UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
         For the quarterly period ended September 30, 2002

                                       OR

[ ]  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 0-24040


                        PennFed Financial Services, Inc.
 -------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                     22-3297339
 -------------------------------------------------------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

  622 Eagle Rock Avenue, West Orange, NJ                          07052-2989
 -------------------------------------------------------------------------------
 (Address of principal executive offices)                         (Zip Code)

   Registrant's telephone number, including area code:      (973) 669-7366
                                                            --------------------


 -------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
               if changed since last report)



     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
requirements for the past 90 days.
YES [X]  NO [ ]


As of November 1, 2002, there were issued and outstanding 7,196,678 shares of
the Registrant's Common Stock.


<PAGE>


PART I - Financial Information
Item 1.  Financial Statements

PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>
                                                                                           September 30,            June 30,
                                                                                               2002                   2002
                                                                                               ----                   ----
                                                                                                 (Dollars in thousands)
<S>                                                                                        <C>                    <C>
ASSETS
Cash and cash equivalents.............................................................     $     52,427           $     37,189
Investment securities available for sale, at market value, amortized cost of
     $4,321 and $4,266 at September 30, 2002 and June 30, 2002........................            4,544                  4,295
Investment securities held to maturity, at amortized cost, market value of
     $179,079 and $178,676 at September 30, 2002 and June 30, 2002....................          178,771                179,490
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $161,506 and $174,036 at September 30, 2002 and June 30, 2002.................          155,889                169,689
Loans held for sale...................................................................            4,437                  1,592
Loans receivable, net of allowance for loan losses of $6,038 and $5,821
     at September 30, 2002 and June 30, 2002..........................................        1,425,747              1,439,668
Premises and equipment, net...........................................................           19,948                 19,598
Real estate owned, net................................................................               28                     28
Federal Home Loan Bank of New York stock, at cost.....................................           25,223                 25,656
Accrued interest receivable, net......................................................           10,450                  9,564
Goodwill and other intangible assets..................................................            4,569                  5,043
Other assets..........................................................................              554                    615
                                                                                             ----------             ----------
                                                                                             $1,882,587             $1,892,427
                                                                                             ==========             ==========

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits.........................................................................       $1,166,804             $1,174,507
     Federal Home Loan Bank of New York advances......................................          504,465                504,465
     Other borrowings.................................................................           25,420                 23,314
     Mortgage escrow funds............................................................           11,624                 12,772
     Accounts payable and other liabilities...........................................           10,480                 14,071
                                                                                             ----------             ----------
     Total liabilities................................................................        1,718,793              1,729,129
                                                                                             ----------             ----------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures...............................................           46,500                 46,500
     Unamortized issuance expenses....................................................           (1,944)                (1,963)
                                                                                             ----------             ----------
     Net Trust Preferred securities...................................................           44,556                 44,537
                                                                                             ----------             ----------

Stockholders' Equity:
     Serial preferred stock, $.01 par value, 7,000,000 shares
         authorized, no shares issued.................................................              ---                    ---
     Common stock, $.01 par value, 15,000,000 shares authorized, 11,900,000
         shares issued and 7,241,678 and 7,347,552 shares outstanding at
          September 30, 2002 and June 30, 2002 (excluding shares held in
          treasury of 4,658,322 and 4,552,448 at September 30, 2002 and
          June 30, 2002)..............................................................               60                     60
     Additional paid-in capital.......................................................           64,524                 63,820
     Employee Stock Ownership Plan Trust debt.........................................           (1,094)                (1,244)
     Retained earnings, partially restricted..........................................          117,266                114,444
     Accumulated other comprehensive income, net of taxes.............................              143                     18
     Treasury stock, at cost, 4,658,322 and 4,552,448 shares at
         September 30, 2002 and June 30, 2002.........................................          (61,661)               (58,337)
                                                                                             ----------             ----------
     Total stockholders' equity.......................................................          119,238                118,761
                                                                                             ----------             ----------
                                                                                             $1,882,587             $1,892,427
                                                                                             ==========             ==========
</TABLE>

See notes to consolidated financial statements.

                                       2


<PAGE>


PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                             Three months ended September 30,
                                                                                             --------------------------------
                                                                                                2002                   2001
                                                                                                ----                   ----
                                                                                                (Dollars in thousands, except
                                                                                                     per share amounts)

<S>                                                                                             <C>                    <C>
Interest and Dividend Income:
     Interest and fees on loans.......................................................          $23,186                $23,855
     Interest on federal funds sold...................................................              ---                      1
     Interest and dividends on investment securities..................................            3,281                  5,924
     Interest on mortgage-backed securities...........................................            2,534                  2,154
                                                                                              ---------              ---------
                                                                                                 29,001                 31,934
                                                                                              ---------              ---------
Interest Expense:
     Deposits.........................................................................            9,654                 11,562
     Borrowed funds...................................................................            7,557                  8,217
                                                                                              ---------              ---------
                                                                                                 17,211                 19,779
                                                                                              ---------              ---------
Net Interest and Dividend Income Before Provision
     for Loan Losses..................................................................           11,790                 12,155
Provision for Loan Losses.............................................................              225                    550
                                                                                              ---------              ---------
Net Interest and Dividend Income After Provision
     for Loan Losses..................................................................           11,565                 11,605
                                                                                              ---------              ---------
Non-Interest Income:
     Service charges..................................................................            1,123                    647
     Net gain (loss) from real estate operations......................................                2                    (39)
     Net gain on sales of loans.......................................................              231                     42
     Other............................................................................              226                    195
                                                                                              ---------              ---------
                                                                                                  1,582                    845
                                                                                              ---------              ---------
Non-Interest Expenses:
     Compensation and employee benefits...............................................            3,481                  3,235
     Net occupancy expense............................................................              403                    406
     Equipment........................................................................              517                    501
     Advertising......................................................................               87                    120
     Amortization of intangibles......................................................              474                    492
     Federal deposit insurance premium................................................               48                     52
     Preferred securities expense.....................................................            1,092                  1,092
     Other............................................................................            1,015                  1,032
                                                                                              ---------              ---------
                                                                                                  7,117                  6,930
                                                                                              ---------              ---------
Income Before Income Taxes............................................................            6,030                  5,520
Income Tax Expense....................................................................            2,206                  1,967
                                                                                              ---------              ---------
Net Income............................................................................         $  3,824               $  3,553
                                                                                              =========              =========
Weighted average number of common shares outstanding:
     Basic............................................................................        7,115,255              7,306,933
                                                                                              =========              =========
     Diluted..........................................................................        7,655,481              7,873,741
                                                                                              =========              =========
Net income per common share:
     Basic............................................................................            $0.54                  $0.49
                                                                                              =========              =========
     Diluted..........................................................................            $0.50                  $0.45
                                                                                              =========              =========
</TABLE>

See notes to consolidated financial statements.

