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 March 31, 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 May 3, 2002, there were issued and outstanding 7,389,914 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,
                                                                                           2002                  2001
                                                                                           ----                  ----
                                                                                               (Dollars in thousands)
<S>                                                                                     <C>                  <C>
ASSETS
Cash and cash equivalents.............................................................  $   33,948           $     15,771
Investment securities held for sale, at market value, amortized cost of
       $15 at March 31, 2002..........................................................          16                     --
Investment securities held to maturity, at amortized cost, market value of
     $173,353 and $327,245 at March 31, 2002 and June 30, 2001........................     179,514                333,969
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $184,829 and $136,592 at March 31, 2002 and June 30, 2001.....................     183,900                135,606
Loans held for sale...................................................................          --                     83
Loans receivable, net of allowance for loan losses of $5,440 and $4,248
     at March 31, 2002 and June 30, 2001..............................................   1,381,711              1,295,409
Premises and equipment, net...........................................................      19,782                 20,354
Real estate owned, net................................................................         191                    500
Federal Home Loan Bank of New York stock, at cost.....................................      24,951                 26,218
Accrued interest receivable, net......................................................      10,682                 11,590
Goodwill and other intangible assets..................................................       5,521                  6,983
Other assets..........................................................................       3,071                  2,894
                                                                                        ----------             ----------
                                                                                        $1,843,287             $1,849,377
                                                                                        ==========             ==========

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits.........................................................................  $1,135,226             $1,085,335
     Federal Home Loan Bank of New York advances......................................     484,465                454,465
     Other borrowings.................................................................      41,430                127,640
     Mortgage escrow funds............................................................      11,493                 11,979
     Accounts payable and other liabilities...........................................       9,662                 12,967
                                                                                        ----------             ----------
    Total liabilities................................................................   1,682,276              1,692,386
                                                                                        ----------             ----------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures...............................................      46,500                 46,500
     Unamortized issuance expenses....................................................      (1,982)                (2,039)
                                                                                        ----------             ----------
     Net Trust Preferred securities...................................................      44,518                 44,461
                                                                                        ----------             ----------

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 7,404,914 and 7,620,329 shares outstanding at
          March 31, 2002 and June 30, 2001 (excluding shares held in treasury
          of 4,495,086 and 4,279,671 at March 31, 2002 and June 30, 2001).............          60                     60
     Additional paid-in capital.......................................................      63,394                 61,504
     Employee Stock Ownership Plan Trust debt.........................................      (1,383)                (1,801)
     Retained earnings, partially restricted..........................................     111,080                102,694
     Unrealized gain on investment securities held for sale...........................           1                     --
     Treasury stock, at cost, 4,495,086 and 4,279,671 shares at
        March 31, 2002 and June 30, 2001..............................................     (56,659)               (49,927)
                                                                                        ----------             ----------
     Total stockholders' equity.......................................................     116,493                112,530
                                                                                        ----------             ----------
                                                                                        $1,843,287             $1,849,377
                                                                                        ==========             ==========
</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,
                                                                            2002          2001          2002           2001
                                                                            ----          ----          ----           ----

                                                                           (Dollars in thousands, except per share amounts)

<S>                                                                     <C>            <C>           <C>            <C>
Interest and Dividend Income:
     Interest and fees on loans......................................   $   22,406     $   22,012    $   69,927     $   68,073
     Interest on federal funds sold..................................          ---             13             1             56
     Interest and dividends on investment securities.................        3,583          5,587        13,612         16,940
     Interest on mortgage-backed securities..........................        3,003          2,045         7,716          5,044
                                                                        ----------     ----------    ----------     ----------
                                                                            28,992         29,657        91,256         90,113
                                                                        ----------     ----------    ----------     ----------
Interest Expense:
     Deposits........................................................        9,825         12,666        32,363         39,369
     Borrowed funds..................................................        7,320          6,698        23,161         20,856
                                                                        ----------     ----------    ----------     ----------
                                                                            17,145         19,364        55,524         60,225
                                                                        ----------     ----------    ----------     ----------
Net Interest and Dividend Income Before Provision
     for Loan Losses.................................................       11,847         10,293        35,732         29,888
Provision for Loan Losses............................................          300            125         1,225            450
                                                                        ----------     ----------    ----------     ----------
Net Interest and Dividend Income After Provision
     for Loan Losses.................................................       11,547         10,168        34,507         29,438
                                                                        ----------     ----------    ----------     ----------

Non-Interest Income:
     Service charges.................................................          765            617         2,174          1,811
     Net loss from real estate operations............................          (12)            (3)          (58)            (7)
     Net gain on sales of loans......................................           22             89           109            648
     Other...........................................................          273            130           677            415
                                                                        ----------     ----------    ----------     ----------
                                                                             1,048            833         2,902          2,867
                                                                        ----------     ----------    ----------     ----------

