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 September 30, 1999

                                       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, New Jersey             07052-2989
        ----------------------------------------------             ----------
           (Address of principal executive offices)                (Zip Code)


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


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

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

                                   YES  [X]   NO [ ]

         As of November 3, 1999,  there were  issued and  outstanding  8,845,268
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

                                                                                     September 30,       June 30,
                                                                                          1999             1999
                                                                                     ------------      ------------
                                                                                         (Dollars in thousands)
ASSETS
<S>                                                                                  <C>               <C>
Cash and cash equivalents                                                            $      9,497      $      9,900
Investment securities held to maturity, at amortized cost, market value of
     $296,105 and $281,880 at  September 30, 1999 and June 30, 1999                       313,090           293,282
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $114,539 and $128,617 at September 30, 1999 and June 30, 1999                     114,193           127,983
Loans held for sale                                                                          --               5,180
Loans receivable, net of allowance for loan losses of $3,363 and $3,209
     at September 30, 1999 and June 30, 1999                                            1,095,459         1,061,431
Premises and equipment, net                                                                19,502            19,240
Real estate owned, net                                                                        647               936
Federal Home Loan Bank of  New York stock, at cost                                         17,186            16,623
Accrued interest receivable, net                                                           11,228             9,680
Goodwill and other intangible assets                                                       10,555            11,118
Other assets                                                                                2,186             3,390
                                                                                     ------------      ------------
                                                                                     $  1,593,543      $  1,558,763
                                                                                     ============      --==========

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits                                                                        $  1,063,684      $  1,063,600
     Federal Home Loan Bank of New York advances                                          304,465           244,465
     Other borrowings                                                                      62,275            88,738
     Mortgage escrow funds                                                                 10,481            10,102
     Due to banks                                                                           5,233             7,385
     Accounts payable and other liabilities                                                 3,844             4,230
                                                                                     ------------      ------------
     Total liabilities                                                                  1,449,982         1,418,520
                                                                                     ------------      ------------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures                                                    34,500            34,500
     Unamortized issuance expenses                                                         (1,741)           (1,757)
                                                                                     ------------      ------------
     Net Trust Preferred securities                                                        32,759            32,743
                                                                                     ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (continued)

                                                                                     September 30,       June 30,
                                                                                          1999             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 8,845,268 and 8,813,416 shares
         outstanding at September 30, 1999 and June 30, 1999  (excluding  shares
         held in treasury of 3,054,732 and 3,084,442 at
         September 30, 1999 and June 30, 1999)                                                 60                59
     Additional paid-in capital                                                            59,813            59,488
     Restricted stock - Management Recognition Plan                                           (36)             --
     Employee Stock Ownership Plan Trust debt                                              (2,683)           (2,804)
     Retained earnings, partially restricted                                               83,276            80,673
     Treasury stock, at cost, 3,054,732 and 3,084,442 shares at
         September 30, 1999 and June 30, 1999                                             (29,628)          (29,916)
                                                                                     ------------      ------------
     Total stockholders' equity                                                           110,802           107,500
                                                                                     ------------      ------------
                                                                                     $  1,593,543         1,558,763
                                                                                     ============      --==========

</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
                                                         Three months ended September 30,
                                                         --------------------------------
                                                              1999             1998
                                                          -----------     -----------
                                                          (Dollars in thousands, except
                                                                per share amounts)
<S>                                                       <C>             <C>
Interest and Dividend Income:
     Interest and fees on loans                           $    19,037     $    20,199
     Interest on federal funds sold                              --                 3
     Interest and dividends on investment securities            5,583           3,788
     Interest on mortgage-backed securities                     2,015           3,248
                                                          -----------     -----------
                                                               26,635          27,238
                                                          -----------     -----------
Interest Expense:
     Deposits                                                  11,409          12,648
     Borrowed funds                                             5,285           5,513
     Trust Preferred securities                                   783             783
                                                          -----------     -----------
                                                               17,477          18,944
                                                          -----------     -----------
Net Interest and Dividend Income Before Provision
     for Loan Losses                                            9,158           8,294
Provision for Loan Losses                                         210             175
                                                          -----------     -----------
Net Interest and Dividend Income After Provision
     for Loan Losses                                            8,948           8,119
                                                          -----------     -----------

