 | ) | $ | 5,917 |   |

----

|                                                       |   | **September                        30, 2006** |   |
|------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                       |   |                                          |   | **Gross** |   | **Gross** |   | **Estimated** |   |
|                                                       |   | **Amortized**                                 |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                                       |   | **Cost**                                      |   | **Gains** |   | **Losses** |   | **Value** |   |
|                                                       |   | (Dollars                        in thousands) |   |
| Securities                        held to maturity         |   |                                          |   |   |   |   |   |   |   |
| GNMA                        pass-through certificates      |   | $                                             | 46,992 |   | $ | 157 |   | $ | (896 | ) | $ | 46,253 |   |
| FNMA                        pass-through certificates      |   |                                          | 1,448  |   |   | - |   |   | (53 | ) |   | 1,395 |   |
| FHLMC                        pass-through certificates     |   |                                          | 1,920  |   |   |    |   |   | (42 | ) |   | 1,878 |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity   |   | $                                             | 50,360 |   | $ | 157 |   | $ | (991 | ) | $ | 49,526 |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| FNMA                        pass-through certificates      |   | $                                             | 4,535  |   | $ | 80 |   | $ | - |   | $ | 4,615 |   |
| Total                        securities available for sale |   | $                                             | 4,535  |   | $ | 80 |   | $ | - |   | $ | 4,615 |   |

----

|                                                       |   | **Less                        than 12 months** |   | **More                        than 12 months** |   |
|------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                       |   | **Gross**                                      |   | **Estimated**                                  |   | **Gross** |   | **Estimated** |   |
|                                                       |   | **Unrealized**                                 |   | **Fair**                                       |   | **Unrealized** |   | **Fair** |   |
|                                                       |   | **Losses**                                     |   | **Value**                                      |   | **Losses** |   | **Value** |   |
|                                                       |   | (Dollars                        in thousands)  |   |
| Securities                        held to maturity:        |   |                                           |   |                                           |   |   |   |   |   |
| GNMA                        pass-through certificates      |   | $                                              | 271    |                                           | $      | 9,188 |   | $ | 1,744 |   | $ | 31,614 |   |
| FNMA                        pass-through certificates      |   |                                           |        |                                           |   |  |   |   | 83 |   |   | 1,342 |   |
| FHLMC                        pass-through certificates     |   |                                           | -      |                                           |   | - |   |   | 28 |   |   | 1,695 |   |
|                                                       |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities held to maturity   |   |                                           | 271    |                                           |   | 9,188 |   |   | 1,855 |   |   | 34,651 |   |
|                                                       |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Securities                        available for sale:      |   |                                           |   |                                           |   |   |   |   |  |   |   |   |   |
| FNMA                        pass-through certificates      |   |                                           | 28     |                                           |   | 1,853 |   |   | - |   |   | - |   |
|                                                       |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                        securities available for sale |   |                                           | 28     |                                           |   | 1,853 |   |   | - |   |   | - |   |
|                                                       |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                                                      |   | $                                              | 299    |                                           | $      | 11,041 |   | $ | 1,855 |   | $ | 34,651 |   |

|                                                   |   | **Less                        than 12 months** |   | **More                        than 12 months** |   |
|--------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                   |   | **Gross**                                      |   | **Estimated**                                  |   | **Gross** |   | **Estimated** |   |
|                                                   |   | **Unrealized**                                 |   | **Fair**                                       |   | **Unrealized** |   | **Fair** |   |
|                                                   |   | **Losses**                                     |   | **Value**                                      |   | **Losses** |   | **Value** |   |
|                                                   |   | (Dollars                        in thousands)  |   |
| Securities                        held to maturity:    |   |                                           |   |                                           |   |   |   |   |   |
| GNMA                        pass-through certificates  |   | $                                              | 526    |                                           | $      | 25,602 |   | $ | 370 |   | $ | 11,200 |   |
| FNMA                        pass-through certificates  |   |                                           | 52     |                                           |   | 1,395 |   |   | 1 |   |   |  |   |
| FHLMC                        pass-through certificates |   |                                           | 42     |                                           |   | 1,877 |   |   | - |   |   | - |   |
|                                                   |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Total                                                  |   | $                                              | 620    |                                           | $      | 28,874 |   | $ | 371 |   | $ | 11,200 |   |

