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
     [FEE REQUIRED]
     For the quarterly period ended March 31, 2000

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     [NO FEE REQUIRED]
     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 May 9, 2000,  there were issued and outstanding  8,447,183 shares of
the Registrant's Common Stock.
<PAGE>
PART I - Financial Information
Item 1.  Financial Statements
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition

                                                                                   March 31,        June 30,
                                                                                     2000            1999
                                                                                 -----------      -----------
                                                                                      (Dollars in thousands)
<S>                                                                              <C>              <C>
ASSETS
Cash and cash equivalents ..................................................     $    13,596      $     9,900
Investment securities held to maturity, at amortized cost, market value of
     $279,905 and $281,880 at March 31, 2000 and June 30, 1999 .............         303,045          293,282
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $95,941 and $128,617 at March 31, 2000 and June 30, 1999 ...........          96,823          127,983
Loans held for sale ........................................................            --              5,180
Loans receivable, net of allowance for loan losses of $3,777 and $3,209
     at March 31, 2000 and June 30, 1999 ...................................       1,193,358        1,061,431
Premises and equipment, net ................................................          19,562           19,240
Real estate owned, net .....................................................             345              936
Federal Home Loan Bank of New York stock, at cost ..........................          19,688           16,623
Accrued interest receivable, net ...........................................          11,828            9,680
Goodwill and other intangible assets .......................................           9,512           11,118
Other assets ...............................................................           3,751            3,390
                                                                                 -----------      -----------
                                                                                 $ 1,671,508      $ 1,558,763
                                                                                 ===========      ===========

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits ..............................................................     $ 1,065,915      $ 1,063,600
     Federal Home Loan Bank of New York advances ...........................         344,465          244,465
     Other borrowings ......................................................          91,975           88,738
     Mortgage escrow funds .................................................          10,406           10,102
     Due to banks ..........................................................           9,262            7,385
     Accounts payable and other liabilities ................................           4,719            4,230
                                                                                 -----------      -----------
     Total liabilities .....................................................       1,526,742        1,418,520
                                                                                 -----------      -----------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures ....................................          34,500           34,500
     Unamortized issuance expenses .........................................          (1,710)          (1,757)
                                                                                 -----------      -----------
     Net Trust Preferred securities ........................................          32,790           32,743
                                                                                 -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (Continued)


                                                                                      March 31,        June 30,
                                                                                         2000            1999
                                                                                     ----------       -----------
                                                                                      (Dollars in thousands)
<S>                                                                                  <C>              <C>
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
         and 11,897,858 shares  issued  and 8,467,183 and 8,813,416 shares
         outstanding at March 31, 2000 and June 30, 1999 (excluding  shares held
         in treasury of 3,432,817 and 3,084,442 at
         March 31, 2000 and June 30, 1999) .....................................              60               59
     Additional paid-in capital ................................................          60,299           59,488
     Employee Stock Ownership Plan Trust debt ..................................          (2,441)          (2,804)
     Retained earnings, partially restricted ...................................          89,134           80,673
     Treasury stock, at cost, 3,432,817 and 3,084,442 shares at
         March 31, 2000 and June 30, 1999 ......................................         (35,076)         (29,916)
                                                                                     -----------      -----------
     Total stockholders' equity ................................................         111,976          107,500
                                                                                     -----------      -----------
                                                                                     $ 1,671,508      $ 1,558,763
                                                                                     ===========      ===========
</TABLE>

See notes to consolidated financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
                                                                            Three months ended           Nine months ended
                                                                                 March 31,                    March 31,
                                                                         ------------------------     ------------------------
                                                                            2000           1999          2000           1999
                                                                         ---------      ---------     ---------      ---------
                                                                           (Dollars in thousands, except per share amounts)
<S>                                                                        <C>            <C>           <C>            <C>
Interest and Dividend Income:
     Interest and fees on loans......................................      $20,862        $19,572       $59,972        $59,544
     Interest on federal funds sold..................................            2             33            16             59
     Interest and dividends on investment securities.................        5,620          3,992        16,904         11,664
     Interest on mortgage-backed securities..........................        1,721          2,475         5,590          8,595
                                                                         ---------      ---------     ---------      ---------
                                                                            28,205         26,072        82,482         79,862
                                                                          --------       --------      --------       --------
Interest Expense:
     Deposits........................................................       11,684         11,857        34,573         37,011
     Borrowed funds..................................................        6,281          4,893        17,417         15,478
     Trust Preferred securities......................................          784            783         2,350          2,349
                                                                        ----------     ----------     ---------      ---------
                                                                            18,749         17,533        54,340         54,838
                                                                          --------       --------      --------       --------
Net Interest and Dividend Income Before Provision
     for Loan Losses.................................................        9,456          8,539        28,142         25,024
Provision for Loan Losses............................................          210            210           630            570
                                                                        ----------     ----------    ----------     ----------
Net Interest and Dividend Income After Provision
     for Loan Losses.................................................        9,246          8,329        27,512         24,454
                                                                         ---------      ---------      --------       --------