Non-Interest Expenses:
     Compensation and employee benefits..............................        3,209          2,988         9,624          8,413
     Net occupancy expense...........................................          409            471         1,203          1,253
     Equipment.......................................................          617            479         1,649          1,394
     Advertising.....................................................          121            113           361            325
     Amortization of intangibles.....................................          483            501         1,462          1,517
     Federal deposit insurance premium...............................           52             55           154            165
     Preferred securities expense....................................        1,092            794         3,276          2,360
     Other...........................................................        1,044            912         3,072          2,596
                                                                        ----------     ----------    ----------     ----------
                                                                             7,027          6,313        20,801         18,023
                                                                        ----------     ----------    ----------     ----------

Income Before Income Taxes...........................................        5,568          4,688        16,608         14,282
Income Tax Expense...................................................        1,964          1,649         5,880          5,034
                                                                        ----------     ----------    ----------     ----------
Net Income...........................................................   $    3,604     $    3,039    $   10,728     $    9,248
                                                                        ==========     ==========    ==========     ==========

Weighted average number of common shares outstanding:
     Basic...........................................................    7,173,326      7,557,337     7,255,536      7,667,870
                                                                        ==========     ==========    ==========     ==========
     Diluted.........................................................    7,702,997      8,096,493     7,790,381      8,137,440
                                                                        ==========     ==========    ==========     ==========

Net income per common share:
     Basic...........................................................       $0.50           $0.40        $1.48          $1.21
                                                                        ==========     ==========    ==========     ==========
     Diluted.........................................................       $0.47           $0.38        $1.38          $1.14
                                                                        ==========     ==========    ==========     ==========

</TABLE>

See notes to consolidated financial statements.


                                       3


<PAGE>


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

                                                     For the Nine Months Ended March 31, 2002 and 2001
                                                     -------------------------------------------------

                                                                                                          Unrealized
                                                                               Employee                     Gain on
                                                                                Stock                     Investment
                                     Serial                    Additional      Ownership                  Securities
                                   Preferred     Common         Paid-In       Plan Trust       Retained      Held        Treasury
                                     Stock        Stock         Capital          Debt          Earnings     For Sale       Stock
                                     -----        -----         -------          ----          --------     --------       -----
                                                                    (Dollars in thousands)


<S>             <C> <C>              <C>         <C>            <C>            <C>             <C>            <C>        <C>
Balance at June 30, 2000...........  $ --        $     60       $ 60,523       $ (2,320)       $ 91,840       $ --       $(36,122)
Allocation of Employee Stock
  Ownership Plan (ESOP) stock......                                                 389
ESOP adjustment....................                                  708
Purchase of 580,000 shares of
  treasury stock...................                                                                                        (8,731)
Issuance of 61,443 shares of
  treasury stock for options
  exercised and Dividend
  Reinvestment Plan (DRP)..........                                                                (340)                      652
Cash dividends of $0.12 per
  common share.....................                                                                (936)
Net income for the nine months
  ended March 31, 2001.............                                                               9,248
                                     ----        --------       --------       ---------       --------       ----       ---------
Balance at March 31, 2001..........  $ --        $     60       $ 61,231       $ (1,931)       $ 99,812       $ --       $(44,201)
                                     ====        ========       ========       =========       ========       ====       =========


Balance at June 30, 2001...........  $ --        $     60       $ 61,504       $ (1,801)       $102,694       $ --       $(49,927)
Allocation of ESOP stock                                                            418
ESOP adjustment....................                                1,890
Purchase of 430,000 shares of
  treasury stock...................                                                                                        (9,280)
Market value adjustment for
  investment securities held for
  sale.............................                                                                              1
Issuance of 214,585 shares of
  treasury stock for options
  exercised and DRP................                                                              (1,095)                    2,548
Cash dividends of $0.17 per
  common share.....................                                                              (1,247)
Net income for the nine months
  ended March 31, 2002.............                                                              10,728
                                     ----        --------       --------       ---------       --------       ----       ---------
Balance at March 31, 2002            $ --        $     60       $ 63,394       $ (1,383)       $111,080       $  1       $(56,659)
                                     ====        ========       ========       =========       ========       ====       =========


</TABLE>

See notes to consolidated financial statements.


                                       4


<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                Nine months ended March 31,
                                                                                                ---------------------------
                                                                                                2002                   2001
                                                                                                ----                   ----
                                                                                                 (Dollars in thousands)
<S>                                                                                          <C>                     <C>
Cash Flows from Operating Activities:
     Net income.......................................................................       $   10,728              $   9,248
     Adjustments to reconcile net income to net cash provided by
       operating activities:
     Net gain on sales of loans.......................................................             (109)                  (648)
     Proceeds from sales of loans held for sale.......................................            9,593                 89,541
     Net gain on sales of real estate owned...........................................              (40)                   (16)
     Amortization of investment and mortgage-backed securities
       premium, net...................................................................              319                    120
     Depreciation and amortization....................................................            1,306                  1,051
     Provision for losses on loans and real estate owned..............................            1,251                    466
     Amortization of cost of stock plans..............................................            2,309                  1,098
     Amortization of intangibles......................................................            1,462                  1,517
     Amortization of premiums on loans and loan fees..................................            2,795                  1,431
     Amortization of Trust Preferred securities issuance costs........................               57                     47
     Increase in accrued interest receivable, net of accrued
       interest payable...............................................................             (347)                (1,863)
     (Increase) decrease in other assets..............................................             (177)                   438
     Increase (decrease) in accounts payable and other liabilities....................           (3,305)                   949
     Decrease in mortgage escrow funds................................................             (486)                (1,212)
     Other, net.......................................................................              (19)                    --
                                                                                              ---------              ---------
     Net cash provided by operating activities........................................           25,337                102,167
                                                                                              ---------              ---------

Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities................................          274,585                 50,011
     Purchases of investment securities held to maturity..............................         (120,148)               (31,034)
     Purchases of investment securities held for sale.................................              (15)                    --
     Net outflow from loan originations net of principal repayments of loans..........         (146,420)               (77,809)
     Purchases of loans...............................................................          (19,233)               (32,488)
     Proceeds from principal repayments of mortgage-backed securities.................           37,692                 24,098
     Purchases of mortgage-backed securities..........................................          (20,364)               (10,468)
     Proceeds from sale of premises and equipment.....................................               14                     --
     Purchases of premises and equipment..............................................             (729)                (1,125)
     Net inflow from real estate owned activity.......................................              329                     87
     Redemptions (purchases) of Federal Home Loan Bank of New York stock..............            1,267                   (193)
                                                                                              ---------              ---------
     Net cash provided by (used in) investing activities..............................            6,978                (78,921)
                                                                                              ---------              ---------

Cash Flows from Financing Activities:
     Net increase in deposits.........................................................           51,145                 26,242
     Decrease in advances from the Federal Home Loan Bank
       of New York and other borrowings...............................................          (56,210)               (42,775)
     Net proceeds from issuance of Trust Preferred securities.........................               --                 11,617
     Cash dividends paid..............................................................           (1,247)                  (936)
     Purchases of treasury stock, net of reissuance...................................           (7,826)                (8,420)
                                                                                              ---------              ---------
     Net cash used in financing activities............................................          (14,138)               (14,272)
                                                                                              ---------              ---------
Net Increase in Cash and Cash Equivalents.............................................           18,177                  8,974
Cash and Cash Equivalents, Beginning of Period........................................           15,771                 13,866
                                                                                              ---------              ---------
Cash and Cash Equivalents, End of Period..............................................        $  33,948              $  22,840
                                                                                              =========              =========

</TABLE>


                                       5


<PAGE>


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

                                                                               Nine months ended March 31,
                                                                               ---------------------------
                                                                                   2002         2001
                                                                                   ----         ----
                                                                                 (Dollars in thousands)
<S>                                                                               <C>          <C>
Supplemental Disclosures of Cash Flow Information:
     Cash paid during period for:
     Interest .........................................................           $56,883      $60,838
                                                                                  =======      =======
     Income taxes .....................................................           $ 5,511      $ 5,001
                                                                                  =======      =======

Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to real estate owned, net ...........           $     6      $   593
                                                                                  =======      =======
     Transfer of loans receivable to loans held for sale, at market ...           $ 9,401      $91,250
                                                                                  =======      =======
     Securitization of loans receivable and transfer to mortgage-backed
       securities .....................................................           $65,923      $47,661
                                                                                  =======      =======
     Unrealized gain on investment securities held for sale ...........           $     1      $    --
                                                                                  =======      =======


</TABLE>

See notes to consolidated financial statements.


                                       6


<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, 2001.
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, 2002 and 2001. 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. Adoption of Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 supersedes Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). SFAS 144 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. SFAS 144 is effective for fiscal years beginning after
December 15, 2001. The Company has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

3.  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,
                                                                                ---------                   ---------
                                                                           2002         2001            2002           2001
                                                                           ----         ----            ----           ----
                                                                            (Dollars in thousands, except per share amounts)

<S>                                                                    <C>            <C>           <C>             <C>
Net income......................................................       $    3,604     $    3,039    $   10,728      $    9,248
                                                                       ==========     ==========    ==========      ==========

Number of shares outstanding:
Weighted average shares issued..................................       11,900,000     11,900,000    11,900,000      11,900,000
Less: Weighted average shares held in treasury..................        4,450,067      3,956,429     4,339,762       3,819,752
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...........................          675,393        565,766       647,298         539,622
                                                                       ----------     ----------    ----------      ----------
Average basic shares............................................        7,173,326      7,557,337     7,255,536       7,667,870
Plus: Average common stock equivalents..........................          529,671        539,156       534,845         469,570
                                                                       ----------     ----------    ----------      ----------
Average diluted shares..........................................        7,702,997      8,096,493     7,790,381       8,137,440
                                                                       ==========     ==========    ==========      ==========

Earnings per common share:
        Basic....................................................      $     0.50     $     0.40    $     1.48      $     1.21
                                                                       ==========     ==========    ==========      ==========
        Diluted..................................................      $     0.47     $     0.38    $     1.38      $     1.14
                                                                       ==========     ==========    ==========      ==========

</TABLE>


                                       7


<PAGE>


4. 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 March 31, 2002
Tangible capital, and ratio to
  adjusted total assets....................      $154,491      8.41%            $27,551     1.50%              N/A         N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $154,491      8.41%            $73,470     4.00%          $91,838      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $154,491     15.52%                N/A       N/A          $59,738      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $159,913     16.06%            $79,650     8.00%          $99,563     10.00%