Non-Interest Income:
     Service charges                                              556             541
     Net gain (loss) from real estate operations                   30             (37)
     Net gain on sales of loans                                    33             417
     Other                                                        189              94
                                                          -----------     -----------
                                                                  808           1,015
                                                          -----------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income (continued)
                                                         Three months ended September 30,
                                                         --------------------------------
                                                              1999             1998
                                                          -----------     -----------
                                                          (Dollars in thousands, except
                                                                per share amounts)
<S>                                                       <C>             <C>

Non-Interest Expenses:
     Compensation and employee benefits                         2,511           2,235
     Net occupancy expense                                        383             327
     Equipment                                                    440             425
     Advertising                                                   82              76
     Amortization of intangibles                                  562             598
     Federal deposit insurance premium                            159             159
     Other                                                        832             852
                                                          -----------     -----------
                                                                4,969           4,672
                                                          -----------     -----------

Income Before Income Taxes                                      4,787           4,462
Income Tax Expense                                              1,705           1,611
                                                          -----------     -----------
Net Income                                                $     3,082     $     2,851
                                                          ===========     ===========

Weighted average number of common shares outstanding:
     Basic                                                  8,296,598       8,663,450
                                                          ===========     ===========
     Diluted                                                8,909,660       9,327,443
                                                          ===========     ===========

Net income per common share:
     Basic                                                $      0.37     $      0.33
                                                          ===========     ===========
     Diluted                                              $      0.35     $      0.31
                                                          ===========     ===========

</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

                                                                          Three months ended September 30,
                                                                                   1999          1998
                                                                                 --------      --------
                                                                                 (Dollars in thousands)
<S>                                                                              <C>           <C>
Cash Flows from Operating Activities:
     Net income                                                                  $  3,082      $  2,851
     Adjustments to reconcile net income to net cash provided by
       operating activities:
     Net gain on sales of loans                                                       (33)         (417)
     Proceeds from sales of loans held for sale                                     5,324        26,766
     Net gain on sales of real estate owned                                           (36)           (7)
     Amortization of investment and mortgage-backed securities
       premium, net                                                                    60           101
     Depreciation and amortization                                                    352           345
     Provision for losses on loans and real estate owned                              210           208
     Amortization of cost of stock plans                                              446           533
     Amortization of intangibles                                                      562           598
     Amortization of premiums on loans and loan fees                                  405           483
     Amortization of Trust Preferred securities issuance costs                         16            16
     Increase in accrued interest receivable, net of accrued
       interest payable                                                            (1,105)         (882)
     Decrease in other assets                                                       1,204         1,867
     Decrease in accounts payable and other liabilities                              (420)         (132)
     Increase in mortgage escrow funds                                                379           364
     Decrease in due to banks                                                      (2,152)       (6,847)
     Other, net                                                                       (48)         --
                                                                                 --------      --------
Net cash provided by operating activities                                           8,246        25,847
                                                                                 --------      --------

Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities                                165        27,070
     Purchases of investment securities held to maturity                          (19,991)      (42,688)
     Net outflow from loan originations net of principal repayments of loans      (13,661)      (36,325)
     Purchases of loans                                                           (21,208)       (9,808)
     Proceeds from principal repayments of mortgage-backed securities              13,813        22,559
     Purchases of mortgage-backed securities                                          (65)         --
     Proceeds from sale of premises and equipment                                     250          --
     Purchases of premises and equipment                                             (816)         (851)
     Proceeds from sale of real estate owned                                          440           329
     Purchases of Federal Home Loan Bank of New York stock                           (563)       (1,233)
                                                                                 --------      --------
     Net cash used in investing activities                                        (41,636)      (40,947)
                                                                                 --------      --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)