Non-Interest Income:
     Service charges.................................................          521            531         1,641          1,559
     Net gain from real estate operations............................            2             98            83             52
     Net gain on sales of loans......................................            3            201            36            963
     Other...........................................................          155            165           496            348
                                                                        ----------     ----------   -----------    -----------
                                                                               681            995         2,256          2,922
                                                                        ----------     ----------    ----------     ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income (Continued)
                                                                            Three months ended           Nine months ended
                                                                                 March 31,                    March 31,
                                                                         ------------------------     ------------------------
                                                                            2000           1999          2000           1999
                                                                         ---------      ---------     ---------      ---------
                                                                           (Dollars in thousands, except per share amounts)
<S>                                                                        <C>            <C>           <C>            <C>
Non-Interest Expenses:
     Compensation and employee benefits..............................        2,476          2,357         7,374          6,709
     Net occupancy expense...........................................          477            344         1,287            990
     Equipment.......................................................          442            405         1,335          1,244
     Advertising.....................................................          113            104           275            242
     Amortization of intangibles.....................................          519            588         1,606          1,779
     Federal deposit insurance premium...............................           56            166           374            477
     Other...........................................................          843            826         2,573          2,565
                                                                        ----------     ----------     ---------      ---------
                                                                             4,926          4,790        14,824         14,006
                                                                         ---------      ---------      --------       --------

Income Before Income Taxes...........................................        5,001          4,534        14,944         13,370
Income Tax Expense...................................................        1,777          1,626         5,315          4,793
                                                                         ---------      ---------     ---------      ---------
Net Income...........................................................     $  3,224       $  2,908      $  9,629       $  8,577
                                                                          ========       ========      ========       ========

Weighted average number of common shares outstanding:
     Basic...........................................................    8,032,585      8,210,536     8,191,001      8,462,521
                                                                         =========      =========     =========      =========
     Diluted.........................................................    8,540,618      8,851,358     8,683,856      9,100,235
                                                                         =========      =========     =========      =========

Net income per common share:
     Basic...........................................................       $0.40           $0.35        $1.18          $1.01
                                                                            =====           =====        =====          =====
     Diluted.........................................................       $0.38           $0.33        $1.11          $0.94
                                                                            =====           =====        =====          =====

</TABLE>

                See notes to consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

                                                                                                  Nine months ended March 31,
                                                                                              --------------------------------
                                                                                                  2000                   1999
                                                                                              ---------              ---------
                                                                                                    (Dollars in thousands)
<S>                                                                                           <C>                    <C>
Cash Flows from Operating Activities:
     Net income.......................................................................        $   9,629              $   8,577
     Adjustments to reconcile net income to net cash provided by
       operating activities:
     Net gain on sales of loans.......................................................              (36)                  (963)
     Proceeds from sales of loans held for sale.......................................            5,500                135,534
     Net gain on sales of real estate owned...........................................              (89)                  (123)
     Amortization of investment and mortgage-backed securities
       premium, net...................................................................              154                    315
     Depreciation and amortization....................................................            1,059                  1,022
     Provision for losses on loans and real estate owned..............................              630                    615
     Amortization of cost of stock plans..............................................            1,174                  1,644
     Amortization of intangibles......................................................            1,606                  1,779
     Amortization of premiums on loans and loan fees..................................            1,045                  1,757
     Amortization of Trust Preferred securities issuance costs........................               47                     47
     Increase in accrued interest receivable, net of accrued
       interest payable...............................................................           (3,735)                (1,765)
     (Increase) decrease in other assets..............................................             (361)                   405
     Increase in accounts payable and other liabilities...............................              489                    572
     Increase (decrease) in mortgage escrow funds.....................................              304                   (359)
     Increase (decrease) in due to banks..............................................            1,877                 (5,671)
     Other, net.......................................................................              (49)                    26
                                                                                              ---------              ---------
     Net cash provided by operating activities........................................           19,244                143,412
                                                                                              ---------              ---------

Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities................................           10,175                147,070
     Purchases of investment securities held to maturity..............................          (19,991)              (208,641)
     Net outflow from loan originations net of principal repayments of loans..........          (64,340)               (86,315)
     Purchases of loans...............................................................          (69,866)               (27,618)
     Proceeds from principal repayments of mortgage-backed securities.................           31,279                 63,027
     Purchases of mortgage-backed securities..........................................             (220)                  ---
     Proceeds from sale of premises and equipment.....................................              250                   ---
     Purchases of premises and equipment..............................................           (1,633)                (1,754)
     Proceeds from sale of real estate owned..........................................            1,051                  1,140
     Purchases of Federal Home Loan Bank of New York stock............................           (3,065)                (1,558)
                                                                                              ---------              ---------
     Net cash used in investing activities............................................         (116,360)              (114,649)
                                                                                              ---------              ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)

                                                                                                  Nine months ended March 31,
                                                                                              --------------------------------
                                                                                                  2000                   1999
                                                                                              ---------              ---------
                                                                                                    (Dollars in thousands)
<S>                                                                                           <C>                    <C>
Cash Flows from Financing Activities:
     Net increase in deposits.........................................................            3,902                 64,090
     Increase (decrease) in advances from the Federal Home Loan Bank
       of New York and other borrowings...............................................          103,237                (37,762)
     Cash dividends paid..............................................................           (1,014)                (1,012)
     Purchases of treasury stock, net of reissuance...................................           (5,313)                (8,604)
                                                                                              ---------              ---------
     Net cash provided by financing activities........................................          100,812                 16,712
                                                                                              ---------              ---------
Net Increase in Cash and Cash Equivalents.............................................            3,696                 45,475
Cash and Cash Equivalents, Beginning of Period........................................            9,900                 10,960
                                                                                              ---------              ---------
Cash and Cash Equivalents, End of Period..............................................        $  13,596              $  56,435
                                                                                              =========              =========

Supplemental Disclosures of Cash Flow Information:
     Cash paid during period for:
     Interest.........................................................................        $  55,374              $  55,227
                                                                                              =========              =========
     Income taxes.....................................................................        $   5,628              $   4,226
                                                                                              =========              =========

Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to real estate owned, net...........................       $      320            $       413
                                                                                             ==========            ===========
     Transfer of loans receivable to loans held for sale, at market...................       $      285            $   140,317
                                                                                             ==========            ===========
     Transfer of premises and equipment, net to real estate owned, net................       $       50            $       ---
                                                                                             ===========           ===========
</TABLE>

                See notes to consolidated financial statements.