----

| **5.** | **LOANS                      RECEIVABLE** |
|--------|-------------------------------------------|

|                                                           |   | **June                        30,**           |    | **September                        30,** |   |
|----------------------------------------------------------------|--------|-----------------------------------------------|---------|------------------------------------------|--------|
|                                                           |   | **2007**                                      |    | **2006**                                 |   |
|                                                           |   | (Dollars                        in thousands) |    |
| One-to-four                        family residential          |   | $                                             | 159,484 |                                     | $      | 155,454 |   |
| Multi-family                        residential                |   |                                          | 4,651   |                                     |   | 5,074 |   |
| Commercial                        real estate                  |   |                                          | 15,956  |                                     |   | 11,339 |   |
| Construction                        and land development       |   |                                          | 61,200  |                                     |   | 82,801 |   |
| Commercial                        business                     |   |                                          | 990     |                                     |   | 234 |   |
| Consumer                                                       |   |                                          | 807     |                                     |   | 1,239 |   |
|                                                           |   |                                          |    |                                     |   |   |   |
| Total                        loans                             |   |                                          | 243,088 |                                     |   | 256,141 |   |
|                                                           |   |                                          |    |                                     |   |   |   |
| Undisbursed                        portion of loans-in-process |   |                                          | (19,193 | )                                        |   | (36,258 | ) |
| Deferred                        loan fees                      |   |                                          | 302     |                                     |   | 153 |   |
| Allowance                        for loan losses               |   |                                          | (671    | )                                        |   | (618 | ) |
|                                                           |   |                                          |    |                                     |   |   |   |
| Net                                                            |   | $                                             | 223,526 |                                     | $      | 219,418 |   |

----

|                                                |   | **Nine                        Months Ended June 30,** |   |
|-----------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                |   | **2007**                                              |   | **2006** |   |
|                                                |   | (Dollars                        in thousands)         |   |
|                                                |   |                                                  |   |   |   |
| Balance,                        beginning of period |   | $                                                     | 618    |   | $ | 558 |   |
| Provision                        for loan losses    |   |                                                  | 55     |   |   | 30 |   |
| Charge-offs                                         |   |                                                  | (2     | ) |   | - |   |
| Recoveries                                          |   |                                                  | -      |   |   | - |   |
|                                                |   |                                                  |   |   |   |   |   |
| Balance,                        end of period       |   | $                                                     | 671    |   | $ | 588 |   |

| **6.** | **DEPOSITS** |
|--------|--------------|

|                                                                 |   | **June                        30,**               |    | **September                        30,** |   |
|----------------------------------------------------------------------|--------|---------------------------------------------------|---------|------------------------------------------|--------|
|                                                                 |   | **2007**                                          |    | **2006**                                 |   |
|                                                                 |   | **(Dollars                        in thousands)** |    |
|                                                                 |   | **Amount**                                        |    | **Percent**                              |   | **Amount** |   | **Percent** |   |
|                                                                 |   |                                              |    |                                     |   |   |   |   |   |
|                                                                 |   |                                              |    |                                     |   |   |   |   |   |
| Money                        market deposit accounts                 |   | $                                                 | 64,813  |                                     |   | 18.3 | % | $ | 64,498 |   |   | 18.6 | % |
| NOW                        accounts                                  |   |                                              | 30,060  |                                     |   | 8.5 |   |   | 34,203 |   |   | 9.8 |   |
| Passbook,                        club and statement savings          |   |                                              | 72,441  |                                     |   | 20.5 |   |   | 76,989 |   |   | 22.2 |   |
| Certificates                        maturing in six months or less   |   |                                              | 111,716 |                                     |   | 31.5 |   |   | 77,904 |   |   | 22.4 |   |
| Certificates                        maturing in more than six months |   |                                              | 75,022  |                                     |   | 21.2 |   |   | 93,698 |   |   | 27.0 |   |
|                                                                 |   |                                              |    |                                     |   |  |   |   |   |   |   |  |   |
| Total                                                                |   | $                                                 | 354,052 |                                     |   | 100.0 | % | $ | 347,292 |   |   | 100.0 | % |