                                       3


<PAGE>


PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>
                                                                                             Three months ended September 30,
                                                                                             --------------------------------
                                                                                                2002                   2001
                                                                                                ----                   ----
                                                                                                       (In thousands)

<S>                                                                                              <C>                    <C>
Net income............................................................................           $3,824                 $3,553
Other comprehensive income, net of tax:
   Unrealized gains (losses) on investment securities available for sale:
     Unrealized holding gains (losses) arising during period..........................              125                     (3)
                                                                                                 ------                 ------
Comprehensive income..................................................................           $3,949                 $3,550
                                                                                                 ======                 ======
</TABLE>


See notes to consolidated financial statements.

                                       4


<PAGE>


PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                                     For the Three Months Ended September 30, 2002 and 2001
                                                     ------------------------------------------------------


                                                                             Employee
                                                                               Stock                      Accumulated
                                       Serial                 Additional      Ownership                    Other
                                      Preferred     Common      Paid-In      Plan Trust     Retained   Comprehensive    Treasury
                                        Stock       Stock       Capital         Debt        Earnings       Income         Stock
                                        -----       -----       -------         ----        --------       ------         -----
                                                                    (Dollars in thousands)

<S>             <C> <C>                  <C>      <C>          <C>           <C>           <C>           <C>           <C>
Balance at June 30, 2001 .......         $---     $      60    $  61,504     $  (1,801)    $ 102,694     $     ---     $ (49,927)
Allocation of Employee Stock
  Ownership Plan (ESOP) stock ..                                                   139
ESOP adjustment ................                                     745
Purchase of 77,500 shares of
  treasury stock ...............                                                                                          (1,655)
Issuance of 101,099 shares of
  treasury stock for options
  exercised and Dividend
  Reinvestment Plan (DRP) ......                                                                (333)                      1,189
Cash dividends of $0.05 per
  common share .................                                                                (371)
Unrealized loss on investment
  securities available for sale,
  net of income taxes ..........                                                                                (3)
Net income for the three months
  ended September 30, 2001 .....                                                               3,553
                                         ----     ---------    ---------     ---------     ---------     ---------     ---------
Balance at September 30, 2001 ..         $---     $      60    $  62,249     $  (1,662)    $ 105,543     $      (3)    $ (50,393)
                                         ====     =========    =========     =========     =========     =========     =========



Balance at June 30, 2002 .......         $---     $      60    $  63,820     $  (1,244)    $ 114,444     $      18     $ (58,337)
Allocation of ESOP stock .......                                                   150
ESOP adjustment ................                                     704
Purchase of 145,000 shares of
  treasury stock ...............                                                                                          (3,826)
Issuance of 39,126 shares of
  treasury stock for options
  exercised and DRP ............                                                                (290)                        502
Cash dividends of $0.10 per
  common share .................                                                                (712)
Unrealized gain on investment
  securities available for sale,
  net of income taxes ..........                                                                               125
Net income for the three months
  ended September 30, 2002 .....                                                               3,824
                                         ----     ---------    ---------     ---------     ---------     ---------     ---------
Balance at September 30, 2002 ..         $---     $      60    $  64,524     $  (1,094)    $ 117,266     $     143     $ (61,661)
                                         ====     =========    =========     =========     =========     =========     =========

</TABLE>
See notes to consolidated financial statements.


                                       5


<PAGE>


PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                            Three months ended September 30,
                                                                                            --------------------------------
                                                                                              2002                    2001
                                                                                              ----                    ----
                                                                                                 (Dollars in thousands)
<S>                                                                                          <C>                    <C>
Cash Flows from Operating Activities:
     Net income.......................................................................        $   3,824              $   3,553
     Adjustments to reconcile net income to net cash provided by
       (used in) operating activities:
     Net gain on sales of loans.......................................................             (231)                   (42)
     Proceeds from sales of loans held for sale.......................................           12,816                  3,408
     Amortization of investment and mortgage-backed securities
       premium, net...................................................................              142                     68
     Depreciation and amortization....................................................              415                    386
     Provision for losses on loans and real estate owned..............................              225                    576
     Amortization of cost of stock plans..............................................              854                    885
     Amortization of intangibles......................................................              474                    492
     Amortization of premiums on loans and loan fees..................................            1,655                    773
     Amortization of Trust Preferred securities issuance costs........................               19                     19
     (Increase) decrease in accrued interest receivable, net of
       accrued interest payable.......................................................             (217)                    27
     (Increase) decrease in other assets..............................................               61                 (8,821)
     Decrease in accounts payable and other liabilities...............................           (3,660)                (1,350)
     Decrease in mortgage escrow funds................................................           (1,148)                  (288)
                                                                                              ---------              ---------
     Net cash provided by (used in) operating activities..............................           15,229                   (314)
                                                                                              ---------              ---------
Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities................................           44,565                 96,155
     Purchases of investment securities held to maturity..............................          (43,870)               (24,553)
     Purchases of investment securities available for sale............................              (56)                   (15)
     Net outflow from loan originations net of principal repayments of loans..........           (2,712)               (98,702)
     Purchases of loans...............................................................             (676)                (7,286)
     Proceeds from principal repayments of mortgage-backed securities.................           13,682                 11,199
     Purchases of premises and equipment..............................................             (765)                  (440)
     Net inflow from real estate owned activity.......................................              ---                     90
     Redemptions (purchases) of Federal Home Loan Bank of New York stock..............              433                   (860)
                                                                                              ---------              ---------
     Net cash provided by (used in) investing activities..............................           10,601                (24,412)
                                                                                              ---------              ---------
Cash Flows from Financing Activities:
     Net increase (decrease) in deposits..............................................           (8,372)                68,692
     Increase (decrease) in advances from the Federal Home Loan Bank
       of New York and other borrowings...............................................            2,106                (43,490)
     Cash dividends paid..............................................................             (712)                  (371)
     Purchases of treasury stock, net of reissuance...................................           (3,614)                  (799)
                                                                                              ---------              ---------
     Net cash provided by (used in) financing activities..............................          (10,592)                24,032
                                                                                              ---------              ---------
Net Increase (Decrease) in Cash and Cash Equivalents..................................           15,238                   (694)
Cash and Cash Equivalents, Beginning of Period........................................           37,189                 15,771
                                                                                              ---------              ---------
Cash and Cash Equivalents, End of Period..............................................        $  52,427              $  15,077
                                                                                              =========              =========
</TABLE>
                                       6