                                       4
<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")  and  PennFed  Capital  Trust I. 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,  1999.  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 nine months  ended March 31,  2000 and 1999.  The interim  results of
operations presented are not necessarily  indicative of the results for the full
year.

When  necessary,  reclassifications  have been made to conform to current period
presentation.

2.  Computation of EPS

The computation of EPS is presented in the following table.
<TABLE>
<CAPTION>
                                                             Three months ended             Nine months ended
                                                                 March 31,                       March 31,
                                                      ----------------------------    ---------------------------
                                                           2000             1999           2000           1999
                                                      -----------     -----------     -----------     -----------
                                                             (Dollars in thousands, except per share amounts)
<S>                                                   <C>             <C>             <C>             <C>
Net income ......................................     $     3,224     $     2,908     $     9,629     $     8,577
                                                      ===========     ===========     ===========     ===========

Number of shares outstanding:
  Weighted average shares issued ................      11,900,000      11,900,000      11,899,790      11,900,000
  Less:  Weighted average shares held in treasury       3,379,164       3,106,278       3,196,297       2,831,653
  Less:  Average shares held by the ESOP ........         952,000         952,000         952,000         952,000
  Plus:  ESOP shares released or committed to be
           released during the fiscal year ......         463,749         368,814         439,508         346,174
                                                      -----------     -----------     -----------     -----------
         Average basic shares ...................       8,032,585       8,210,536       8,191,001       8,462,521
  Plus:  Average common stock equivalents .......         508,033         640,822         492,855         637,714
                                                      -----------     -----------     -----------     -----------
         Average diluted shares .................       8,540,618       8,851,358       8,683,856       9,100,235
                                                      ===========     ===========     ===========     ===========

Earnings per common share:
         Basic ..................................     $      0.40     $      0.35     $      1.18     $      1.01
                                                      ===========     ===========     ===========     ===========
         Diluted ................................     $      0.38     $      0.33     $      1.11     $      0.94
                                                      ===========     ===========     ===========     ===========

</TABLE>
                                       5

<PAGE>
3. Stockholders' Equity and Regulatory Capital

The Bank's 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 March 31, 2000
Tangible capital, and ratio to
  adjusted total assets....................      $130,529      7.86%            $24,919     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $130,529      7.86%            $66,450     4.00%          $83,062      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $130,529     15.45%            $33,801     4.00%          $50,701      6.00%
Total risk-based capital, and ratio to
  risk-weighted assets.....................      $134,160     15.88%            $67,602     8.00%          $84,502     10.00%

As of June 30, 1999
Tangible capital, and ratio to
  adjusted total assets....................      $121,910      7.88%            $23,207     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $121,943      7.88%            $61,888     4.00%          $77,360      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $121,943     15.90%            $30,687     4.00%          $46,030      6.00%
Total risk-based capital, and ratio to
  risk-weighted assets.....................      $124,976     16.29%            $61,374     8.00%          $76,717     10.00%

</TABLE>


                                       6
<PAGE>
The above 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 March 31, 2000
Tangible capital, and ratio to
  adjusted total assets....................      $135,254      8.14%            $24,931     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $135,254      8.14%            $66,484     4.00%          $83,105      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $135,254     16.20%            $33,386     4.00%          $50,079      6.00%
Total risk-based capital, and ratio to
  risk-weighted assets.....................      $138,885     16.64%            $66,773     8.00%          $83,466     10.00%

As of June 30, 1999
Tangible capital, and ratio to
  adjusted total assets....................      $128,385      8.29%            $23,217     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $128,419      8.30%            $61,913     4.00%          $77,391      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $128,419     16.98%            $30,253     4.00%          $45,380      6.00%
Total risk-based capital, and ratio to
  risk-weighted assets.....................      $131,452     17.38%            $60,507     8.00%          $75,633     10.00%


</TABLE>
                                       7
<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.  Results  of  operations  are also
affected by the  Company's  provision  for loan losses and  operating  expenses.
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  law,  regulations  or  government  policies may also have a material
impact on the Company.

Forward-Looking Statements

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,  demand for loans in the Company's  market area
and  competition,  that could cause  actual  results to differ  materially  from
historical  earnings and those presently  anticipated or projected.  The Company
cautions  readers  not to  place  undue  reliance  on any  such  forward-looking
statements,  which speak only as of the date made. The Company  advises  readers
that the factors listed above 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 will 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  increased  $112.7 million to $1.672 billion at March 31, 2000 from
total assets of $1.559  billion at June 30, 1999. The increase was primarily due
to the originations and purchases of loans, primarily adjustable rate, offset by
principal payments on loans and mortgage-backed securities.