----

| **7.** | **INCOME                      TAXES** |
|--------|---------------------------------------|

|                                                                    |   | **June                        30,** |                                          | **September                        30,** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|-----------------------------------------------|------------------------------------------|--------|
|                                                                    |   | **2007**                            |                                          | **2006**                                 |   |
| Deferred                        tax assets:                             |   |                                | (Dollars                        in thousands) |                                     |
| Deposit                        premium                                  |   | $                                   | 277                                           |                                     | $      | 314 |   |
| Allowance                        for loan losses                        |   |                                | 249                                           |                                     |   | 247 |   |
| Employee                        stock ownership plan                    |   |                                | 70                                            |                                     |   | - |   |
| Other                                                                   |   |                                | -                                             |                                     |   | 40 |   |
|                                                                    |   |                                |                                          |                                     |   |   |   |
| Total                                                                   |   |                                | 596                                           |                                     |   | 601 |   |
| Deferred                        tax liabilities:                        |   |                                |                                          |                                     |   |   |   |
| Unrealized                        gain on available for sale securities |   |                                | 120                                           |                                     |   | 286 |   |
| Property                                                                |   |                                | 443                                           |                                     |   | 407 |   |
| Mortgage                        servicing rights                        |   |                                | 8                                             |                                     |   | 10 |   |
| Deferred                        loan fees                               |   |                                | 102                                           |                                     |   | 51 |   |
|                                                                    |   |                                |                                          |                                     |   |   |   |
| Total                                                                   |   |                                | 673                                           |                                     |   | 754 |   |
|                                                                    |   |                                |                                          |                                     |   |   |   |
| Net                        deferred tax liability                       |   | $                                   | (77                                           | )                                        | $      | (153 | ) |

| **8.** | **COMMITMENTS                      AND CONTINGENT LIABILITIES** |
|--------|-----------------------------------------------------------------|

----

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

**Overview.**
*** ***

**Critical            Accounting Policies.**
*** ***

*Allowance            for Loan Losses*

----

*Income            Taxes.*

**Forward-looking            Statements**

**COMPARISON            OF FINANCIAL CONDITION AT JUNE 30, 2007 AND SEPTEMBER 30, 2006**

----

**COMPARISON            OF RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30,            2007 AND            2006**

**Net            income. **

**Net            interest income. **

**Average            Balances, Net Interest Income, and Yields Earned and Rates            Paid.**

----

|                                                              |   | Three                        Months           |    |
|-------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                              |   | Ended                        June 30,         |    |
|                                                              |   | 2007                                          |    | 2006 |   |
|                                                              |   | Average                                       |    |   |   | Average |   | Average |   |   |   | Average |   |
|                                                              |   | Balance                                       |    | Interest |   | Yield/Rate |   | Balance |   | Interest |   | Yield/Rate |   |
|                                                              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