As of June 30, 2001
Tangible capital, and ratio to
  adjusted total assets....................      $144,825      7.87%            $27,617     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $144,825      7.87%            $73,645     4.00%          $92,056      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $144,825     15.25%                N/A      N/A           $56,999      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $149,050     15.69%            $75,998     8.00%          $94,998     10.00%

</TABLE>


                                       8


<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 March 31, 2002
Tangible capital, and ratio to
  adjusted total assets....................      $147,963      8.05%            $27,573     1.50%              N/A       N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $147,963      8.05%            $73,527     4.00%          $91,908      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $147,963     15.01%                N/A       N/A          $59,151      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $153,384     15.56%            $78,868     8.00%          $98,585     10.00%

As of June 30, 2001
Tangible capital, and ratio to
  adjusted total assets....................      $140,729      7.64%            $27,638     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $140,729      7.64%            $73,702     4.00%          $92,127      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $140,729     14.97%                N/A      N/A           $56,401      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $144,954     15.42%            $75,202     8.00%          $94,002     10.00%

</TABLE>


                                       9


<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 primarily
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 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, 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 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 decreased $6.1 million to $1.843 billion at March 31, 2002 from
total assets of $1.849 billion at June 30, 2001. The decrease at March 31, 2002
was primarily due to a $155.7 million decrease in investment securities and
Federal Home Loan Bank ("FHLB") of New York stock offset by an $86.2 million
increase in net loans receivable and a $48.3 million increase in mortgage-backed
securities, when compared to June 30, 2001. Lower market interest rates have
resulted in certain investment securities being called before maturity while the
lower market interest rates and the resulting effect of loan refinancing
activity has led to growth in the loan portfolio.

During the nine months ended March 31, 2002, the Company securitized
approximately $66 million of one- to four-family mortgage loans as Freddie Mac
mortgage-backed securities. These securities are held in the Company's
mortgage-backed securities portfolio for collateral purposes.

Deposits increased $49.9 million to $1.135 billion at March 31, 2002 from $1.085
billion at June 30, 2001. An increase in core deposit accounts (checking, money
market and savings accounts) and medium-term certificates of deposit was
partially offset by a decrease in short-term certificates of deposit, including
municipal certificates of deposit. FHLB of New York advances increased $30.0
million from $454.5 million at June 30, 2001 to $484.5 million at March 31,
2002, while other borrowings decreased $86.2 million from $127.6 million at June
30, 2001 to $41.4 million at March 31, 2002. The decrease in other borrowings
primarily reflects the use of funds received from investment securities being
called before maturity and the increase in medium-term and core deposits.

Non-performing assets at March 31, 2002 totaled $2.8 million, representing 0.15%
of total assets, compared to $2.1 million, or 0.12% of total assets, at June 30,
2001. Non-accruing loans at March 31, 2002 totaled $2.6 million, with a ratio of
non-accruing loans to total loans of 0.19%, as compared to $1.6 million, or
0.13% of total loans, at June 30, 2001. Real estate owned decreased to $191,000
at March 31, 2002 from $500,000 at June 30, 2001.


                                       10


<PAGE>


Stockholders' equity at March 31, 2002 totaled $116.5 million compared to $112.5
million at June 30, 2001. The increase reflects the net income recorded for the
nine months ended March 31, 2002 and the exercise of stock options partially
offset by the repurchase of 430,000 shares of the Company's outstanding stock at
an average market price of $21.58 per share and the declaration of cash
dividends.

Results of Operations

General. For the three months ended March 31, 2002, net income was $3.6 million,
or $0.47 per diluted share, as compared to net income of $3.0 million, or $0.38
per diluted share, for the comparable prior year period. For the nine months
ended March 31, 2002, net income was $10.7 million, or $1.38 per diluted share.
These results compare to net income of $9.2 million, or $1.14 per diluted share,
for the nine months ended March 31, 2001.

Interest and Dividend Income. Interest and dividend income for the three months
ended March 31, 2002 decreased to $29.0 million from $29.7 million for the three
months ended March 31, 2001, while interest and dividend income for the nine
months ended March 31, 2002 increased to $91.3 million from $90.1 million for
the prior year period. The decrease in the current three month period was due to
a decrease in the average yield earned on interest-earning assets partially
offset by an increase in the average balance of these assets, when compared to
the prior year period. The average yield earned on interest-earning assets
decreased to 6.55% for the three months ended March 31, 2002 from 7.19% for the
three months ended March 31, 2001. Average interest-earning assets were $1.775
billion for the three months ended March 31, 2002, compared to $1.653 billion
for the comparable prior year period. The increase in interest and dividend
income for the nine months ended March 31, 2002 was due to an increase in
average interest-earning assets partially offset by a decrease in the average
yield earned on these assets, when compared to the prior year period. Average
interest-earning assets were $1.801 billion for the nine months ended March 31,
2002, compared to $1.665 billion for the nine months ended March 31, 2001. The
average yield earned on interest-earning assets decreased to 6.75% for the nine
months ended March 31, 2002 from 7.21% for the comparable prior year period.