Deposits  increased $2.3 million to $1.066 billion at March 31, 2000 from $1.064
billion at June 30, 1999. The increase was  principally  due to growth in demand
deposits.  Federal Home Loan Bank ("FHLB") of New York advances increased $100.0
million from $244.5 million at June 30, 1999,  reflecting  growth in medium-term
borrowings.
<PAGE>
Non-performing assets at March 31, 2000 totaled $3.7 million, representing 0.22%
of total assets, compared to $4.6 million, or 0.30% of total assets, at June 30,
1999.  Non-accruing  loans  totaled $3.4 million,  with a ratio of  non-accruing
loans to total loans of 0.28% at March 31, 2000 as compared to $3.7 million,  or
0.34% of total loans,  at June 30, 1999. Real estate owned decreased to $345,000
at March 31, 2000 from $936,000 at June 30, 1999.

Stockholders' equity at March 31, 2000 totaled $112.0 million compared to $107.5
million  at June 30,  1999.  The  increase  primarily  reflects  the net  income
recorded  for the nine months  ended  March 31,  2000,  partially  offset by the
repurchase  of 380,000  shares of the Company's  outstanding  common stock at an
average price of $14.39 per share and the declaration of dividends.

Results of Operations

General.  For the three months ended March 31, 2000 net income was $3.2 million,
or $0.38 per diluted share, compared to net income of $2.9 million, or $0.33 per
diluted share, for the comparable  prior year period.  For the nine months ended
March 31, 2000 net income was $9.6 million,  or $1.11 per diluted  share.  These
results compare to net income of $8.6 million,  or $0.94 per diluted share,  for
the nine months ended March 31, 1999.

Interest and  Dividend  Income.  Interest and dividend  income for the three and
nine months ended March 31, 2000

                                       8
<PAGE>
increased to $28.2 million and $82.5 million,  respectively,  from $26.1 million
and $79.9  million  for the three and nine  months  ended  March 31,  1999.  The
increases in the current year periods were primarily due to increases in average
interest-earning assets. The increase in average interest-earning assets for the
nine  months  ended  March 31,  2000 was  partially  offset by a decrease in the
average yield earned on interest-earning assets, when compared to the prior year
period. Average  interest-earning  assets were $1.596 billion and $1.559 billion
for the three and nine months  ended March 31, 2000,  respectively,  compared to
$1.499  billion and $1.509 billion for the  comparable  prior year periods.  The
average yield earned on interest-earning assets increased to 7.07% for the three
months  ended  March 31,  2000 from 6.97% for the three  months  ended March 31,
1999.  For the nine months  ended March 31,  2000 the  average  yield  earned on
interest-earning   assets  decreased  slightly  to  7.04%  from  7.05%  for  the
comparable prior year period.

Interest income on residential one- to four-family  mortgage loans for the three
months ended March 31, 2000 increased $646,000,  when compared to the prior year
period. For the nine months ended March 31, 2000, interest income on residential
one- to  four-family  mortgage  loans  decreased $1.2 million from the March 31,
1999 period.  The increase in interest income on residential one- to four-family
mortgage  loans for the  current  three  month  period was due to an increase of
$29.0 million in the average  balance  outstanding and an increase of five basis
points in the average yield earned on this portfolio, when compared to the prior
year period.  For the nine months ended March 31, 2000, the decrease in interest
income  on  residential  one-  to  four-family   mortgage  loans  was  partially
attributable to a decrease of $17.7 million in the average balance  outstanding,
when  compared  to the prior  year  period.  The  average  yield  earned on this
portfolio for the nine months ended March 31, 2000  decreased  four basis points
to 6.97% from 7.01% for the comparable prior year period.

Interest  income on  commercial  and  multi-family  real estate loans  increased
$252,000  and  $560,000  for the three and nine  months  ended  March 31,  2000,
respectively, when compared to the prior year periods. The increases in interest
income  on  the  commercial  and   multi-family   real  estate   portfolio  were
attributable  to  increases  of $12.3  million and $10.4  million in the average
outstanding  balance  for the  three  and nine  months  ended  March  31,  2000,
respectively,  when  compared  to the  prior  year  periods.  The  growth in the
portfolio  was  partially  offset by a decline in the  average  yield  earned on
commercial and  multi-family  real estate loans.  The average yield decreased to
8.45% and 8.38% for the  current  three and nine  month  periods,  respectively,
compared to 8.58% and 8.69% for the three and nine months  ended March 31, 1999,
respectively.

Growth in consumer  loans  contributed to increases of $393,000 and $1.0 million
in the  interest  income  earned on this loan  portfolio  for the three and nine
months ended March 31, 2000,  respectively,  compared to the prior year periods.
Also  contributing  to  increases  in  interest  income on  consumer  loans were
increases in the average  yields earned on the consumer loan  portfolio to 7.37%
and 7.26% for the three and nine  months  ended  March 31,  2000,  respectively,
compared to 7.15% and 7.23% for the prior year periods.

Interest  income on  investment  securities  and other  interest-earning  assets
increased  $1.6  million and $5.2  million  for the three and nine months  ended
March 31,  2000,  respectively,  from the  comparable  prior year  periods.  The
increase was primarily due to a $89.4 million and a $100.5  million  increase in
the average  balance  outstanding  for the three and nine months ended March 31,
2000,  respectively,  over the comparable prior year periods.  The average yield
earned on investment securities and other interest-earning  assets for the three
months  ended March 31, 2000  increased  to 6.97% from 6.84% for the  comparable
prior year period.  For the nine months ended March 31, 2000,  the average yield
earned on these securities  decreased  slightly to 6.98% from 6.99% for the nine
months ended March 31, 1999.
<PAGE>
Interest income on the mortgage-backed  securities  portfolio decreased $753,000
and  $3.0  million  for  the  three  and  nine  months  ended  March  31,  2000,
respectively,  compared to the prior year  periods.  The  decreases  in interest
income  on  mortgage-backed  securities  primarily  reflect  decreases  of $50.1
million and $60.1 million in the average  balance  outstanding for the three and
nine  months  ended  March 31,  2000,  respectively,  compared to the prior year
periods.