|                                                              |   | (Dollars                        in Thousands) |    |
| Interest-earning                        assets:                   |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
| Investment                        securities                      |   | $                                             | 175,293 |   | $ | 2,231 |   |   | 5.09 | % | $ | 175,118 |   | $ | 2,043 |   |   | 4.67 | % |
| Mortgage-backed                        securities                 |   |                                          | 53,318  |   |   | 692 |   |   | 5.19 |   |   | 59,188 |   |   | 769 |   |   | 5.20 |   |
| Loans                        receivable(1)                        |   |                                          | 222,409 |   |   | 3,792 |   |   | 6.82 |   |   | 204,260 |   |   | 3,380 |   |   | 6.62 |   |
| Other                        interest-earning assets              |   |                                          | 4,246   |   |   | 31 |   |   | 2.92 |   |   | 3,452 |   |   | 43 |   |   | 4.98 |   |
| Total                        interest-earning assets              |   |                                          | 455,266 |   |   | 6,746 |   |   | 5.93 |   |   | 442,018 |   |   | 6,235 |   |   | 5.64 |   |
| Cash                        and non-interest-bearing balances     |   |                                          | 3,936   |   |   |   |   |   |   |   |   | 4,848 |   |   |   |   |   |   |   |
| Other                        non-interest-earning assets          |   |                                          | 11,520  |   |   |   |   |   |   |   |   | 11,436 |   |   |   |   |   |   |   |
| Total                        assets                               |   | $                                             | 470,722 |   |   |   |   |   |   |   | $ | 458,302 |   |   |   |   |   |   |   |
| Interest-bearing                        liabilities:              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                        accounts                           |   | $                                             | 70,847  |   |   | 469 |   |   | 2.65 |   | $ | 81,167 |   |   | 635 |   |   | 3.13 |   |
| Money                        market deposit and NOW accounts      |   |                                          | 92,993  |   |   | 832 |   |   | 3.58 |   |   | 95,008 |   |   | 781 |   |   | 3.29 |   |
| Certificates                        of deposit                    |   |                                          | 184,617 |   |   | 2,052 |   |   | 4.45 |   |   | 161,944 |   |   | 1,398 |   |   | 3.45 |   |
| Total                        deposits                             |   |                                          | 348,457 |   |   | 3,353 |   |   | 3.85 |   |   | 338,119 |   |   | 2,814 |   |   | 3.33 |   |
| Advances                        from Federal Home Loan Bank       |   |                                          | 28,043  |   |   | 387 |   |   | 5.52 |   |   | 21,544 |   |   | 294 |   |   | 5.46 |   |
| Advances                        from borrowers for taxes and      |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| insurance                                                         |   |                                          | 1,553   |   |   | 2 |   |   | 0.52 |   |   | 1,451 |   |   | 2 |   |   | 0.55 |   |
| Total                        interest-bearing liabilities         |   |                                          | 378,053 |   |   | 3,742 |   |   | 3.96 |   |   | 361,114 |   |   | 3,110 |   |   | 3.44 |   |
| Non-interest-bearing                        liabilities:          |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                        demand accounts       |   |                                          | 4,895   |   |   |   |   |   |   |   |   | 4,146 |   |   |   |   |   |   |   |
| Other                        liabilities                          |   |                                          | 3,267   |   |   |   |   |   |   |   |   | 3,370 |   |   |   |   |   |   |   |
| Total                        liabilities                          |   |                                          | 386,215 |   |   |   |   |   |   |   |   | 368,630 |   |   |   |   |   |   |   |
| Stockholders'                        equity                       |   |                                          | 84,507  |   |   |   |   |   |   |   |   | 89,672 |   |   |   |   |   |   |   |
| Total                        liabilities and stockholders' equity |   | $                                             | 470,722 |   |   |   |   |   |   |   | $ | 458,302 |   |   |   |   |   |   |   |
| Net                        interest-earning assets                |   | $                                             | 77,213  |   |   |   |   |   |   |   | $ | 80,904 |   |   |   |   |   |   |   |
| Net                        interest income; interest rate spread  |   |                                          |    |   | $ | 3,004 |   |   | 1.97 | % |   |   |   | $ | 3,125 |   |   | 2.20 | % |
| Net                        interest margin(2)                     |   |                                          |         |   |   |  |   |   | 2.64 | % |   |  |   |   |  |   |   | 2.83 | % |
|                                                              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                        interest-earning assets to average |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-bearing                        liabilities               |   |                                          |    |   |   | 120.42 | % |   |   |   |   |   |   |   | 122.40 | % |   |   |   |