Interest income on residential one- to four-family mortgage loans for the three
and nine months ended March 31, 2002 increased $164,000 and $753,000,
respectively, when compared to the prior year periods. The increases in interest
income on residential one- to four-family mortgage loans were due to increases
of $109.1 million and $86.8 million in the average balance outstanding for the
three and nine months ended March 31, 2002, respectively, when compared to the
prior year periods. The increases in interest income on residential one- to
four-family mortgage loans were partially offset by decreases in the average
yield earned on these loans. For the three months ended March 31, 2002, the
average yield earned on residential one- to four-family mortgage loans decreased
to 6.46% from 7.09% for the three months ended March 31, 2001. The average yield
earned on this portfolio for the nine months ended March 31, 2002 decreased to
6.65% from 7.11% for the comparable prior year period.

Interest income on commercial and multi-family real estate loans increased
$459,000 and $1.2 million for the three and nine months ended March 31, 2002,
respectively, when compared to the prior year periods. The increases in interest
income on commercial and multi-family real estate loans were attributable to
increases of $28.6 million and $24.5 million in the average outstanding balance
for the three and nine months ended March 31, 2002, respectively, when compared
to the prior year periods. The growth in interest income on this portfolio was
partially offset by decreases in the average yield earned on commercial and
multi-family real estate loans. The average yield decreased to 8.09% and 8.17%
for the current three and nine month periods, respectively, compared to 8.57%
and 8.59% for the three and nine months ended March 31, 2001.

Interest income on consumer loans decreased $229,000 and $111,000 for the three
and nine months ended March 31, 2002, respectively, when compared to the prior
year periods. The decreases in interest income for this loan portfolio were due
to decreases in the average yield earned on consumer loans. The average yield
earned decreased to 6.55% and 6.87% for the three and nine months ended March
31, 2002, respectively, compared to 7.78% and 7.82% for the prior year periods.
Partially offsetting the decreases in interest income on consumer loans for the
current three and nine month periods were increases of $6.5 million and $12.4
million in the average balance outstanding, respectively, when compared to the
three and nine months ended March 31, 2001.

Interest income on investment securities and other interest-earning assets
decreased $2.0 million and $3.3 million for the three and nine months ended
March 31, 2002, respectively, compared to the prior year periods. The decreases
in interest income on these securities is partially attributable to a $96.7
million and a $50.7 million decrease in the


                                       11


<PAGE>


average balance outstanding for the three and nine months ended March 31, 2002,
respectively, when compared to the prior year periods. In addition, the
decreases in interest income on investment securities and other interest-earning
assets were due to declines in the average yield earned on these securities. The
average yield decreased to 6.39% and 6.64% for the current three and nine month
periods, respectively, compared to 6.96% and 6.97% for the prior year periods.

Interest income on the mortgage-backed securities portfolio increased $958,000
and $2.7 million for the three and nine months ended March 31, 2002,
respectively, compared to the prior year periods. The increases in interest
income on mortgage-backed securities primarily reflects a $76.0 million and a
$64.6 million increase in the average balance outstanding for the three and nine
months ended March 31, 2002, respectively, compared to the prior year periods.
The increases in interest income were partially offset by decreases in the
average yield earned on the mortgage-backed securities portfolio to 6.24% and
6.42% for the three and nine months ended March 31, 2002, respectively, compared
to 7.02% and 7.03% for the three and nine months ended March 31, 2001.

Interest Expense. Interest expense decreased $2.2 million and $4.7 million for
the three and nine months ended March 31, 2002, respectively, from the
comparable March 2001 periods. The decrease in the current three month period
was attributable to a decrease in the Company's cost of funds from a rate of
5.09% to 4.20%, when compared to the prior year period, as a result of lower
market interest rates. Partially offsetting the decrease in rate during the
current three month period was a $109.4 million increase in total average
deposits and borrowings, when compared to the three months ended March 31, 2001.
For the nine months ended March 31, 2002, the cost of funds decreased from a
rate of 5.16% to 4.41% while total average deposits and borrowings increased
$120.9 million, when compared to the nine months ended March 31, 2001. For the
three and nine months ended March 31, 2002, the average rate paid on deposits
decreased to 3.54% and 3.82%, respectively, from 4.67% and 4.76% for the three
and nine months ended March 31, 2001. The average balance of deposits increased
$26.8 million and $26.1 million, respectively, from the $1.099 billion and
$1.103 billion for the three and nine months ended March 31, 2001. The average
cost of FHLB of New York advances decreased to 5.72% and 5.81% from 6.13% and
6.14% for the three and nine months ended March 31, 2002, respectively, while
the average balance of FHLB of New York advances increased $76.5 million and
$86.0 million for the same respective periods, when compared to the prior year
periods. For the three and nine months ended March 31, 2002, the average rate
paid on other borrowings decreased to 4.57% and 4.47%, respectively, from 6.20%
and 6.34% for the three and nine months ended March 31, 2001. The average
balance of other borrowings increased $6.2 million and $8.8 million,
respectively, compared to the prior year periods.