Interest  Expense.  Interest expense increased $1.2 million for the three months
ended March 31, 2000 from the comparable March 31, 1999 period.  The increase in
the current  year  period was  primarily  due to an  increase  in the  Company's
borrowings.  Average  deposits and  borrowings  increased  $85.4 million for the
three months ended March 31, 2000 when  compared to the prior year period,  with
$79.6 million of the increase in the Company's borrowings.  For the three months
ended March 31, 2000, a decrease in the average rate paid on deposits was offset
by an  increase  in the cost of  borrowings,  when  compared  to the prior  year
period.  For the nine months ended March 31, 2000,  interest  expense  decreased
$498,000 from the prior year period.  The decline was primarily  attributable to
the average cost of deposits, which decreased to 4.33% for the nine months ended
March 31, 2000 from 4.66% for the comparable March 1999 period. The average cost
of deposits  and  borrowings  decreased to 4.76% for the nine months ended March
31,


                                       9
<PAGE>
2000 from 4.96% for the prior year period.

Net Interest and Dividend Income. Net interest and dividend income for the three
and nine  months  ended  March 31,  2000 was $9.5  million  and  $28.1  million,
respectively,  reflecting a $917,000 and $3.1 million increase from $8.5 million
and $25.0 million  recorded in the comparable  prior year periods.  The increase
primarily reflects the Company's improvement in net interest rate spread coupled
with growth in the Company's average  interest-earning  assets. The net interest
rate spread and net  interest  margin for the three  months ended March 31, 2000
were  2.13%  and  2.37%,  respectively,   an  increase  from  2.02%  and  2.24%,
respectively, for the comparable prior year period. The net interest rate spread
and net interest  margin for the nine months ended March 31, 2000 were 2.17% and
2.42%,  respectively,  an increase from 1.98% and 2.21%,  respectively,  for the
nine months ended March 31, 1999. The current year increases in the net interest
rate spread and net interest margin were primarily attributable to the decreases
in the average  rate paid on deposits  and,  to a lesser  extent,  growth in the
commercial and multi-family real estate and consumer loan portfolios.

Provision for Loan Losses.  The provision for loan losses for the three and nine
months ended March 31, 2000 was $210,000 and $630,000, respectively, compared to
$210,000 and $570,000 for the comparable  prior year periods.  The allowance for
loan losses at March 31, 2000 of $3.8 million reflects a $568,000  increase from
the June 30, 1999  level.  The  allowance  for loan  losses as a  percentage  of
non-accruing loans was 112.61% at March 31, 2000, compared to 87.44% at June 30,
1999.  The allowance for loan losses was 0.32% of total loans at March 31, 2000,
compared to 0.30% at June 30, 1999.

Non-Interest  Income.  For the  three  and nine  months  ended  March  31,  2000
non-interest  income was $681,000 and $2.3  million,  respectively,  compared to
$995,000  and $2.9  million  for the prior  year  periods.  The  decreases  were
primarily  attributable to a $198,000 and $927,000  reduction in the net gain on
sales  of loans  during  the  three  and  nine  months  ended  March  31,  2000,
respectively,  as compared to the same 1999  periods.  The  $201,000 net gain on
sales  of  loans  for  the  three  months   ended  March  31,  1999   represents
approximately  $60 million  of one- to  four-family  residential  mortgage loans
which were sold in the  secondary  market.  For the nine months  ended March 31,
2000, $5.5 million of one- to four-family  residential  mortgage loans were sold
in the secondary market early in the fiscal year for a net gain of $36,000.  For
the nine months  ended March 31,  1999,  approximately  $135  million of one- to
four-family residential mortgage loans were sold for a net gain of $963,000. Due
to the majority of one- to  four-family  residential  mortgage  loan  production
being  adjustable  rate and due to the higher  interest rate  environment in the
current periods,  loan sale activity was reduced from the fiscal 1999 levels, as
the  majority of new  production  was retained in  portfolio.  The level of such
activity  will  continue to be  evaluated  with primary  consideration  given to
interest rate risk, long-term  profitability and liquidity  objectives.  Service
charge  income for the three and nine months  ended March 31, 2000 was  $521,000
and $1.6  million,  respectively,  compared to $531,000 and $1.6 million for the
prior year  periods.  The net gain from real  estate  operations  was $2,000 and
$83,000 for the three and nine months  ended March 31,  2000.  This  compares to
$98,000 and $52,000 for the three and nine months  ended March 31,  1999.  Other
non-interest  income  for the three  months  ended  March 31,  2000 of  $155,000
reflects a $10,000  decline from $165,000 for the comparable  prior year period.
For the nine months ended March 31, 2000, other  non-interest  income reflects a
$148,000 increase from the nine months ended March 31, 1999. For the nine months
<PAGE>
ended March 31, 2000 and 1999, other  non-interest  income included $205,000 and
$121,000 in earnings  from the  Investment  Services  at Penn  Federal  program,
respectively.   Through  this  program,  customers  have  convenient  access  to
financial  consulting/advisory  services and related non-deposit  investment and
insurance products.  In addition,  other non-interest income for the nine months
ended  March 31,  2000  included a $48,000  gain on the sale of a former  branch
location.