<PAGE>


PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>
                                                                                            Three months ended September 30,
                                                                                            --------------------------------
                                                                                                 2002                 2001
                                                                                                 ----                 ----
                                                                                                 (Dollars in thousands)

<S>                                                                                           <C>                   <C>
Supplemental Disclosures of Cash Flow Information:
     Cash paid during the period for:
     Interest.........................................................................        $  16,925             $  18,628
                                                                                              =========             =========
     Income taxes.....................................................................        $     200             $     ---
                                                                                              =========             =========
Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to loans held for sale, at market...................        $  15,430             $   5,295
                                                                                              =========             =========

</TABLE>

See notes to consolidated financial statements.

                                       7


<PAGE>


                PENNFED FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation

The interim consolidated financial statements of PennFed Financial Services,
Inc. ("PennFed") and subsidiaries (with its subsidiaries, the "Company") include
the accounts of PennFed and its subsidiaries (Penn Federal Savings Bank (the
"Bank"), PennFed Capital Trust I and PennFed Capital Trust II). These interim
consolidated financial statements included herein should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended June 30, 2002.
The interim consolidated financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, considered necessary for a
fair presentation of the financial condition and results of operations for the
periods presented. There were no adjustments of a non-recurring nature recorded
during the three months ended September 30, 2002 and 2001. The interim results
of operations presented are not necessarily indicative of the results for the
full year.

2. Commitments to Originate Loans

The Company enters into commitments to originate loans whereby the interest rate
on the loan is determined prior to funding (rate lock commitments). Rate lock
commitments on mortgage loans that are intended to be sold are considered to be
derivatives and are recorded within other assets at fair value with changes in
fair value recorded in the net gain on sales of loans. Fair value is based upon
current prices in the secondary market for mortgage loans with similar
characteristics as the rate lock commitments.

3. Adoption of Recently Issued Accounting Standards

Effective July 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143") and Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144").

SFAS 142 requires that, upon adoption, amortization of goodwill will cease and
instead, the carrying value of goodwill will be evaluated for impairment on an
annual basis. Identifiable intangible assets will continue to be amortized over
their useful lives and reviewed for impairment in accordance with Statement of
Financial Position No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" ("SFAS 121").

SFAS 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred, if a reasonable
estimate of fair value can be made. The associated asset retirement cost would
be capitalized as part of the carrying amount of the long-lived asset.

SFAS 144 supersedes SFAS 121 but retains the requirements of SFAS 121 for
recognizing and measuring the impairment loss of long-lived assets to be held
and used. For long-lived assets to be disposed of by sale, SFAS 144 requires a
single accounting model be used for all long-lived assets, whether previously
held and used or newly acquired. Long-lived assets to be disposed of other than
by sale would be considered held and used until disposition. SFAS 144 also
broadens the presentation of discontinued operations in the income statement to
include more disposal transactions.

The adoption of SFAS 142, SFAS 143 and SFAS 144 did not have an effect on the
Company's financial condition, results of operations or cash flows as of and for
the three months ended September 30, 2002.

4. Recently Issued Accounting Standards

In October 2002, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 147, "Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9" ("SFAS 147"). Among other things, SFAS 147 amends SFAS 144
to include in its scope long-term customer-relationship intangible assets of
financial institutions such as depositor- and borrower-relationship intangible
assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow recoverability test and impairment loss recognition and
measurement provisions that SFAS 144 requires for other long-lived assets that
are held and used. SFAS 147 is effective beginning October 1, 2002. The Company
has not determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

                                       8


<PAGE>


5. Computation of EPS

The computation of EPS is presented in the following table.

<TABLE>
<CAPTION>
                                                                                               Three months ended September 30,
                                                                                               --------------------------------
                                                                                                  2002                    2001
                                                                                                  ----                    ----
                                                                                                 (Dollars in thousands, except
                                                                                                        per share amounts)

<S>                                                                                            <C>                     <C>
Net income.............................................................................            $3,824                  $3,553
                                                                                               ==========              ==========
Number of shares outstanding:
Weighted average shares issued.........................................................        11,900,000              11,900,000
Less: Weighted average shares held in treasury.........................................         4,566,001               4,260,678
Less: Average shares held by the ESOP..................................................           952,000                 952,000
Plus: ESOP shares released or committed to be released
           during the fiscal year......................................................           733,256                 619,611
                                                                                               ----------              ----------
Average basic shares...................................................................         7,115,255               7,306,933
Plus: Average common stock equivalents.................................................           540,226                 566,808
                                                                                               ----------              ----------
Average diluted shares.................................................................         7,655,481               7,873,741
                                                                                               ==========              ==========
Earnings per common share:
        Basic..........................................................................          $  0.54                  $  0.49
                                                                                               ==========              ==========
        Diluted........................................................................          $  0.50                  $  0.45
                                                                                               ==========              ==========

</TABLE>

6. Stockholders' Equity and Regulatory Capital

The Bank's regulatory  capital amounts and ratios are presented in the following
table.

<TABLE>
<CAPTION>
                                                                                                               To Be Well
                                                                                   For Minimum              Capitalized Under
                                                                                Capital Adequacy            Prompt Corrective
                                                        Actual                       Purposes               Action Provisions
                                                        ------                       --------               -----------------
                                                  Amount      Ratio             Amount      Ratio         Amount        Ratio
                                                  ------      -----             ------      -----         ------        -----
                                                                             (Dollars in thousands)
<S>                                              <C>           <C>              <C>         <C>           <C>           <C>
As of September 30, 2002
Tangible capital, and ratio to
   adjusted total assets...................      $161,498      8.59%            $28,186     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $161,498      8.59%            $75,163     4.00%         $ 93,954      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $161,498     15.70%                N/A      N/A          $ 61,737      6.00%
Risk-based capital, and ratio to
   risk-weighted assets....................      $167,617     16.29%            $82,315     8.00%         $102,894     10.00%

As of June 30, 2002
Tangible capital, and ratio to
   adjusted total assets...................      $158,034      8.37%            $28,323     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $158,034      8.37%            $75,529     4.00%        $  94,411      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $158,034     15.36%                N/A      N/A         $  61,722      6.00%
Risk-based capital, and ratio to
   risk-weighted assets....................      $163,828     15.93%            $82,296     8.00%         $102,869     10.00%

</TABLE>
                                       9


<PAGE>


The previous table reflects information for the Bank. Savings and loan holding
companies, such as PennFed, are not subject to capital requirements for capital
adequacy purposes or for prompt corrective action requirements. Bank holding
companies, however, are subject to capital requirements established by the Board
of Governors of the Federal Reserve System (the "FRB"). The following table
summarizes the Company's capital amounts and ratios under the FRB's capital
requirements for bank holding companies.