Net Interest and Dividend Income. Net interest and dividend income before
provision for loan losses for the three and nine months ended March 31, 2002 was
$11.8 million and $35.7 million, respectively, reflecting a $1.6 million and
$5.8 million increase from the $10.3 million and $29.9 million recorded in the
comparable prior year periods. The net interest rate spread and net interest
margin for the three months ended March 31, 2002 were 2.35% and 2.65%,
respectively, an increase from 2.10% and 2.46%, respectively, for the comparable
prior year period. For the nine months ended March 31, 2002, the net interest
rate spread and net interest margin were 2.34% and 2.66%, respectively, an
increase from 2.05% and 2.41%, respectively, for the nine months ended March 31,
2001. A decline in short-term market interest rates and growth in the Company's
loan portfolio and core deposit accounts contributed to the improvements in net
interest margin.

Provision for Loan Losses. The provision for loan losses for the three and nine
months ended March 31, 2002 was $300,000 and $1.2 million, respectively,
compared to $125,000 and $450,000 for the comparable prior year periods. The
Company continues to closely monitor all delinquent loans, with special
consideration of the loans of those families affected by the World Trade Center
disaster. The allowance for loan losses at March 31, 2002 of $5.4 million
reflects a $1.2 million increase from the June 30, 2001 level. The allowance for
loan losses as a percentage of non-accruing loans was 206.14% at March 31, 2002,
compared to 259.50% at June 30, 2001. The allowance for loan losses was 0.39% of
total loans at March 31, 2002, an increase from 0.33% of total loans at June 30,
2001.

Non-Interest Income. For the three and nine months ended March 31, 2002,
non-interest income was $1.0 million and $2.9 million, respectively, compared to
$833,000 and $2.9 million for the prior year periods. The increase in
non-interest income for the current three month period was primarily due to an
increase in service charges and other non-interest income offset by a decrease
in the net gain on sales of loans, when compared to the three months ended March
31, 2001. During the three and nine months ended March 31, 2002, the net gain on
sales of loans was $22,000 and $109,000, respectively, as compared to $89,000
and $648,000 for the three and nine months ended March 31,


                                       12


<PAGE>


2001. Loan production has been retained in portfolio during the current periods
as a partial replacement of the investment securities called before maturity.
During the three and nine months ended March 31, 2001, nearly $9 million and $24
million of conforming, fixed rate one- to four-family residential loans were
sold, respectively, generating gains of $89,000 and $241,000 for those
respective periods. In addition, during the nine months ended March 31, 2001,
the Company sold approximately $65 million of longer duration, one- to
four-family residential mortgage loans in an effort to improve funding,
liquidity, interest rate risk and net interest margin and recorded net gains on
sales of these loans of $407,000.

Service charge income for the three and nine months ended March 31, 2002 was
$765,000 and $2.2 million, respectively, increases of $148,000 and $363,000 over
the $617,000 and $1.8 million recorded for the prior year periods. Service
charges were positively impacted by fees associated with various loan
prepayments and refinances. Other non-interest income increased $143,000 and
$262,000 to $273,000 and $677,000 for the three and nine months ended March 31,
2002, respectively, from $130,000 and $415,000 for the three and nine months
ended March 31, 2001. Other non-interest income included $87,000 and $179,000 of
increases in earnings from the Investment Services at Penn Federal program for
the three and nine months ended March 31, 2002, respectively, when compared to
the prior year periods. 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 $7.0 million and $20.8 million
for the three and nine months ended March 31, 2002, respectively, representing
increases over the $6.3 million and $18.0 million recorded during the prior year
periods. An increase in preferred securities expense due to the issuance of $12
million of Trust Preferred securities in March 2001, additional "non-cash"
expense related to the Employee Stock Ownership Plan, additional costs related
to the Bank's new Business Development department and expenses related to the
Company's development of an internet presence contributed to the increase in
non-interest expenses during the current year periods when compared to the prior
year periods. The Company's non-interest expenses as a percent of average assets
increased to 1.54% and 1.50% for the three and nine months ended March 31, 2002,
respectively, from 1.48% and 1.40% for the comparable prior year periods.

Income Tax Expense. Income tax expense for the three and nine months ended March
31, 2002 was $2.0 million and $5.9 million, respectively, compared to $1.6
million and $5.0 million for the three and nine months ended March 31, 2001. The
effective tax rate for the three and nine months ended March 31, 2002 was 35.3%
and 35.4%, respectively, compared to 35.2% for the three and nine months ended
March 31, 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 and nine months ended March 31, 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 March 31,
                                             ------------------------------------------------------------------------------------
                                                                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 .............................    $1,111,880     $   17,900        6.46%      $1,002,830     $   17,736         7.09%
    Commercial and multi-family real
       estate loans ......................       129,350          2,617        8.09          100,739          2,158         8.57
    Consumer loans .......................       116,913          1,889        6.55          110,379          2,118         7.78
                                              ----------     ----------                   ----------     ----------
       Total loans receivable ............     1,358,143         22,406        6.62        1,213,948         22,012         7.27