                                                                          Three months ended September 30,
                                                                                   1999          1998
                                                                                 --------      --------
                                                                                 (Dollars in thousands)
<S>                                                                              <C>           <C>
Cash Flows from Financing Activities:
     Net increase (decrease) in deposits                                             (359)       53,866
     Increase (decrease) in advances from the Federal Home Loan Bank
       of New York and other borrowings                                            33,537       (34,875)
     Cash dividends paid                                                             (343)         (313)
     Purchases of treasury stock, net of reissuance                                   152        (2,301)
                                                                                 --------      --------
     Net cash provided by financing activities                                     32,987        16,377
                                                                                 --------      --------
Net Increase (Decrease) in Cash and Cash Equivalents                                 (403)        1,277
Cash and Cash Equivalents, Beginning of Period                                      9,900        10,960
                                                                                 --------      --------
Cash and Cash Equivalents, End of Period                                         $  9,497      $ 12,237
                                                                                 ========      ========

Supplemental Disclosures of Cash Flow Information:
     Cash paid during the period for:
     Interest                                                                    $ 17,120      $ 17,143
                                                                                 ========      ========
     Income taxes                                                                $    209      $    ---
                                                                                 ========      ========

Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to real estate owned, net                      $    114      $     19
                                                                                 ========      ========
     Transfer of loans receivable to loans held for sale, at market              $    111      $    ---
                                                                                 ========      ========

</TABLE>

See notes to consolidated financial statements.
<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 three months ended  September 30, 1999 and 1998. 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 September 30,
                                                                  1999            1998
                                                              -----------     -----------
                                                             (Dollars in thousands, except
                                                                   per share amounts)
<S>                                                           <C>             <C>
Net income                                                    $     3,082     $     2,851
                                                              ===========     ===========

Number of shares outstanding:
  Weighted average shares issued                               11,899,371      11,900,000
  Less:  Weighted average shares held in treasury               3,066,216       2,608,412
  Less:  Average shares held by the ESOP                          952,000         952,000
  Plus:  ESOP shares released or committed to be released
            during the fiscal year                                415,443         323,862
                                                              -----------     -----------
         Average basic shares                                   8,296,598       8,663,450
  Plus:  Average common stock equivalents                         613,062         663,993
                                                              -----------     -----------
         Average diluted shares                                 8,909,660       9,327,443
                                                              ===========     ===========

Earnings per common share:
         Basic                                                $      0.37     $      0.33
                                                              ===========     ===========
         Diluted                                              $      0.35     $      0.31
                                                              ===========     ===========

</TABLE>
<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 September 30, 1999
Tangible capital, and ratio to
   adjusted total assets...................      $124,740      7.87%       $23,766           1.50%           N/A       N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $124,740      7.87%       $63,376           4.00%       $79,220      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $124,740     15.84%       $31,505           4.00%       $47,258      6.00%
Total risk-based capital, and ratio to
   risk-weighted assets....................      $127,924     16.24%       $63,011           8.00%       $78,763     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>

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.
<PAGE>
<TABLE>
<CAPTION>
                                                                                                              To Be Well
                                                                                 For Minimum              Capitalized Under
                                                                               Capital Adequacy           Prompt Corrective
                                                        Actual                     Purposes               Action Provisions
                                                  -----------------        ----------------------         -----------------
                                                  Amount      Ratio         Amount          Ratio         Amount      Ratio
                                                  ------      -----         ------          -----         ------      -----
                                                                           (Dollars in thousands)
<S>                                              <C>          <C>          <C>               <C>         <C>         <C>
As of September 30, 1999
Tangible capital, and ratio to
   adjusted total assets...................      $133,639      8.44%       $23,748           1.50%           N/A       N/A
Tier I (core) capital, and ratio to
   adjusted total assets...................      $133,639      8.44%       $63,328           4.00%       $79,159      5.00%
Tier I (core) capital, and ratio to
   risk-weighted assets....................      $133,639     17.24%       $31,004           4.00%       $46,506      6.00%
Total risk-based capital, and ratio to
   risk-weighted assets....................      $136,824     17.65%       $62,009           8.00%       $77,511     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>

4. Subsequent Event

On October 27, 1999, the Company  announced a 5% stock repurchase  program to be
in effect over the next 18 months.
<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.