<TABLE>
<CAPTION>
                                                                                                              To Be Well
                                                                                    For Minimum            Capitalized Under
                                                                                 Capital Adequacy          Prompt Corrective
                                                        Actual                       Purposes              Action Provisions
                                                        ------                       --------              -----------------
                                                  Amount      Ratio             Amount      Ratio         Amount        Ratio
                                                  ------      -----             ------      -----         ------        -----
                                                                            (Dollars in thousands)
<S>                                              <C>           <C>              <C>         <C>           <C>           <C>
As of September 30, 2002
Tangible capital, and ratio to
   adjusted total assets...................      $152,701      8.13%            $28,182     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $152,701      8.13%            $75,151     4.00%         $ 93,939      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $152,701     15.01%                N/A      N/A          $ 61,052      6.00%
Risk-based capital, and ratio to
   risk-weighted assets....................      $158,720     15.60%            $81,403     8.00%         $101,754     10.00%

As of June 30, 2002
Tangible capital, and ratio to
   adjusted total assets...................      $151,600      8.02%            $28,349     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $151,600      8.02%            $75,597     4.00%         $ 94,496      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $151,600     14.87%                N/A      N/A          $ 61,150      6.00%
Risk-based capital, and ratio to
   risk-weighted assets....................      $157,386     15.44%            $81,534     8.00%         $101,917     10.00%

</TABLE>

                                       10


<PAGE>


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

General

The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan,
securities and investment portfolios and its cost of funds, consisting of the
interest paid on deposits and borrowings. General economic and competitive
conditions, particularly changes in interest rates, government policies and
actions of regulatory authorities, also significantly affect the Company's
results of operations. Future changes in applicable laws, regulations or
government policies may also have a material impact on the Company.

When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission (the "SEC"), in the Company's press releases
or other public or shareholder communications, and in oral statements made with
the approval of an authorized executive officer, the words or phrases "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including, among other things, changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates and demand for loans in the Company's market
area, the relationship of short-term interest rates to long-term interest rates,
competition and terrorist acts that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above, as well as other
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.

The Company does not undertake - and specifically declines any obligation - to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

Financial Condition

Total assets decreased $9.8 million to $1.883 billion at September 30, 2002 from
total assets of $1.892 billion at June 30, 2002. The decrease at September 30,
2002 was primarily due to a $13.8 million decrease in mortgage-backed securities
and an $11.1 million decrease in net loans receivable offset by a $15.2 million
increase in cash and cash equivalents, when compared to June 30, 2002. Low
market interest rates and the resulting effect of loan refinancing activity has
led to an increase in the runoff of the mortgage-backed securities portfolio.
The effects of accelerated prepayments on loans and the sale of conforming,
fixed rate, one- to four-family residential mortgage loans into the secondary
market have primarily offset total loan originations. Due to the lower yielding
investment alternatives that have been available in the market and with
increased cash flows from asset repayments and the sale of loans, cash and cash
equivalents have increased since June 30, 2002.

Deposits decreased $7.7 million to $1.167 billion at September 30, 2002 from
$1.175 billion at June 30, 2002. An increase in core deposit accounts (checking,
money market and savings accounts) was offset by a decrease in short- and
medium-term certificates of deposit. At September 30, 2002, Federal Home Loan
Bank ("FHLB") of New York advances and other borrowings remained relatively
unchanged from June 30, 2002.

Non-performing assets at September 30, 2002 totaled $2.5 million, a decrease of
$844,000 from the $3.3 million recorded at June 30, 2002. The ratio of
non-performing assets to total assets decreased to 0.13% at September 30, 2002
from 0.17% at June 30, 2002. Non-accruing loans at September 30, 2002 totaled
$2.4 million, as compared to $3.3 million at June 30, 2002, while the ratio of
non-accruing loans to total loans decreased from 0.17% at September 30, 2002 to
0.23% at June 30, 2002. Real estate owned at September 30, 2002 remained
unchanged from the $28,000 recorded at June 30, 2002.

Stockholders' equity at September 30, 2002 totaled $119.2 million compared to
$118.8 million at June 30, 2002. The increase primarily reflects the net income
recorded for the three months ended September 30, 2002 and the exercise of stock
options, partially offset by the repurchase of 145,000 shares of the Company's
outstanding stock at an average price of $26.39 per share and the declaration of
cash dividends.

                                       11


<PAGE>


Results of Operations

General. For the three months ended September 30, 2002, net income was $3.8
million, or $0.50 per diluted share, compared to net income of $3.6 million, or
$0.45 per diluted share, for the comparable prior year period.

Interest and Dividend Income. Interest and dividend income for the three months
ended September 30, 2002 decreased to $29.0 million from $31.9 million for the
three months ended September 30, 2001. This decrease was due to a decrease in
average interest-earning assets and a decrease in the average yield earned on
these assets, when compared to the prior year's quarter. Average
interest-earning assets were $1.822 billion for the three months ended September
30, 2002 compared to $1.832 billion for the prior year period. The average yield
earned on interest-earning assets decreased to 6.34% for the three months ended
September 30, 2002 from 6.95% for the three months ended September 30, 2001.

Interest income on residential one- to four-family mortgage loans for the three
months ended September 30, 2002 decreased $1.1 million when compared to the
prior year period. The decrease in interest income on residential one- to
four-family mortgage loans was due to a decrease in the average yield earned on
this loan portfolio to 6.24% for the three months ended September 30, 2002 from
6.88% for the comparable prior year period. The decrease in interest income on
residential one- to four-family mortgage loans was partially offset by a $43.2
million increase in the average balance outstanding to $1.167 billion for the
three months ended September 30, 2002 compared to $1.124 billion for the prior
year period.