Non-Interest Expenses. The Company's non-interest expenses were $4.9 million and
$14.8 million for the three and nine months ended March 31, 2000,  respectively,
compared  to $4.8  million  and $14.0  million  for the  comparable  prior  year
periods. In February 1999 and June 1999, the Company opened new branches in Toms
River and Livingston,  NJ, respectively.  Growth in retail branches has resulted
in an  increase  in  non-interest  expenses in the  current  year  periods  when
compared to the prior year  periods.  The Company's  non-interest  expenses as a
percent of  average  assets  were 1.19% and 1.22% for the three and nine  months
ended March 31,  2000,  respectively,  compared to 1.23% and 1.19% for the prior
year periods.

Income Tax Expense. Income tax expense for the three and nine months ended March
31,  2000 was $1.8  million  and $5.3  million,  respectively,  compared to $1.6
million and $4.8 million for the three and nine months ended March 31, 1999. The
effective  tax rate for the three and nine months ended March 31, 2000 was 35.5%
and  35.6%,  respectively.  The  effective  tax rate was 35.9% and 35.8% for the
three and nine months ended March 31, 1999, respectively.



                                       10
<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 and nine  months  ended  March 31,  2000 and 1999,  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.

                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                                              Three Months Ended March 31,
                                                   -----------------------------------------------------------------------------
                                                                     2000                                    1999
                                                   ------------------------------------      -----------------------------------
                                                     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...................................     $1,005,330     $17,556       6.99%       $   976,312     $16,911      6.94%
    Commercial and multi-family real
       estate loans............................         82,226       1,753       8.45             69,973       1,501      8.58
    Consumer loans.............................         84,556       1,553       7.37             65,797       1,160      7.15
                                                    ----------     -------                   -----------     -------
       Total loans receivable..................      1,172,112      20,862       7.12          1,112,082      19,572      7.06

    Federal funds sold.........................            138           2       5.73              2,725          33      4.84
    Investment securities and other............        322,737       5,620       6.97            233,307       3,992      6.84
    Mortgage-backed securities.................        100,871       1,721       6.82            150,993       2,475      6.56
                                                    ----------     -------                   -----------     -------
       Total interest-earning assets...........      1,595,858     $28,205       7.07          1,499,107     $26,072      6.97
                                                                   =======                                   =======

    Non-interest earning assets................         54,972                                    56,169
                                                    ----------                                ----------
       Total assets ...........................     $1,650,830                                $1,555,276
                                                    ==========                                ==========

Deposits, borrowings and Trust
     Preferred securities:
    Money market and demand deposits...........    $   114,103   $     309       1.09%       $   104,560   $     287      1.11%
    Savings deposits...........................        161,132         670       1.67            162,093         659      1.65
    Certificates of deposit....................        792,442      10,705       5.42            795,169      10,911      5.56
                                                    ----------     -------                   -----------     -------
       Total deposits..........................      1,067,677      11,684       4.39          1,061,822      11,857      4.53

    FHLB of New York advances..................        331,881       5,025       6.02            267,046       3,961      5.97
    Other borrowings...........................         84,626       1,256       5.87             69,896         932      5.33
                                                    ----------     -------                   -----------     -------
       Total deposits and borrowings...........      1,484,184      17,965       4.84          1,398,764      16,750      4.84
    Trust Preferred securities.................         32,782         784       9.57             32,720         783      9.57
                                                    ----------     -------                   -----------     -------
       Total deposits, borrowings and
           Trust Preferred securities..........      1,516,966     $18,749       4.94          1,431,484     $17,533      4.95
                                                                   =======                                   =======

Other liabilities..............................         22,882                                    21,741
                                                    ----------                                ----------
       Total liabilities.......................      1,539,848                                 1,453,225
Stockholders' equity...........................        110,982                                   102,051
                                                    ----------                                ----------
       Total liabilities and stockholders'
           equity..............................     $1,650,830                                $1,555,276
                                                    ==========                                ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                              Three Months Ended March 31,
                                                   -----------------------------------------------------------------------------
                                                                     2000                                    1999
                                                   ------------------------------------      -----------------------------------
                                                     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>

Net interest income and net
    interest rate spread.......................                   $  9,456       2.13%                      $  8,539      2.02%
                                                                  ========       ====                       ========      ====

Net interest-earning assets and
    interest margin............................     $   78,892                   2.37%       $    67,623                  2.24%
                                                    ==========                   ====       ============                  ====

Ratio of interest-earning assets to
    deposits, borrowings and Trust
      Preferred securities.....................                                105.20%                                  104.72%
                                                                               ======                                   ======
</TABLE>

(1)  Annualized.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                              Nine Months Ended March 31,
                                                   -----------------------------------------------------------------------------
                                                                     2000                                    1999
                                                   ------------------------------------      -----------------------------------
                                                     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...................................    $   968,246     $50,649       6.97%        $  985,959     $51,822      7.01%
    Commercial and multi-family real
       estate loans............................         77,631       4,956       8.38             67,278       4,396      8.69
    Consumer loans.............................         79,810       4,367       7.26             61,255       3,326      7.23
                                                    ----------     -------                    ----------     -------
       Total loans receivable..................      1,125,687      59,972       7.09          1,114,492      59,544      7.12