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

Financial Condition

Total assets  increased  $34.8  million to $1.594  billion at September 30, 1999
from total assets of $1.559  billion at June 30,  1999.  The increase was due to
the originations  and purchases of loans and purchases of investment  securities
offset by principal payments on loans and mortgage-backed securities.

Deposits remained  unchanged at $1.064 billion at September 30, 1999 and at June
30, 1999. Growth in retail  certificates of deposit was offset by a reduction in
municipal  certificates of deposit.  Federal Home Loan Bank ("FHLB") of New York
advances  increased  $60.0  million  from  $244.5  million  at  June  30,  1999,
reflecting  growth  in  medium-term  borrowings.  Other  borrowings,   including
overnight  borrowings,  totaled  $62.3  million at  September  30, 1999, a $26.4
million decrease from $88.7 million at June 30, 1999.
<PAGE>
Non-performing  assets at September 30, 1999 totaled $4.1 million,  representing
0.26% of total assets,  compared to $4.6 million,  or 0.30% of total assets,  at
June  30,  1999.  Non-accruing  loans  totaled  $3.5  million,  with a ratio  of
non-accruing loans to total loans of 0.31%, at September 30, 1999 as compared to
$3.7  million,  or 0.34% of total  loans,  at June 30,  1999.  Real estate owned
decreased to $647,000 at September 30, 1999 from $936,000 at June 30, 1999.

Stockholders'  equity at September 30, 1999 totaled $110.8  million  compared to
$107.5 million at June 30, 1999. The increase  primarily reflects the net income
recorded for the three months ended September 30, 1999,  partially offset by the
declaration of dividends.

Results of Operations

General.  For the three  months  ended  September  30,  1999 net income was $3.1
million, or $0.35 per diluted share,  compared to net income of $2.9 million, or
$0.31 per diluted share, for the comparable prior year period.

Interest and Dividend Income.  Interest and dividend income for the three months
ended  September 30, 1999  decreased to $26.6 million from $27.2 million for the
three months ended  September 30, 1998.  The decrease in the current year period
was primarily due to a decrease in the average yield earned on  interest-earning
assets. The average yield earned on  interest-earning  assets decreased to 7.00%
for the three  months ended  September  30, 1999 from 7.16% for the three months
ended September 30, 1998.

Interest income on residential one- to four-family  mortgage loans for the three
months ended  September  30, 1999  decreased  $1.6 million when  compared to the
prior year  period.  The  decrease in  interest  income on  residential  one- to
four-family mortgage loans was due to a decrease of $66.2 million in the average
balance  outstanding  for the three months ended  September 30, 1999 compared to
the prior year period.  The decrease in interest  income on residential  one- to
four-family  mortgage loans was also due to a decrease of 17 basis points in the
average yield earned on this loan  portfolio to 6.94% for the three months ended
September 30, 1999 from 7.11% for the comparable prior year period.

Interest on investment  securities and other  interest-earning  assets increased
$1.8 million for the three months ended  September 30, 1999 from the  comparable
prior year  period.  The  increase  was  primarily  due to an increase of $108.5
million in the average balance  outstanding for the current year period over the
prior year period. The increase in the average balance on investment  securities
and other  interest-earning  assets  was  partially  offset by a 19 basis  point
decrease in the average  yield earned on these  securities  for the three months
ended September 30, 1999 when compared to the prior year period.