| (1) | Includes                      non-accrual loans. Calculated net of unamortized deferred fees,                      undisbursed portion of loans-in-process and allowance for loan                      losses. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Equals                      net interest income divided by average interest-earning assets. |
|-----|---------------------------------------------------------------------------------------------|

----

|                                                              |   | Nine                        Months            |    |
|-------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                              |   | Ended                        June 30,         |    |
|                                                              |   | 2007                                          |    | 2006 |   |
|                                                              |   | Average                                       |    |   |   | Average |   | Average |   |   |   | Average |   |
|                                                              |   | Balance                                       |    | Interest |   | Yield/Rate |   | Balance |   | Interest |   | Yield/Rate |   |
|                                                              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
|                                                              |   | (Dollars                        in Thousands) |    |
| Interest-earning                        assets:                   |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
| Investment                        securities                      |   | $                                             | 173,228 |   | $ | 6,490 |   |   | 5.00 | % | $ | 174,001 |   | $ | 5,928 |   |   | 4.54 | % |
| Mortgage-backed                        securities                 |   |                                          | 53,796  |   |   | 2,105 |   |   | 5.22 | % |   | 62,314 |   |   | 2,421 |   |   | 5.18 | % |
| Loans                        receivable(1)                        |   |                                          | 221,238 |   |   | 11,402 |   |   | 6.87 | % |   | 191,090 |   |   | 9,335 |   |   | 6.51 | % |
| Other                        interest-earning assets              |   |                                          | 5,102   |   |   | 123 |   |   | 3.21 | % |   | 8,461 |   |   | 259 |   |   | 4.08 | % |
| Total                        interest-earning assets              |   |                                          | 453,364 |   |   | 20,120 |   |   | 5.92 | % |   | 435,866 |   |   | 17,943 |   |   | 5.49 | % |
| Cash                        and non-interest-bearing balances     |   |                                          | 4,403   |   |   |   |   |   |   |   |   | 4,696 |   |   |   |   |   |   |   |
| Other                        non-interest-earning assets          |   |                                          | 11,419  |   |   |   |   |   |   |   |   | 10,011 |   |   |   |   |   |   |   |
| Total                        assets                               |   | $                                             | 469,186 |   |   |   |   |   |   |   | $ | 450,573 |   |   |   |   |   |   |   |
| Interest-bearing                        liabilities:              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                        accounts                           |   | $                                             | 72,727  |   |   | 1,582 |   |   | 2.90 | % | $ | 83,065 |   |   | 1,834 |   |   | 2.94 | % |
| Money                        market deposit and NOW accounts      |   |                                          | 94,371  |   |   | 2,505 |   |   | 3.54 | % |   | 99,412 |   |   | 2,259 |   |   | 3.03 | % |
| Certificates                        of deposit                    |   |                                          | 179,202 |   |   | 5,714 |   |   | 4.25 | % |   | 152,973 |   |   | 3,704 |   |   | 3.23 | % |
| Total                        deposits                             |   |                                          | 346,300 |   |   | 9,801 |   |   | 3.77 | % |   | 335,450 |   |   | 7,797 |   |   | 3.10 | % |
| Advances                        from Federal Home Loan Bank       |   |                                          | 26,542  |   |   | 1,102 |   |   | 5.54 | % |   | 16,389 |   |   | 680 |   |   | 5.53 | % |
| Advances                        from borrowers for taxes and      |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| insurance                                                         |   |                                          | 1,595   |   |   | 6 |   |   | 0.50 | % |   | 1,513 |   |   | 7 |   |   | 0.62 | % |
| Total                        interest-bearing liabilities         |   |                                          | 374,437 |   |   | 10,909 |   |   | 3.88 | % |   | 353,352 |   |   | 8,484 |   |   | 3.20 | % |
| Non-interest-bearing                        liabilities:          |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                        demand accounts       |   |                                          | 5,099   |   |   |   |   |   |   |   |   | 3,369 |   |   |   |   |   |   |   |
| Other                        liabilities                          |   |                                          | 3,181   |   |   |   |   |   |   |   |   | 3,127 |   |   |   |   |   |   |   |
| Total                        liabilities                          |   |                                          | 382,717 |   |   |   |   |   |   |   |   | 359,848 |   |   |   |   |   |   |   |
| Stockholders'                        equity                       |   |                                          | 86,469  |   |   |   |   |   |   |   |   | 90,725 |   |   |   |   |   |   |   |
| Total                        liabilities and stockholders' equity |   | $                                             | 469,186 |   |   |   |   |   |   |   | $ | 450,573 |   |   |   |   |   |   |   |
| Net                        interest-earning assets                |   | $                                             | 78,927  |   |   |   |   |   |   |   | $ | 82,514 |   |   |   |   |   |   |   |
| Net                        interest income; interest rate spread  |   |                                          |    |   | $ | 9,211 |   |   | 2.04 | % |   |   |   | $ | 9,459 |   |   | 2.29 | % |
| Net                        interest margin(2)                     |   |                                          |         |   |   |  |   |   | 2.71 | % |   |  |   |   |  |   |   | 2.89 | % |
|                                                              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                        interest-earning assets to average |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-bearing                        liabilities               |   |                                          |    |   |   | 121.08 | % |   |   |   |   |   |   |   | 123.35 | % |   |   |   |

| (1) | Includes                      non-accrual loans. Calculated net of unamortized deferred fees,                      undisbursed portion of loans-in-process and allowance for loan                      losses. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Equals                      net interest income divided by average interest-earning assets. |
|-----|---------------------------------------------------------------------------------------------|