    Federal funds sold ...................            --             --          --              983             13         5.21
    Investment securities and other ......       224,354          3,583        6.39          321,098          5,587         6.96
    Mortgage-backed securities ...........       192,505          3,003        6.24          116,526          2,045         7.02
                                              ----------     ----------                   ----------     ----------
       Total interest-earning assets .....     1,775,002     $   28,992        6.55        1,652,555     $   29,657         7.19
                                                             ==========                                  ==========

Non-interest earning assets ..............        51,183                                      55,664
                                              ----------                                  ----------
       Total assets ......................    $1,826,185                                  $1,708,219
                                              ==========                                  ==========
Deposits and borrowings:
    Money market and demand deposits .....    $  146,530     $      275        0.76%      $  121,926     $      283         0.94%
    Savings deposits .....................       232,227          1,210        2.11          164,107            743         1.84
    Certificates of deposit ..............       747,378          8,340        4.53          813,334         11,640         5.80
                                              ----------     ----------                   ----------     ----------
       Total deposits ....................     1,126,135          9,825        3.54        1,099,367         12,666         4.67

    FHLB of New York advances ............       482,960          6,892        5.72          406,508          6,213         6.13
    Other borrowings .....................        37,448            428        4.57           31,279            485         6.20
                                              ----------     ----------                   ----------     ----------
       Total deposits and borrowings .....     1,646,543     $   17,145        4.20        1,537,154     $   19,364         5.09
                                                             ==========                                  ==========
Other liabilities ........................        19,436                                      23,058
                                              ----------                                  ----------
       Total liabilities .................     1,665,979                                   1,560,212
Trust Preferred securities ...............        44,508                                      33,296
Stockholders' equity .....................       115,698                                     114,711
                                              ----------                                  ----------
       Total liabilities and stockholders'
           equity ........................    $1,826,185                                  $1,708,219
                                              ==========                                  ==========

Net interest income and net
    interest rate spread .................                   $   11,847        2.35%                      $   10,293         2.10%
                                                             ==========      ======                       ==========         ====
Net interest-earning assets and
    interest margin ......................    $  128,459                       2.65%      $  115,401                         2.46%
                                              ==========                     ======       ==========                         =====

Ratio of interest-earning assets to
    deposits and borrowings ..............                                   107.80%                                       107.51%
                                                                             ======                                        ======

(1)  Annualized.

</TABLE>

                                       14


<PAGE>


<TABLE>
<CAPTION>
                                                                              Nine Months Ended March 31,
                                                    ----------------------------------------------------------------------------
                                                                   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...................................    $ 1,129,841     $56,397       6.65%        $1,043,090    $ 55,644      7.11%
    Commercial and multi-family real
       estate loans............................        120,025       7,449       8.17             95,573       6,237      8.59
    Consumer loans.............................        117,865       6,081       6.87            105,487       6,192      7.82
                                                     ---------      ------                     ---------      ------
       Total loans receivable..................      1,367,731      69,927       6.81          1,244,150      68,073      7.29

    Federal funds sold.........................             45           1       3.35              1,215          56      6.08
    Investment securities and other............        273,273      13,612       6.64            323,997      16,940      6.97
    Mortgage-backed securities.................        160,319       7,716       6.42             95,689       5,044      7.03
                                                     ---------      ------                     ---------      ------
       Total interest-earning assets...........      1,801,368     $91,256       6.75          1,665,051    $ 90,113      7.21
                                                                   =======                                  ========
Non-interest earning assets....................         48,948                                    55,409
                                                     ---------                                 ---------
       Total assets ...........................    $ 1,850,316                                $1,720,460
                                                   ===========                                ==========

Deposits and borrowings:
    Money market and demand deposits...........    $   138,728     $   856       0.82%        $  124,207    $  1,168      1.25%
    Savings deposits...........................        213,818       3,350       2.09            159,044       2,051      1.72
    Certificates of deposit....................        776,380      28,157       4.83            819,551      36,150      5.88
                                                     ---------      ------                     ---------      ------
       Total deposits..........................      1,128,926      32,363       3.82          1,102,802      39,369      4.76

    FHLB of New York advances..................        471,871      20,827       5.81            385,915      17,971      6.14
    Other borrowings...........................         68,543       2,334       4.47             59,768       2,885      6.34
                                                     ---------      ------                     ---------      ------
       Total deposits and borrowings...........      1,669,340     $55,524       4.41          1,548,485    $ 60,225      5.16
                                                                   =======                                  ========
Other liabilities..............................         21,283                                    24,961
                                                     ---------                                 ---------
       Total liabilities.......................      1,690,623                                 1,573,446
Trust Preferred securities.....................         44,489                                    32,979
Stockholders' equity...........................        115,204                                   114,035
                                                     ---------                                 ---------
       Total liabilities and stockholders'
           equity..............................     $1,850,316                                $1,720,460
                                                    ==========                                ==========

Net interest income and net
    interest rate spread.......................                    $35,732       2.34%                      $ 29,888      2.05%
                                                                   =======       ====                       ========     =====

Net interest-earning assets and
    interest margin............................    $   132,028                   2.66%        $  116,566                  2.41%
                                                   ===========                   ====         ==========                  ====

Ratio of interest-earning assets to
    deposits and borrowings....................                                107.91%                                  107.53%
                                                                               ======                                   ======

(1)  Annualized.