Interest  income on the  mortgage-backed  securities  portfolio  decreased  $1.2
million for the three months ended  September  30, 1999 as compared to the prior
year  period.  The  decrease in interest  income on  mortgage-backed  securities
primarily  reflects a $71.1 million decrease in the average balance  outstanding
for the three months ended September 30, 1999 compared to the prior year period.

Interest  Expense.  Interest expense decreased $1.5 million for the three months
ended September 30, 1999 from $18.9 million for the comparable 1998 period.  The
decrease was  attributable to a $12.8 million decrease in total average deposits
and borrowings and a 36 basis point decline in the Company's cost of funds.  The
average  rate  paid on  deposits,  borrowings  and  Trust  Preferred  securities
decreased to 4.82% for the three months ended  September 30, 1999 from 5.18% for
the comparable prior year period.
<PAGE>
Net Interest and Dividend Income. Net interest and dividend income for the three
months ended  September 30, 1999 was $9.2  million,  reflecting an increase from
$8.3  million  recorded  in the  comparable  prior  year  period.  The  increase
primarily  reflects the Company's  improvement in net interest rate spread.  The
net  interest  rate spread and net  interest  margin for the three  months ended
September  30, 1999 were 2.18% and 2.43%,  respectively,  an increase from 1.98%
and 2.21%,  respectively,  for the comparable prior year period. The increase in
the net interest rate spread and net interest margin were primarily attributable
to the decrease in the average rate paid on deposits and borrowings.

Provision  for Loan Losses.  The  provision for loan losses for the three months
ended  September  30, 1999 was $210,000  compared to $175,000 for the prior year
period.  The  allowance  for loan losses at  September  30, 1999 of $3.4 million
reflects a $154,000  increase  from the June 30, 1999 level.  The  allowance for
loan losses as a percentage  of  non-accruing  loans was 97.37% at September 30,
1999, compared to 87.44% at June 30, 1999.

Non-Interest  Income. For the three months ended September 30, 1999 non-interest
income was  $808,000  compared to $1.0  million for the prior year  period.  The
decrease was primarily  attributable to a $384,000  reduction in the net gain on
sales of loans during the three months ended  September  30, 1999 as compared to
the prior year  period.  For the three  months  ended  September  30,  1999 $5.3
million  of one- to  four-family  residential  mortgage  loans  were sold in the
secondary market for a net gain of $33,000. This compares to a $417,000 net gain
on sales of $26 million of one- to four-family residential mortgage loans during
the three months ended  September 30, 1998. Due to the higher  interest rate and
steeper yield curve  environment in the current  period,  loan sale activity was
reduced  from the fiscal  1999 level,  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  and  long-term
profitability objectives.  The decrease in net gain on sales of loans during the
current  period was  partially  offset by a $15,000  increase in service  charge
income,  a $67,000  increase in the net gain (loss) from real estate  operations
and a $95,000 increase in other non-interest  income, when compared to the prior
year period.  Other non-interest income for the three months ended September 30,
1999  included  a $48,000  gain on the sale of a former  branch  location  and a
$51,000  increase  in earnings  from the  Investment  Services  at Penn  Federal
program.  Through this program,  customers have  convenient  access to financial
consulting/advisory services and related non-deposit investment products.

Non-Interest Expenses. The Company's non-interest expenses were $5.0 million for
the three months ended September 30, 1999 compared to $4.7 million for the prior
year period.  In February 1999 and June 1999, the Company opened new branches in
Toms River and Livingston,  NJ,  respectively.  Growth in retail branches and in
loan  origination  and servicing  capacity,  as well as investment in technology
over the last eighteen months, has resulted in a slight increase in non-interest
expenses in the  current  period when  compared  to the prior year  period.  The
Company's  non-interest  expenses as a percent of average  assets  increased  to
1.26%  for the  three  months  ended  September  30,  1999  from  1.18%  for the
comparable prior year period.