----

**Provision            for loan losses.**

**Non-interest            income**

**Non-interest            expenses**

----

**Income            tax expense**

----

**LIQUIDITY            AND CAPITAL RESOURCES**

----

|                                                            |   |                                    |   |                                        |   | **To                        Be**             |   |
|-----------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------------|--------|----------------------------------------------|--------|
|                                                            |   |                                    |   |                                        |   | **Well                        Capitalized**  |   |
|                                                            |   |                                    |   | **Required                        for**     |   | **Under                        Prompt**      |   |
|                                                            |   |                                    |   | **Capital                        Adequacy** |   | **Corrective                        Action** |   |
|                                                            |   | **Actual                        Ratio** |   | **Purposes**                                |   | **Provisions**                               |   |
|                                                            |   |                                    |   |                                        |   |                                         |   |
| June                        30, 2007:                           |   |                                    |   |                                        |   |                                         |   |
| Tier                        1 capital (to average assets)       |   |                                    |   |                                        |   |                                         |   |
| The                        Company                              |   |                                    | 17.51  | %                                           |   | 4.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 15.35  | %                                           |   | 4.0                                          | %      |   | 5.0 | % |
|                                                            |   |                                    |   |                                        |   |                                         |   |   |   |   |
| Tier                        1 capital (to risk weighted assets) |   |                                    |   |                                        |   |                                         |   |   |   |   |
| The                        Company                              |   |                                    | 37.26  | %                                           |   | 4.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 32.66  | %                                           |   | 4.0                                          | %      |   | 6.0 | % |
|                                                            |   |                                    |   |                                        |   |                                         |   |   |   |   |
| Total                        capital (to risk weighted assets)  |   |                                    |   |                                        |   |                                         |   |   |   |   |
| The                        Company                              |   |                                    | 37.66  | %                                           |   | 8.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 33.05  | %                                           |   | 8.0                                          | %      |   | 10.0 | % |
|                                                            |   |                                    |   |                                        |   |                                         |   |   |   |   |
| September                        30, 2006:                      |   |                                    |   |                                        |   |                                         |   |   |   |   |
| Tier                        1 capital (to average assets)       |   |                                    |   |                                        |   |                                         |   |   |   |   |
| The                        Company                              |   |                                    | 18.64  | %                                           |   | 4.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 14.74  | %                                           |   | 4.0                                          | %      |   | 5.0 | % |
|                                                            |   |                                    |   |                                        |   |                                         |   |   |   |   |
| Tier                        1 capital (to risk weighted assets) |   |                                    |   |                                        |   |                                         |   |   |   |   |
| The                        Company                              |   |                                    | 39.23  | %                                           |   | 4.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 31.12  | %                                           |   | 4.0                                          | %      |   | 6.0 | % |
|                                                            |   |                                    |   |                                        |   |                                         |   |   |   |   |
| Total                        capital (to risk weighted assets)  |   |                                    |   |                                        |   |                                         |   |   |   |   |
| The                        Company                              |   |                                    | 39.68  | %                                           |   | 8.0                                          | %      |   | N/A |   |
| The                        Bank                                 |   |                                    | 31.56  | %                                           |   | 8.0                                          | %      |   | 10.0 | % |

**IMPACT            OF INFLATION AND CHANGING PRICES**

----

**ITEM            3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**How            we Manage Market Risk**

| ·   | we                    have increased our originations of shorter term loans and/or                    loans with                    adjustable rates of interest, particularly construction and land                    development loans; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | we                    have invested in securities with “step-up” rate features providing for                    increased interest rates prior to maturity according to a pre-determined                    schedule and formula; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | we                    have maintained moderate levels of short-term liquid                    assets. |
|--------------------|-------------------------------------------------------------------------------------------------------|