    Federal funds sold.........................            387          16       5.36              1,589          59      4.93
    Investment securities and other............        322,822      16,904       6.98            222,344      11,664      6.99
    Mortgage-backed securities.................        110,487       5,590       6.75            170,618       8,595      6.72
                                                    ----------     -------                    ----------     -------
       Total interest-earning assets...........      1,559,383     $82,482       7.04          1,509,043     $79,862      7.05
                                                                   =======                                   =======

Non-interest earning assets....................         55,010                                    57,520
                                                 -------------                             -------------
       Total assets ...........................     $1,614,393                                $1,566,563
                                                    ==========                                ==========

Deposits, borrowings and Trust
     Preferred securities:
    Money market and demand deposits...........    $   112,841   $     905       1.06%       $   100,301   $     904      1.20%
    Savings deposits...........................        163,548       2,053       1.67            163,619       2,206      1.80
    Certificates of deposit....................        784,700      31,615       5.36            796,186      33,901      5.69
                                                    ----------     -------                    ----------     -------
       Total deposits..........................      1,061,089      34,573       4.33          1,060,106      37,011      4.66

    FHLB of New York advances..................        313,516      14,227       5.97            270,350      12,212      5.98
    Other borrowings...........................         72,853       3,190       5.73             78,078       3,266      5.50
                                                    ----------     -------                    ----------     -------
       Total deposits and borrowings...........      1,447,458      51,990       4.76          1,408,534      52,489      4.96
    Trust Preferred securities.................         32,766       2,350       9.56             32,704       2,349      9.58
                                                    ----------     -------                    ----------     -------
       Total deposits, borrowings and
           Trust Preferred securities..........      1,480,224     $54,340       4.87          1,441,238     $54,838      5.07
                                                                   =======                                   =======

Other liabilities..............................         23,980                                    22,086
                                                    ----------                                ----------
       Total liabilities.......................      1,504,204                                 1,463,324
Stockholders' equity...........................        110,189                                   103,239
                                                    ----------                                ----------
       Total liabilities and stockholders'
           equity..............................     $1,614,393                                $1,566,563
                                                    ==========                                ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                              Nine Months Ended March 31,
                                                   -----------------------------------------------------------------------------
                                                                     2000                                    1999
                                                   ------------------------------------      -----------------------------------
                                                     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>
Net interest income and net
    interest rate spread.......................                    $28,142       2.17%                       $25,024      1.98%
                                                                   =======       ====                        =======      ====

Net interest-earning assets and
    interest margin............................     $   79,159                   2.42%        $   67,805                  2.21%
                                                    ==========                   ====         ==========                  ====

Ratio of interest-earning assets to
    deposits, borrowings and Trust
      Preferred securities.....................                                105.35%                                  104.70%
                                                                               ======                                   ======
</TABLE>

(1)  Annualized.

                                       13
<PAGE>
Non-Performing Assets

The  table  below  sets  forth  the   Company's   amounts  and   categories   of
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>
                                                              March 31,              June 30,
                                                                2000                   1999
                                                              --------               --------
                                                                  (Dollars in thousands)
<S>                                                             <C>                    <C>
 Non-accruing loans:
     One- to four-family..................................      $2,785                 $2,937
     Commercial and multi-family..........................          95                     46
     Consumer.............................................         474                    687
                                                              --------               --------
         Total non-accruing loans.........................       3,354                  3,670

Real estate owned, net....................................         345                    936
                                                              --------               --------

         Total non-performing assets......................       3,699                  4,606
                                                               -------                -------

         Total risk elements..............................      $3,699                 $4,606
                                                                ======                 ======

Non-accruing loans as a percentage of total loans.........        0.28%                  0.34%
                                                             =========              =========

Non-performing assets as a percentage of total assets.....        0.22%                  0.30%
                                                             =========              =========

Total risk elements as a percentage of total assets.......        0.22%                  0.30%
                                                             =========              =========
</TABLE>
Allowance for Loan Losses. The allowance for loan losses is established  through
a  provision  for loan losses  based upon  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.
<PAGE>
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 their  examination.  At March 31,  2000,  the Company had a total
allowance  for  loan  losses  of $3.8  million  representing  112.61%  of  total
non-accruing loans and 0.32% of total loans.

Interest Rate Sensitivity

Interest Rate 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 negative gap if the
amount of interest-bearing

                                       14
<PAGE>
liabilities  maturing or repricing  within a specified  time period  exceeds the
amount of interest-earning  assets maturing or repricing within the same period.
If more  interest-earning  assets than  interest-bearing  liabilities  mature or
reprice within a specified period,  then the institution is considered to have a
positive  gap.  Accordingly,  in a  rising  interest  rate  environment,  in  an
institution  with a negative  gap,  the cost of its rate  sensitive  liabilities
would  theoretically  rise at a faster pace than the yield on its rate sensitive
assets,  thereby  diminishing  future net interest income. In a falling interest
rate environment,  a negative gap would indicate that the cost of rate sensitive
liabilities  would  decline  at a faster  pace than the yield on rate  sensitive
assets and may improve net interest  income.  For an institution with a positive
gap, the reverse would be expected.