Income Tax  Expense.  Income tax expense was $1.7  million for the three  months
ended  September  30, 1999  compared to $1.6  million for the three months ended
September 30, 1998. The effective tax rate for the three months ended  September
30, 1999 was 35.6%.  The effective tax rate was 36.1% for the three months ended
September 30, 1998.
<PAGE>
Analysis of Net Interest Income

The  following  table sets forth certain  information  relating to the Company's
consolidated  statements of financial condition and the consolidated  statements
of income for the three months ended  September 30, 1999 and 1998,  and reflects
the average  yield on assets and  average  cost of  liabilities  for the periods
indicated.  Such yields and costs are derived from average daily  balances.  The
average balance of loans receivable includes  non-accruing loans. The yields and
costs include fees which are considered adjustments to yields.
<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30,
                                                   -----------------------------------------------------------------------------
                                                                     1999                                     1998
                                                   ------------------------------------      -----------------------------------
                                                      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...................................     $  929,523     $16,143       6.94%       $   995,729     $17,720      7.11%
    Commercial and multi-family real
       estate loans............................         73,049       1,554       8.35             64,804       1,434      8.83
    Consumer loans.............................         74,449       1,340       7.14             56,451       1,045      7.34
                                                    ----------     -------                   -----------     -------
       Total loans receivable..................      1,077,021      19,037       7.05          1,116,984      20,199      7.22

    Federal funds sold.........................            ---         ---        ---                240           3      5.21
    Investment securities and other............        319,616       5,583       6.99            211,102       3,788      7.18
    Mortgage-backed securities.................        120,969       2,015       6.66            192,032       3,248      6.77
                                                    ----------     -------                   -----------     -------
       Total interest-earning assets...........      1,517,606     $26,635       7.00          1,520,358     $27,238      7.16
                                                                   =======                                   =======

Non-interest earning assets....................         56,137                                    58,435
                                                    ----------                                ----------
       Total assets ...........................     $1,573,743                                $1,578,793
                                                    ==========                                ==========

Deposits, borrowings and Trust
    Preferred securities:
    Money market and demand deposits...........    $   110,982   $     289       1.03%      $     95,602   $     312      1.29%
    Savings deposits...........................        165,212         692       1.66            164,804         831      2.00
    Certificates of deposit....................        774,774      10,428       5.36            792,145      11,505      5.79
                                                    ----------     -------                   -----------     -------
       Total deposits..........................      1,050,968      11,409       4.32          1,052,551      12,648      4.79

    FHLB of New York advances..................        273,906       4,123       5.93            262,413       4,006      6.02
    Other borrowings...........................         81,865       1,162       5.55            104,532       1,507      5.64
                                                    ----------     -------                   -----------     -------
       Total deposits and borrowings...........      1,406,739      16,694       4.71          1,419,496      18,161      5.08
    Trust Preferred securities.................         32,751         783       9.56             32,689         783      9.58
                                                    ----------     -------                   -----------     -------
       Total deposits, borrowings and
           Trust Preferred securities..........      1,439,490     $17,477       4.82          1,452,185     $18,944      5.18
                                                                   =======                                   =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30,
                                                   -----------------------------------------------------------------------------
                                                                     1999                                     1998
                                                   ------------------------------------      -----------------------------------
                                                      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>
Other liabilities..............................         25,405                                    23,012
                                                    ----------                               -----------
       Total liabilities.......................      1,464,895                                 1,475,197
Stockholders' equity...........................        108,848                                   103,596
                                                    ----------                               -----------
       Total liabilities and stockholders'
           equity .............................     $1,573,743                               $ 1,578,793
                                                    ==========                               ===========

Net interest income and net
    interest rate spread.......................                   $  9,158       2.18%                      $  8,294      1.98%
                                                                  ========       ====                       ========      ====

Net interest-earning assets and
    interest margin ...........................     $   78,116                   2.43%       $    68,173                  2.21%
                                                    ==========                   ====        ===========                  ====