**Gap            Analysis.**

----

|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |
|------------------------------------------------------------------------|--------|-----------------------------------------------|---------|----------------------------------|--------|-----------------------------------|--------|-----------------------------------|----------|----------------------------------|--------|----------|--------|
|                                                                   |   |                                          |    | More                        than |   | More                        than  |   | More                        than  |     |                             |   |     |   |
|                                                                   |   | 3                        Months               |    | 3                        Months  |   | 1                        Year     |   | 3                        Years    |     | More                        than |   | Total    |   |
|                                                                   |   | or                        Less                |    | to                        1 Year |   | to                        3 Years |   | to                        5 Years |     | 5                        Years   |   | Amount   |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |
|                                                                   |   | (Dollars                        in Thousands) |    |
| Interest-earning                        assets(1):                     |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |
| Investment                        securities(2)                        |   | $                                             | 15,774  |                             | $      | 25,336                            |   | $                                 | 24,874   |                             | $      | 10,493   |   | $ | 96,745 |   | $ | 173,222 |   |
| Mortgage-backed                        securities                      |   |                                          | 1,352   |                             |   | 4,052                             |   |                              | 9,915    |                             |   | 8,520    |   |   | 29,254 |   |   | 53,093 |   |
| Loans                        receivable(3)                             |   |                                          | 59,610  |                             |   | 27,554                            |   |                              | 47,786   |                             |   | 31,185   |   |   | 57,760 |   |   | 223,895 |   |
| Other                        interest earning assets                   |   |                                          | 8,729   |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   | 8,729 |   |
| Total                        interest-earning assets                   |   | $                                             | 85,465  |                             | $      | 56,942                            |   | $                                 | 82,575   |                             | $      | 50,198   |   | $ | 183,759 |   | $ | 458,939 |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Interest-bearing                        liabilities:                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Savings                        accounts                                |   | $                                             | 556     |                             | $      | 54                                |   | $                                 | 42,421   |                             | $      | 14,141   |   | $ | 14,141 |   | $ | 71,313 |   |
| Money                        market deposit and NOW accounts           |   |                                          | -       |                             |   | 32,406                            |   |                              | 48,292   |                             |   | 5,296    |   |   | 5,296 |   |   | 91,290 |   |
| Certificates                        of deposits                        |   |                                          | 69,411  |                             |   | 76,834                            |   |                              | 22,949   |                             |   | 17,544   |   |   | - |   |   | 186,738 |   |
| Advances                        from Federal Home Loan Bank            |   |                                          | 19,019  |                             |   | 57                                |   |                              | 156      |                             |   | 13,157   |   |   | 364 |   |   | 32,753 |   |
| Advances                        from borrowers for taxes and insurance |   |                                          | -       |                             |   | -                                 |   |                              | -        |                             |   | -        |   |   | 1,926 |   |   | 1,926 |   |
| Total                        interest-bearing liabilities              |   | $                                             | 88,986  |                             | $      | 109,351                           |   | $                                 | 113,818  |                             | $      | 50,138   |   | $ | 21,727 |   | $ | 384,020 |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Interest-earning                        assets                         |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| less                        interest-bearing liabilities               |   |                                          | ($3,521 | )                                |   | ($52,409                          | )      |                              | ($31,243 | )                                | $      | 60       |   | $ | 162,032 |   | $ | 74,919 |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Cumulative                        interest-rate sensitivity gap (4)    |   |                                          | ($3,521 | )                                |   | ($55,930                          | )      |                              | ($87,173 | )                                |   | ($87,113 | )      | $ | 74,919 |   |   |   |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Cumulative                        interest-rate gap as a               |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| percentage                        of total assets at June 30, 2007     |   |                                          | (0.74   | )%                               |   | (11.72                            | )%     |                              | (18.26   | )%                               |   | (18.25   | )%     |   | 15.69 | % |   |   |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| Cumulative                        interest-earning assets              |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| as                        a percentage of cumulative interest-         |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |
| bearing                        liabilities at June 30, 2007            |   |                                          | 96.04   | %                                |   | 71.80                             | %      |                              | 72.07    | %                                |   | 75.96    | %      |   | 119.51 | % |   |   |   |
|                                                                   |   |                                          |    |                             |   |                              |   |                              |     |                             |   |     |   |   |   |   |   |   |   |

| (1) | Interest-earning                      assets are included in the period in which the balances are                      expected to be                      redeployed and/or repriced as a result of anticipated prepayments,                      scheduled rate adjustments and contractual                      maturities. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For                      purposes of the gap analysis, investment securities are stated                      at                      amortized cost. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | For                      purposes of the gap analysis, loans receivable includes non-performing                      loans and is gross of the allowance for loan losses, but net                      of                      undisbursed portion of loans-in-process and unamortized deferred                      loan                      fees. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Interest-rate                      sensitivity gap represents the difference between net interest-earning                      assets and interest-bearing                      liabilities. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Net            Portfolio Value Analysis.**

| Change                        in       |   |                                          |   |                                   |   |                            |   | NPV                        as % of Portfolio |   |
|----------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------|--------|---------------------------------|--------|----------------------------------------------|--------|
| Interest                        Rates  |   | Net                        Portfolio Value    |   | Value                        of Assets |   |
| In                        Basis Points |   |                                          |   |                                   |   |                            |   |                                         |   |   |   |
| (Rate                        Shock)    |   | Amount                                        |   | $                        Change        |   | %                        Change |   | NPV                        Ratio             |   | Change |   |
|                                   |   |                                          |   |                                   |   |                            |   |                                         |   |   |   |
|                                   |   | (Dollars                        in Thousands) |   |
|                                   |   |                                          |   |                                   |   |                            |   |                                         |   |   |   |
| 300                                    |   | $                                             | 51,856 |                                   | $      | (36,037                         | )      |                                         | (41.00 | )% |   | 12.35 | % |   | (6.38 | )% |
| 200                                    |   |                                          | 63,025 |                                   |   | (24,868                         | )      |                                         | (28.29 | )% |   | 14.25 | % |   | (4.48 | )% |
| 100                                    |   |                                          | 75,157 |                                   |   | (12,736                         | )      |                                         | (14.49 | )% |   | 16.63 | % |   | (2.10 | )% |
| Static                                 |   |                                          | 87,893 |                                   |   | -                               |   |                                         | -      |   |   | 18.73 | % |   | - |   |
| (100)                                  |   |                                          | 95,735 |                                   |   | 7,842                           |   |                                         | 8.92   | % |   | 19.87 | % |   | 1.14 | % |
| (200)                                  |   |                                          | 95,093 |                                   |   | 7,200                           |   |                                         | 8.19   | % |   | 19.56 | % |   | 0.83 | % |
| (300)                                  |   |                                          | 92,133 |                                   |   | 4,240                           |   |                                         | 4.82   | % |   | 18.88 | % |   | 0.15 | % |
|                                   |   |                                          |   |                                   |   |                            |   |                                         |   |   |   |   |   |   |   |   |