At March 31, 2000, the Company's total deposits,  borrowings and Trust Preferred
securities   maturing  or   repricing   within  one  year   exceeded  its  total
interest-earning assets maturing or repricing within one year by $334.4 million,
representing  a one year  negative  gap of 20.00% of total  assets.  At June 30,
1999,  the one year  negative  gap was  13.61% of total  assets.  The  Company's
negative  gap  position  widened  from  June 30,  1999 as  interest  rates  have
increased.  Results included  declining  prepayments of loans and securities and
lengthening of asset cash flows. Under the current interest rate environment, it
is assumed that certain  callable  investment  securities  will not be called at
their  call  date,  thereby  extending  the  life  of  these  securities.   Also
contributing to the increase in the negative gap position was the termination of
$70  million  notional  amount  of  interest  rate  swap  contracts.   Partially
offsetting  the  increase in the  negative  gap position was an increase in core
deposits and  medium-term  certificates  of deposit,  as well as the addition of
medium-term borrowings.

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 selected interest rate risk ("IRR") measures set
forth by the Office of Thrift Supervision  ("OTS"). The IRR measures used by the
OTS  include an IRR  "Exposure  Measure" or  "Post-Shock"  net  portfolio  value
("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 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.
<PAGE>
As of March 31,  2000,  the Bank's  internally  generated  initial NPV ratio was
9.74%.  Following a 2% increase in interest  rates,  the Bank's  Post-Shock  NPV
ratio was 6.94%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was 2.80%. NPV is also measured  internally on a consolidated basis. As of March
31, 2000, the Company's  initial NPV ratio was 10.02%,  the Post-Shock ratio was
7.15%, and the Sensitivity  Measure was 2.87%.  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.

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 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 December  31, 1999 (the  latest date for which  information  is
available), the Bank's initial NPV ratio, as measured by the OTS, was 7.22%, the
Bank's Post-Shock ratio was 3.75% and the Sensitivity Measure was 3.47%.

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.


                                       15
<PAGE>
At March 31, 2000,  based on its internally  generated  simulation  models,  the
Company's  consolidated net interest income projected for one year forward would
decrease 16% from the base case, or current market,  as a result of an immediate
and sustained 2% increase in interest rates.

Year 2000

By following a carefully prescribed Year 2000 Project Plan, all mission-critical
systems, including interfaces to the main systems, were completely renovated and
tested.  To date, the Company has not  experienced  any problems with respect to
the century  rollover.  The Company  will  continue to monitor for any Year 2000
problems,  as  appropriate,  through the end of the calendar  year. The Board of
Directors  has been updated on a monthly  basis  through the  completion  of the
March 2000 quarterly period with respect to any problems encountered.

The cost for the Year 2000 effort  incurred in fiscal  1999 was  $45,000.  As of
March 31,  2000,  no  additional  costs had been  incurred  in fiscal  2000.  No
additional  expenditures are currently  anticipated.  The actual expenditures do
not include manpower costs of Company personnel associated with this effort, who
retained their individual operational  responsibilities in addition to Year 2000
duties. No assurance can be given that any remaining issues relating to the Year
2000  will  not  have a  material  adverse  effect  on the  Company's  financial
condition or results of operations.

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.

Federal  regulations  require  the Bank to  maintain  minimum  levels  of liquid
assets. The required percentage has varied from time to time based upon economic
conditions  and savings  flows.  The current  required  percentage  is 4% of net
withdrawable  deposits  payable on demand or in one year or less and  borrowings
payable  on demand or in one year or less,  both as of the end of the  preceding
calendar  quarter.  Liquid assets for purposes of this ratio  generally  include
cash,  accrued  interest  receivable  and  U.S.  government  or  federal  agency
securities,  including  mortgage-backed  securities.  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.  At March 31, 2000 and June 30, 1999, the Bank's  liquidity  ratios were
10.54% and 21.30%, respectively.

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 nine months ended March 31, 2000 were provided
by operating activities,  proceeds from maturities of investment securities,  an
increase in advances from the FHLB of New York and principal repayments on loans

<PAGE>
and  mortgage-backed  securities.  During this  period,  the cash  provided  was
primarily used to fund investing activities,  which included the origination and
purchase of loans and the  purchase of  investment  securities.  During the nine
months  ended March 31,  1999,  the cash needs of the Company  were  principally
provided by proceeds from sales of loans held for sale, proceeds from maturities
of investment  securities,  principal  repayments  on loans and  mortgage-backed
securities and an increase in deposits. The cash provided was used for investing
activities,  which  included  the  origination  and  purchase  of loans  and the
purchase of investment securities.

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 March 31, 2000, the Bank exceeded all regulatory
capital requirements and qualified as a "well-capitalized" institution (see Note
3. - Stockholders'  Equity and Regulatory  Capital, in the Notes to Consolidated
Financial Statements).

                                       16
<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.
                Exhibit 27: Financial Data Schedule.

           (b)  Reports on Form 8-K
                  None.



                                       17
<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: May 11, 2000                    By:   /s/ Joseph L. LaMonica
                                            ----------------------
                                            Joseph L. LaMonica
                                            President and Chief
                                            Executive Officer


Date: May 11, 2000                    By:   /s/ Lucy T. Tinker
                                            ------------------
                                            Lucy T. Tinker
                                            Senior Executive Vice President and
                                            Chief Operating Officer
                                            (Principal Financial Officer)


Date: May 11, 2000                    By:   /s/ Jeffrey J. Carfora
                                            ----------------------
                                            Jeffrey J. Carfora
                                            Executive Vice President and
                                            Chief Financial Officer
                                            (Principal Accounting Officer)



                                       17