For the three months ended September 30, 2002, interest income on commercial and
multi-family real estate loans increased $654,000, or 27.5%, when compared to
the prior year period. The increase in interest income on this loan portfolio
was attributable to an increase of $37.0 million in the average outstanding
balance for the three months ended September 30, 2002, when compared to the
three months ended September 30, 2001. The increase in interest income on
commercial and multi-family real estate loans was partially offset by a decrease
in the average yield earned to 7.97% for the three months ended September 30,
2002, compared to 8.30% for the three months ended September 30, 2001.

Interest income on consumer loans decreased $206,000 for the three months ended
September 30, 2002 compared to the prior year period. The decrease in interest
income for this loan portfolio was due to a decrease in the average yield earned
on these loans. The average yield decreased to 6.36% for the three months ended
September 30, 2002 compared to 7.18% for the prior year period. Offsetting the
decrease in interest income on consumer loans was a $2.3 million increase in the
average balance outstanding for the three months ended September 30, 2002, when
compared to the prior year period.

Interest income on investment securities and other interest-earning assets
decreased $2.6 million for the three months ended September 30, 2002, when
compared to the prior year period. The decrease in interest income on these
securities was primarily attributable to a $126.2 million decrease in the
average balance outstanding for the current year period over the prior year
period. In addition, the decrease in interest income on investment securities
and other interest-earning assets was due to a decline in the average yield
earned on these securities to 5.94% for the three months ended September 30,
2002, compared to 6.82% for the three months ended September 30, 2001.

Interest income on the mortgage-backed securities portfolio increased $380,000
for the three months ended September 30, 2002, when compared to the prior year
period. The increase in interest income on mortgage-backed securities reflects a
$34.0 million increase in the average balance outstanding to $164.1 million for
the three months ended September 30, 2002, compared to $130.1 million for the
prior year period. The increase in interest income was partially offset by a
decrease in the average yield earned on the mortgage-backed securities portfolio
to 6.18% for the three months ended September 30, 2002, compared to 6.62% for
the comparable prior year period.

Interest Expense. Interest expense decreased $2.6 million for the three months
ended September 30, 2002 from $19.8 million for the comparable prior year
period. The decrease in the current year period was primarily attributable to a
decrease in the Company's cost of funds from an average rate of 4.59% to 4.01%,
when compared to the prior year period, as a result of lower market interest
rates. In addition, the decrease in interest expense was partially attributable
to a $5.5 million decrease in total average deposits and borrowings, when
compared to the prior year period.

For the three months ended September 30, 2002, average deposit balances
increased $42.1 million to $1.168 billion from $1.126 billion for the three
months ended September 30, 2001. The average rate paid on deposits for the
current year period decreased to 3.28% as compared to 4.07% for the three months
ended September 30, 2001.


                                       12


<PAGE>


The average cost of FHLB of New York advances decreased to 5.66% from 5.92%
while the average balance of FHLB of New York advances increased $45.7 million
for the three months ended September 30, 2002, when compared to the three months
ended September 30, 2001. For the three months ended September 30, 2002, the
average balance of other borrowings decreased $93.3 million to $23.2 million
from $116.5 million for the three months ended September 30, 2001. For the three
months ended September 30, 2002, the average rate paid on other borrowings
increased to 4.66% from 4.34% for the prior year period.

Net Interest and Dividend Income. Net interest and dividend income before
provision for loan losses for the three months ended September 30, 2002 was
$11.8 million, reflecting a $365,000 decrease from the $12.2 million recorded in
the comparable prior year period. Average net interest-earning assets decreased
$4.4 million for the three months ended September 30, 2002, when compared to the
prior year period. The net interest rate spread and net interest margin for the
three months ended September 30, 2002 were 2.33% and 2.62%, respectively, a
decrease from 2.36% and 2.69%, respectively, for the three months ended
September 30, 2001. Due to accelerated prepayments and lower market coupons, the
net interest margin experienced compression during the current period, when
compared to the prior year period.

Provision for Loan Losses. The provision for loan losses for the three months
ended September 30, 2002 was $225,000 compared to $550,000 for the prior year
period. The allowance for loan losses at September 30, 2002 of $6.0 million
reflects a $217,000 increase from the $5.8 million at June 30, 2002. The
allowance for loan losses as a percentage of non-accruing loans was 248.38% at
September 30, 2002, compared to 177.74% at June 30, 2002. Non-accruing loans
were $2.4 million at September 30, 2002 compared to $3.3 million at June 30,
2002. The allowance for loan losses as a percentage of total loans at September
30, 2002 was 0.42% compared to 0.40% at June 30, 2002.

Non-Interest Income. For the three months ended September 30, 2002, non-interest
income was $1.6 million compared to $845,000 for the prior year period. The
increase in non-interest income was primarily due to increases in service
charges, net gain on sales of loans and other non-interest income, when compared
to the prior year period.

Service charge income for the three months ended September 30, 2002 was $1.1
million, reflecting an increase of $476,000 over the $647,000 recorded for the
prior year period. Service charges were positively impacted by fees associated
with various loan prepayments and refinances.

During the three months ended September 30, 2002, the net gain on sales of loans
was $231,000 as compared to $42,000 for the three months ended September 30,
2001. Approximately $12.6 million of conforming, fixed rate one- to four-family
residential mortgage loans were sold into the secondary market during the three
months ended September 30, 2002. During the three months ended September 30,
2001, loan production was retained in portfolio as a partial replacement of
investment securities called before maturity. In addition, effective with the
issuance of $12 million of Trust Preferred securities in March 2001, a
determination was made to suspend the sale of conforming, fixed rate one- to
four-family residential mortgage loan production to leverage the proceeds of the
issuance. As a result, only $3.4 million of these conforming, fixed rate one- to
four-family residential mortgage loans were sold during the three months ended
September 30, 2001. In April 2002, the Company resumed the sale of these loans.

Other non-interest income increased to $226,000 for the three months ended
September 30, 2002 from $195,000 for the prior year period. Other non-interest
income included $144,000 and $100,000 in earnings from the Investment Services
at Penn Federal program for the three months ended September 30, 2002 and 2001,
respectively. Through this program, customers have convenient access to
financial consulting/advisory services and related uninsured non-deposit
investment and insurance products.