Ratio of interest-earning assets to
    deposits, borrowings and Trust
      Preferred securities.....................                                105.43%                                  104.69%
                                                                               ======                                   ======
</TABLE>
(1)  Annualized.
<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>
                                                         September 30,  June 30,
                                                              1999        1999
                                                             ------      ------
                                                           (Dollars in thousands)
<S>                                                          <C>         <C>
Non-accruing loans:
     One- to four-family                                     $2,762      $2,937
     Commercial and multi-family                                 95          46
     Consumer                                                   597         687
                                                             ------      ------
         Total non-accruing loans                             3,454       3,670

Real estate owned, net                                          647         936
                                                             ------      ------

         Total non-performing assets                          4,101       4,606
                                                             ------      ------

         Total risk elements                                 $4,101      $4,606
                                                             ======      ======

Non-accruing loans as a percentage of total loans              0.31%       0.34%
                                                             ======      ======

Non-performing assets as a percentage of total assets          0.26%       0.30%
                                                             ======      ======

Total risk elements as a percentage of total assets            0.26%       0.30%
                                                             ======      ======
</TABLE>
<PAGE>
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.

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 September 30, 1999, the Company had a total
allowance  for  loan  losses  of  $3.4  million  representing  97.37%  of  total
non-accruing loans and 0.31% 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  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.
<PAGE>
At September  30, 1999,  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 $277.0 million,
representing  a one year  negative  gap of 17.38% 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  partially as a result of an
increase in interest  rates and a steeper yield curve.  Prepayment  expectations
have declined and asset cash flows have  lengthened.  Under the current interest
rate environment,  it is assumed that certain callable investment securities may
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 maturity of $30 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"  NPV  ratio  and  a
"Sensitivity  Measure." A low Post-Shock NPV ratio indicates greater exposure to
IRR.  Greater  exposure  can  result  from  a low  initial  NPV  ratio  or  high
sensitivity to changes in interest rates. The Sensitivity  Measure is the change
in the NPV ratio, in basis points, caused by a 2% increase or decrease in rates,
whichever produces a larger decline. At least quarterly,  and generally monthly,
management  models the change in net  portfolio  value ("NPV") over a variety of
interest  rate  scenarios.  NPV is the present value of expected cash flows from
assets,  liabilities  and  off-balance  sheet  contracts.  An NPV ratio,  in any
interest rate scenario,  is defined as the NPV in that rate scenario  divided by
the market value of assets in the same scenario.

As of September 30, 1999, the Bank's internally  generated initial NPV ratio was
9.52%.  Following a 2% increase in interest  rates,  the Bank's  Post-Shock  NPV
ratio was 6.92%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was 2.60%.  NPV is also  measured  internally  on a  consolidated  basis.  As of
September 30, 1999, the Company's  initial NPV ratio was 10.06%,  the Post-Shock
ratio was 7.39%, and the Sensitivity  Measure was 2.67%.  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.
<PAGE>
The OTS measures the Bank's (unconsolidated) IRR on a quarterly basis using data
from the  quarterly  Thrift  Financial  Reports,  coupled  with  non-institution
specific  assumptions which are based on national averages.  As of June 30, 1999
(the latest date for which  information  is  available),  the Bank's initial NPV
ratio, as measured by the OTS, was 8.01%, the Bank's  Post-Shock ratio was 4.96%
and the Sensitivity Measure was 3.05%.

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

At September 30, 1999, based on its internally  generated simulation models, the
Company's  consolidated net interest income projected for one year forward would
decrease  10.20%  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,  have  been  completely
renovated and tested.  Significant progress is being made to inform customers of
the Company's Year 2000  preparedness.  The Company  intends to continue to test
systems and plans  throughout the remainder of calendar year 1999, as well as to
sponsor regional seminars for customers.  The Board of Directors continues to be
updated  on a  monthly  basis.  The OTS  also  continues  to  review  all of its
regulated institutions for Year 2000 preparedness.