</TABLE>


                                       15


<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,
                                                                   2002               2001
                                                                   ----               ----
                                                                     (Dollars in thousands)
<S>                                                                <C>                <C>
Non-accruing loans:
     One- to four-family ..............................            $2,271             $1,219
     Commercial and multi-family ......................                --                 49
     Consumer .........................................               368                369
                                                                   ------             ------
         Total non-accruing loans .....................             2,639              1,637

Real estate owned, net ................................               191                500
                                                                   ------             ------

         Total non-performing assets ..................             2,830              2,137
                                                                   ------             ------

         Total risk elements ..........................            $2,830             $2,137
                                                                   ======             ======

Non-accruing loans as a percentage of total loans .....              0.19%              0.13%
                                                                   ======             ======

Non-performing assets as a percentage of total assets .              0.15%              0.12%
                                                                   ======             ======

Total risk elements as a percentage of total assets ...              0.15%              0.12%
                                                                   ======             ======

</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 March 31, 2002, the Company had a total allowance
for loan losses of $5.4 million representing 206.14% of total non-accruing loans
and 0.39% 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


                                       16


<PAGE>


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
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 negative gap if the amount of interest-bearing 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 improve net interest income.
For an institution with a positive gap, the reverse would be expected.

At March 31, 2002, the Company's total deposits and borrowings maturing or
repricing within one year exceeded its total interest-earning assets maturing or
repricing within one year by $43.2 million, representing a one year negative gap
of 2.35% of total assets, compared to a one year negative gap of 14.48% of total
assets at June 30, 2001. The decline in market interest rates has resulted in
the redemption of certain investment securities with callable features. The
proceeds from such activities were used to reduce short-term borrowings and fund
growth in the loan portfolio. Also contributing to the change in the gap
position was the maturity of FHLB of New York advances and subsequent
replacement with advances that have terms in excess of three years. Furthermore,
growth in core deposits and medium-term certificates of deposit coupled with a
decline in short-term certificates of deposit, including municipal certificates
of deposit, also reduced the Company's negative gap position.

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.


                                       17


<PAGE>


As of March 31, 2002, the Bank's internally generated initial NPV ratio was
6.30%. Following a 2% increase in interest rates, the Bank's Post-Shock NPV
ratio was 6.11%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was negative 0.19%. As of March 31, 2002, the Company's internally generated
initial NPV ratio was 6.05%, the Post-Shock ratio was 5.66%, and the Sensitivity
Measure was negative 0.39%. The duration of assets has declined principally due
to increased prepayment estimates. Conversely, the duration of liabilities has
extended principally due to the decline in short-term fundings, both wholesale
and retail, as well as the extension of FHLB of New York advances. 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 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 December 31, 2001 (the latest date for which information is
available), the Bank's initial NPV ratio, as measured by the OTS, was 8.57%, the
Bank's Post-Shock ratio was 5.38% and the Sensitivity Measure was negative
3.19%.

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 March 31, 2002, based on its internally generated simulation models, the
Company's consolidated net interest income projected for one year forward would
decrease 2% 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 nine months ended March 31, 2002 were provided
by operating activities, proceeds from maturities of investment securities,
increased deposits and principal repayments of loans and mortgage-backed
securities. During this period, the cash provided was used for the origination
and purchase of loans, the purchase of investment and mortgage-backed securities
and the purchase of treasury stock, as well as to reduce borrowings. During the
nine months ended March 31, 2001, the cash needs of the Company were provided by
operating activities, primarily from proceeds from the sales of loans, increased
deposits, proceeds from maturities of investment securities and principal
repayments of loans and mortgage-backed securities. Funds were also provided by
the issuance of $12 million of Trust Preferred securities. During this period,
the cash provided was used primarily for investing activities, which included
the origination and purchase of loans and the purchase of mortgage-backed
securities and investment securities, as well as to reduce borrowings and to
fund the purchase of treasury stock.


                                       18


<PAGE>


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, 2002, the Bank exceeded all regulatory
capital requirements and qualified as a "well-capitalized" institution (see Note
4. - Stockholders' Equity and Regulatory Capital, in the Notes to Consolidated
Financial Statements).


                                       19


<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
                  None.


20


<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 14, 2002                   By:  /s/ Joseph L. LaMonica
                                          --------------------------------------
                                               Joseph L. LaMonica
                                               President and Chief
                                               Executive Officer





Date: May 14, 2002                   By:  /s/ Jeffrey J. Carfora
                                          --------------------------------------
                                              Jeffrey J. Carfora
                                              Senior Executive Vice President,
                                              Chief Operating Officer and
                                              Chief Financial Officer
                                              (Principal Financial Officer)





Date: May 14, 2002                   By:  /s/ Claire M. Chadwick
                                          --------------------------------------
                                              Claire M. Chadwick
                                              Senior Vice President,
                                              Controller and
                                              Assistant Secretary
                                              (Principal Accounting Officer)