Non-Interest Expenses. Non-interest expenses were $7.1 million for the three
months ended September 30, 2002, a slight increase from the $6.9 million
recorded during the prior year period. The Company's non-interest expenses as a
percent of average assets increased to 1.51% for the three months ended
September 30, 2002 from 1.47% for the comparable prior year period.

Income Tax Expense. Income tax expense was $2.2 million for the three months
ended September 30, 2002, compared to $2.0 million for the three months ended
September 30, 2001. The effective tax rate for the three months ended September
30, 2002 was 36.6%. The effective tax rate was 35.6% for the three months ended
September 30, 2001.

                                       13


<PAGE>


Analysis of Net Interest Income

The following table sets forth certain information relating to the Company's
Consolidated Statements of Financial Condition and the Consolidated Statements
of Income for the three months ended September 30, 2002 and 2001 and reflects
the average yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived from average daily balances. The
average balance of loans receivable includes non-accruing loans. The yields and
costs include fees which are considered adjustments to yields.

<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30,
                                                    ----------------------------------------------------------------------------
                                                                    2002                                      2001
                                                    ----------------------------------       -----------------------------------
                                                      Average     Interest                     Average      Interest
                                                    Outstanding    Earned/      Yield/       Outstanding     Earned/     Yield/
                                                      Balance       Paid       Rate (1)        Balance        Paid      Rate (1)
                                                    -----------  ---------     --------      -----------    --------    --------
                                                                              (Dollars in thousands)
<S>                                                 <C>            <C>           <C>          <C>            <C>         <C>
Interest-earning assets:
    One- to four-family mortgage
       loans...................................     $1,167,156     $18,227       6.24%        $1,123,941     $19,344      6.88%
    Commercial and multi-family real
       estate loans............................        149,393       3,032       7.97            112,429       2,378      8.30
    Consumer loans.............................        120,155       1,927       6.36            117,865       2,133      7.18
                                                    ----------     -------                    ----------     -------
       Total loans receivable..................      1,436,704      23,186       6.43          1,354,235      23,855      7.02

    Federal funds sold.........................            ---         ---        ---                134           1      3.33
    Investment securities and other............        221,019       3,281       5.94            347,194       5,924      6.82
    Mortgage-backed securities.................        164,060       2,534       6.18            130,086       2,154      6.62
                                                    ----------     -------                    ----------     -------
       Total interest-earning assets...........      1,821,783     $29,001       6.34          1,831,649     $31,934      6.95
                                                                   =======                                   =======
Non-interest earning assets....................         57,872                                    51,632
                                                    ----------                                ----------
       Total assets ...........................     $1,879,655                                $1,883,281
                                                    ==========                                ==========
Deposits and borrowings:
    Money market and demand deposits...........     $  166,954     $   337       0.80%        $  130,775     $   308      0.93%
    Savings deposits...........................        319,765       2,207       2.74            195,003       1,005      2.05
    Certificates of deposit....................        681,525       7,110       4.14            800,383      10,249      5.08
                                                    ----------     -------                    ----------     -------
       Total deposits..........................      1,168,244       9,654       3.28          1,126,161      11,562      4.07

    FHLB of New York advances..................        504,465       7,281       5.66            458,766       6,925      5.92
    Other borrowings...........................         23,166         276       4.66            116,457       1,292      4.34
                                                    ----------     -------                    ----------     -------
       Total deposits and borrowings...........      1,695,875     $17,211       4.01          1,701,384     $19,779      4.59
                                                                   =======                                   =======
Other liabilities..............................         19,822                                    23,350
                                                    ----------                                ----------
       Total liabilities.......................      1,715,697                                 1,724,734
Trust Preferred securities.....................         44,546                                    44,471
Stockholders' equity...........................        119,412                                   114,076
       Total liabilities and stockholders'          ----------                                -----------
           equity..............................     $1,879,655                                $1,883,281
                                                    ==========                                ==========
Net interest income and net
    interest rate spread.......................                    $11,790       2.33%                       $12,155      2.36%
                                                                   =======       ====                        =======    ======
Net interest-earning assets and
    interest margin ...........................     $  125,908                   2.62%        $  130,265                  2.69%
                                                    ==========                   ====         ==========                ======
Ratio of interest-earning assets to
    deposits and borrowings....................                                107.42%                                  107.66%
                                                                               ======                                   ======
</TABLE>

(1)  Annualized.

                                       14


<PAGE>


Non-Performing Assets

The table below sets forth the amounts and categories of the Company's
non-performing assets. Loans are placed on non-accrual status when the
collection of principal or interest becomes delinquent more than 90 days. There
are no loans delinquent more than 90 days which are still accruing. Real estate
owned represents assets acquired in settlement of loans and is shown net of
valuation allowances.

<TABLE>
<CAPTION>
                                                                                                September 30,          June 30,
                                                                                                    2002                 2002
                                                                                                    ----                 ----
                                                                                                     (Dollars in thousands)
<S>                                                                                                <C>                  <C>
Non-accruing loans:
     One- to four-family.................................................................          $2,087               $2,905
     Commercial and multi-family.........................................................            ---                   ---
     Consumer............................................................................             344                  370
                                                                                                   ------               ------
         Total non-accruing loans........................................................           2,431                3,275

Real estate owned, net...................................................................              28                   28
                                                                                                   ------               ------
         Total non-performing assets.....................................................           2,459                3,303
                                                                                                   ------               ------
         Total risk elements.............................................................          $2,459               $3,303
                                                                                                   ======               ======
Non-accruing loans as a percentage of total loans........................................           0.17%                 0.23%
                                                                                                   ======               ======
Non-performing assets as a percentage of total assets....................................           0.13%                 0.17%
                                                                                                   ======               ======
Total risk elements as a percentage of total assets......................................           0.13%                 0.17%
                                                                                                   ======               ======
</TABLE>

Allowance for Loan Losses. The allowance for loan losses is established through
a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters,
loan classifications, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience and other factors that
warrant recognition in providing for an adequate loan loss allowance.

Real estate properties acquired through foreclosure are recorded at the lower of
cost or estimated fair value less costs to dispose of such properties. If fair
value at the date of foreclosure is lower than the balance of the related loan,
the difference will be charged-off to the allowance for loan losses at the time
of transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on real estate owned is established by
a charge to operations.

Although management believes that it uses the best information available to
determine the allowances, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to record additions to the
allowance level based upon their assessment of the information available to them
at the time of examination. At September 30, 2002, the Company had a total
allowance for loan losses of $6.0 million representing 248.38% of total
non-accruing loans and 0.42% of total loans.