----

**ITEM            4. CONTROLS AND PROCEDURES **

----

**PART            II**

**Item            1. Legal Proceedings**

**Item            1A. Risk Factors **

**Item            2. Unregistered Sales of Equity Securities and Use of Proceeds**
| (a)   |                         Not applicable |
|-----------------|------------------------------------------------------------|
| (b)   |      Not                    applicable |
|-----------------|-----------------------------------------------------------------|
| (c)   |                         Purchases of Equity Securities |
|-----------------|----------------------------------------------------------------------------|

----

| **Period**                                    |   | **Total**** Number                      of****Shares****Purchased** |    | **Average                      Price****Paid                      per Share** |   | **Total****Number                      of****Shares****Purchased                      as****Part                      of****Publicly                      Announced****Plans                      or****Programs** |   | **Maximum                      Number****of                      Shares that May Yet be Purchased Under the Plan or                      Programs(1)(2)** |    |
|-----------------------------------------------|--------|--------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| April                      1 - April 30, 2007 |   |                                                                     | 49,400  |                                                                          | $      | 13.65                                                                                                                                                                                                              |   |                                                                                                                                                      | 49,400  |   |   | 244,184 |   |
| May                      1 - May 31, 2007     |   |                                                                     | 32,684  |                                                                          |   | 13.70                                                                                                                                                                                                              |   |                                                                                                                                                      | 32,684  |   |   | 211,500 |   |
| June                      1 - June 30, 2007   |   |                                                                     | 117,700 |                                                                          |   | 13.61                                                                                                                                                                                                              |   |                                                                                                                                                      | 117,700 |   |   | 93,800 |   |
|                                          |   |                                                                     |    |                                                                          |   |                                                                                                                                                                                                               |   |                                                                                                                                                      |    |   |   |   |   |
| Total                                         |   |                                                                     | 199,784 |                                                                          | $      | 13.63                                                                                                                                                                                                              |   |                                                                                                                                                      | 199,784 |   |   | 93,800 |   |

| (1)   | On                    January 17, 2007, the Company announced its third stock repurchase                    program                    to repurchase up to 255,384 shares or approximately 5% of the                    Company’s                    outstanding common stock held by shareholders other than Prudential                    Mutual                    Holding Company. The program was completed during May                    2007. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | On                    March 21, 2007, the Company announced its fourth stock repurchase                    program                    to repurchase up to 242,000 shares or approximately 5% of the                    Company’s                    outstanding common stock held by shareholders other than Prudential                    Mutual                    Holding Company, commencing after the completion of third repurchase                    plan                    in May 2007. The program will expire one year after it commences,                    unless                    extended, as necessary, to complete such buyback                    program. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item            3. Defaults Upon Senior Securities**

**Item            4. Submission of Matters to a Vote of Security Holders**

**Item            5. Other Information **

**Item      6. Exhibits**

| Exhibit No. |   | Description                                                                                            |
|-------------|--------|-------------------------------------------------------------------------------------------------------------|
| 31.1        |   | Rule                      13a-14(a)/15d-14(a) Certification of Chief Executive                      Officer |
| 31.2        |   | Rule                  13a-14(a)/15d-14(a) Certification of Chief Financial                  Officer         |
| 32.0        |   | Section                  1350 Certifications                                                                |

----

**SIGNATURES**

**PRUDENTIAL      BANCORP, INC. OF PENNSYLVANIA **

|                                 |   |                                                                                                                                                                                                 |   |
|--------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                 | By:    | /s/                Thomas A. Vento                                                                                                                                                                   |   |
|                                 |   | Name:                  Thomas A. Vento                                                                                                                                                     |   |
|                                 |   | Title:                    President and Chief Executive                Officer                                                                                                   |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
| Date:                August 14, 2007 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 | By:    | /s/                Joseph R. Corrato                                                                                                                                                                 |   |
|                                 |   | Name:                  Joseph R. Corrato                                                                                                                                                   |   |
|                                 |   | Title:                    Executive Vice President and              Chief                Financial Officer |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |
| Date:                August 14, 2007 |   |                                                                                                                                                                                                 |   |
|                                 |   |                                                                                                                                                                                                 |   |