Critical Accounting Policy

Allowance for Loan Losses - The allowance for loan losses is established through
charges to earnings. Loan losses are charged against the allowance for loan
losses when management believes that the recovery of principal is unlikely. If,
as a result of loans charged off or increases in the size or risk
characteristics of the loan portfolio, the allowance is below the level
considered by management to be adequate to absorb future loan losses on existing
loans, the provision for loan losses is increased to the level considered
necessary to provide an adequate allowance. The allowance is an amount that
management believes will be adequate to absorb possible losses on existing loans
that may become uncollectible, based on evaluations of the collectibility of the
loans. The evaluations take into consideration such factors as changes in the

                                       15


<PAGE>



nature and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans and current economic conditions that may affect the
borrowers' ability to pay. Economic conditions may result in the necessity to
change the allowance quickly in order to react to deteriorating financial
conditions of the Company's borrowers. As a result, additional provisions on
existing loans may be required in the future if borrowers' financial conditions
deteriorate or if real estate values decline.

Interest Rate Sensitivity

Interest Rate Sensitivity Gap. The interest rate risk inherent in assets and
liabilities may be determined by analyzing the extent to which such assets and
liabilities are "interest rate sensitive" and by measuring an institution's
interest rate sensitivity "gap." An asset or liability is said to be interest
rate sensitive within a defined time period if it matures or reprices within
that period. The difference or mismatch between the amount of interest-earning
assets maturing or repricing within a defined period and the amount of
interest-bearing liabilities maturing or repricing within the same period is
defined as the interest rate sensitivity gap. An institution is considered to
have a positive gap if the amount of interest-earning assets maturing or
repricing within a specified time period exceeds the amount of interest-bearing
liabilities maturing or repricing within the same period. If more
interest-bearing liabilities than interest-earning assets mature or reprice
within a specified period, then the institution is considered to have a negative
gap. Accordingly, in a rising interest rate environment, in an institution with
a positive gap, the yield on its rate sensitive assets would theoretically rise
at a faster pace than the cost of its rate sensitive liabilities, thereby
improving future net interest income. In a falling interest rate environment, a
positive gap would indicate that the yield on rate sensitive assets would
decline at a faster pace than the cost of rate sensitive liabilities and
diminish net interest income. For an institution with a negative gap, the
reverse would be expected.

At September 30, 2002, the Company's total interest-earning assets maturing or
repricing within one year exceeded its total deposits and borrowings maturing or
repricing within one year by $168.0 million, representing a one year positive
gap of 8.92% of total assets, compared to a one year positive gap of 5.11% of
total assets at June 30, 2002. The Company's gap position changed from June 30,
2002 primarily due to the decline in market interest rates which has increased
prepayment activity on loans and mortgage-backed securities and has raised
expectations that certain investment securities with callable features will be
redeemed before maturity. Also contributing to the change in the gap position
was growth in core deposits, which reduced the short-term estimated cash flows
of the Company's interest-bearing liabilities.

In evaluating the Company's exposure to interest rate risk, certain limitations
inherent in the method of interest rate gap analysis must be considered. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable rate mortgages, have features
which restrict changes in interest rates in the short-term and over the life of
the asset. Further, in the event of a change in interest rates, prepayment and
early withdrawal levels may deviate significantly from those assumed in
calculating the gap position. Finally, the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of these factors in monitoring its exposure to interest rate risk.

Net Portfolio Value. The Company's interest rate sensitivity is regularly
monitored by management through additional interest rate risk ("IRR") measures,
including an IRR "Exposure Measure" or "Post-Shock" NPV ratio and a "Sensitivity
Measure." A low Post-Shock NPV ratio indicates greater exposure to IRR. Greater
exposure can result from a low initial NPV ratio or high sensitivity to changes
in interest rates. The Sensitivity Measure is the change in the NPV ratio, in
basis points, caused by a 2% increase or decrease in rates, whichever produces a
larger decline. At least quarterly, and generally monthly, management models the
change in net portfolio value ("NPV") over a variety of interest rate scenarios.
NPV is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. An NPV ratio, in any interest rate scenario, is
defined as the NPV in that rate scenario divided by the market value of assets
in the same scenario.

As of September 30, 2002, the Bank's internally generated initial NPV ratio was
5.11%. Following a 2% increase in interest rates, the Bank's Post-Shock NPV
ratio was 7.03%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was positive 1.92%. As of September 30, 2002, the Company's internally generated
initial NPV ratio was 4.64%, the Post-Shock ratio was 6.46%, and the Sensitivity
Measure was positive 1.82%. Variances between the Bank's and the Company's NPV
ratios are attributable to balance sheet items which are adjusted during
consolidation, such as investments, intercompany borrowings and capital.

                                       16


<PAGE>


Internally generated NPV measurements are based on simulations which utilize
institution specific assumptions and, as such, generally result in lower levels
of presumed interest rate risk (i.e., higher Post-Shock NPV ratio and lower
Sensitivity Measure) than Office of Thrift Supervision ("OTS") measurements
indicate.

The OTS measures the Bank's (unconsolidated) IRR on a quarterly basis using data
from the quarterly Thrift Financial Reports filed by the Bank with the OTS,
coupled with non-institution specific assumptions which are based on national
averages. As of June 30, 2002 (the latest date for which information is
available), the Bank's initial NPV ratio, as measured by the OTS, was 9.24%, the
Bank's Post-Shock ratio was 6.20% and the Sensitivity Measure was negative
3.04%.

In addition to monitoring NPV and gap, management also monitors the duration of
assets and liabilities and the effects on net interest income resulting from
parallel and non-parallel increases or decreases in rates.

At September 30, 2002, based on its internally generated simulation models, the
Company's consolidated net interest income projected for one year forward would
increase 2.7% from the base case, or current market, as a result of an immediate
and sustained 2% increase in interest rates.

Liquidity and Capital Resources

The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, and borrowings from the FHLB
of New York. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan repayments are more
influenced by interest rates, general economic conditions and competition. The
Company has competitively set rates on deposit products for selected terms and,
when necessary, has supplemented deposits with longer-term or less expensive
alternative sources of funds.

The Bank maintains appropriate levels of liquid assets. The Company's most
liquid assets are cash and cash equivalents, U.S. government agency securities
and mortgage-backed securities. The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period.

The Company uses its liquid resources principally to fund maturing certificates
of deposit and deposit withdrawals, to purchase loans and securities, to fund
existing and future loan commitments, and to meet operating expenses. Management
believes that loan repayments and other sources of funds will be adequate to
meet the Company's foreseeable liquidity needs.

The Company's cash needs for the three months ended September 30, 2002 were
provided by operating activities, including the sale of loans, proceeds from
maturities of investment securities and principal repayments of loans and
mortgage-backed securities. During this period, the cash provided was used for
investing activities, which included the origination of loans and the purchase
of investment securities, as well as to fund a decrease in deposits.
Additionally, during the three months ended September 30, 2002, cash provided
was used for the repurchase of common stock. During the three months ended
September 30, 2001, the cash needs of the Company were provided by maturities of
investment securities, increased deposits and principal repayments of loans and
mortgage-backed securities. During this period, the cash provided was used for
investing activities, which included the origination and purchase of loans and
the purchase of investment securities, as well as to reduce borrowings.

Current regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percentage of risk-adjusted assets; a
ratio of core capital to risk-adjusted assets; a leverage ratio of core capital
to total adjusted assets; and a tangible capital ratio expressed as a percentage
of total adjusted assets. As of September 30, 2002, the Bank exceeded all
regulatory capital requirements and qualified as a "well-capitalized"
institution (see Note 6. - Stockholders' Equity and Regulatory Capital, in the
Notes to Consolidated Financial Statements).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's most significant form of market risk is interest rate risk, as the
majority of its assets and liabilities are sensitive to changes in interest
rates. See the discussion in this Form 10-Q under "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Interest Rate Sensitivity."


                                       17


<PAGE>


Item 4. Controls and Procedures

     (a) Evaluation of Disclosure Controls and Procedures: An evaluation of the
         -------------------------------------------------
Company's disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Securities Exchange Act of 1934 (the "Act")) was carried out under the
supervision and with the participation of the Company's Chief Executive Officer,
Chief Financial Officer and several other members of the Company's senior
management within the 90-day period preceding the filing date of this quarterly
report. The Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures as currently in
effect are effective in ensuring that the information required to be disclosed
by the Company in the reports it files or submits under the Act is (i)
accumulated and communicated to the Company's management (including the Chief
Executive Officer and Chief Financial Officer) in a timely manner, and (ii)
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms.

     (b) Changes in Internal Controls: In the quarter ended September 30, 2002,
         -----------------------------
there were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

                                       18


<PAGE>


PART II - Other Information

Item 1.    Legal Proceedings
           None.

Item 2.    Changes in Securities
           None.

Item 3.    Defaults Upon Senior Securities
           None.

Item 4.    Submission of Matters to a Vote of Security Holders
           None.

Item 5.    Other Information
           None.

Item 6.    Exhibits and Reports on Form 8-K

           (a) Exhibits
               Exhibit 11: Statement Regarding Computation of Per Share
               Earnings.

           (b) Reports on Form 8-K
               On July 29, 2002, the Company filed a Form 8-K reporting under
               Items 5 and 7 the issuance of a press release on July 26, 2002
               announcing the Company's fourth quarter results and an increased
               dividend.

                                       19


<PAGE>


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                             PENNFED FINANCIAL SERVICES, INC.



Date: November 13, 2002      By: /s/ Joseph L. LaMonica
                                 -----------------------------------------------
                                 Joseph L. LaMonica
                                 President and Chief
                                 Executive Officer
                                (Principal Executive Officer)





Date: November 13, 2002       By: /s/ Claire M. Chadwick
                                  ----------------------------------------------
                                  Claire M. Chadwick
                                  Executive Vice President,
                                  Chief Financial Officer and
                                  Controller
                                  (Principal Financial and Accounting Officer)

                                     20


<PAGE>


                                 CERTIFICATIONS

I, Joseph L. LaMonica, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PennFed Financial
Services, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002


/s/ Joseph L. LaMonica
-------------------------------------
Joseph L. LaMonica
President and Chief Executive Officer

                                       21


<PAGE>


                                 CERTIFICATIONS

I, Claire M. Chadwick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PennFed Financial
Services, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002


/s/ Claire M. Chadwick
--------------------------------------
Claire M. Chadwick
Executive Vice President,
Chief Financial Officer and Controller

                                       22

<PAGE>


                                  CERTIFICATION

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned hereby certifies in his or her capacity as an officer of PennFed
Financial Services, Inc. (the "Company") that the Quarterly Report of the
Company on Form 10-Q for the quarterly period ended September 30, 2002 fully
complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that the information contained in such report fairly presents, in
all material respects, the financial condition and results of operations of the
Company as of the dates and for the periods presented in the financial
statements included in such report.




                                      By: /s/ Joseph L. LaMonica
                                          --------------------------------------
                                          Joseph L. LaMonica
                                          President and Chief
                                          Executive Officer

                                          Date: November 13, 2002


                                      By: /s/ Claire M. Chadwick
                                          --------------------------------------
                                          Claire M. Chadwick
                                          Executive Vice President,
                                          Chief Financial Officer and Controller

                                          Date: November 13, 2002

                                       23


<PAGE>

                                   EXHIBIT 11

              Statement Regarding Computation of Per Share Earnings

                 Three Months Ended September 30, 2002 and 2001

                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                               Three months ended September 30,
                                                                                               --------------------------------
                                                                                                2002                      2001
                                                                                             ----------                ----------
<S>                                                                                          <C>                       <C>
Net income.............................................................................          $3,824                    $3,553
                                                                                             ==========                ==========
Number of shares outstanding:
Weighted average shares issued.........................................................      11,900,000                11,900,000
Less: Weighted average shares held in treasury.........................................       4,566,001                 4,260,678
Less: Average shares held by the ESOP..................................................         952,000                   952,000
Plus: ESOP shares released or committed to be released
           during the fiscal year......................................................         733,256                   619,611
                                                                                             ----------                ----------
Average basic shares...................................................................       7,115,255                 7,306,933
Plus: Average common stock equivalents.................................................         540,226                   566,808
                                                                                             ----------                ----------
Average diluted shares.................................................................       7,655,481                 7,873,741
                                                                                             ==========                ==========
Earnings per common share:
        Basic..........................................................................           $0.54                     $0.49
                                                                                             ==========                ==========
        Diluted........................................................................           $0.50                     $0.45
                                                                                             ==========                ==========

</TABLE>