Due to variables outside the direct control of the Company, contingency planning
is an ongoing  process.  Contingency  planning  includes,  among  other  things,
potential  disruptions in vital utility services,  which could negatively impact
the Company's ability to service its customers.  The Company has developed,  and
the  Board of  Directors  has  reviewed  and  approved,  a  business  resumption
contingency  plan.  This plan  focuses on and attempts to  anticipate  potential
problems  that  may  arise,  and  provides   alternative   contingency  planning
strategies to mitigate risk. The business resumption contingency plan identifies
actions  that could help  reduce the  likelihood  or lessen the impact of a Year
2000 problem, as well as identifies the appropriate response actions to be taken
in the event that a problem does occur.

A critical component of Year 2000 preparedness is to ensure adequate  liquidity.
Given current retail and wholesale  market rates of interest on funds with terms
extending over calendar year-end,  the Company's cost of funds could increase as
December 31, 1999 approaches.

The  Company is  continuing  to review  and  assess the Year 2000  status of its
larger borrowers.  All commercial and multi-family loans have been evaluated for
Year 2000 exposure through an independent review process. As part of the current
credit approval process,  all new and renewed  commercial and multi-family loans
are  evaluated for Year 2000 risk.  The Company has  requested  that each of its
larger borrowers provide  information  regarding the nature of steps being taken
by the borrowers to address their own Year 2000 issues.
<PAGE>
The cost  for the  Year  2000  effort  incurred  in  fiscal  1999  was  $45,000.
Additional  future  costs  are not  expected  to have a  material  effect on the
results  of  operations   and  are  estimated  to  be  $25,000.   No  additional
expenditures are currently  anticipated for hardware or software  upgrades.  The
estimated  remaining  costs  are  expected  to cover  any  ongoing  testing  and
contingency  planning.  The actual and  estimated  expenditures  do not  include
manpower costs of Company  personnel  associated  with a task force,  who retain
their individual  operational  responsibilities in addition to Year 2000 duties.
The costs are based upon  management's  analysis  of the  information  currently
available to it. No assurance can be given that 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 include cash, accrued
interest  receivable,  certain  time  deposits,  U.S.  Treasury  and  government
agencies  and  other  securities  and  obligations  generally  having  remaining
maturities  of  less  than  five  years.  All  mortgage-backed   securities  are
includable in liquid assets,  as well. The Company's most liquid assets are cash
and cash equivalents, short-term investments 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 September 30, 1999 and June
30, 1999, the Bank's liquidity ratios were 19.50% 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 three  months ended  September  30, 1999 were
provided by operating  activities,  an increase in advances from the FHLB of New
York and principal  repayments on loans and mortgage-backed  securities.  During
this period, the cash provided was used for investing activities, which included
the origination and purchase of loans and the purchase of investment securities.
During the three months ended  September 30, 1998, the cash needs of the Company
were principally provided by operating activities,  including sales of loans, an
increase in deposits,  proceeds from  maturities of  investment  securities  and
principal repayments on mortgage-backed  securities.  The cash provided was used
for investing  activities,  which included the origination and purchase of loans
and the purchase of investment securities, as well as to reduce borrowings.
<PAGE>
Current  regulatory  standards  impose the  following  capital  requirements:  a
risk-based capital standard expressed as a percentage of risk-adjusted assets; a
leverage ratio of core capital to total adjusted assets;  and a tangible capital
ratio  expressed as a percentage of total adjusted  assets.  As of September 30,
1999, 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).
<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
             On July 28, 1999,  PennFed Financial  Services,  Inc. (the Company)
             issued a press release announcing its fourth quarter results.

<PAGE>



                                   SIGNATURES


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


                                           PENNFED FINANCIAL SERVICES, INC.



Date: November 12, 1999               By: /s/ Joseph L. LaMonica
                                          ----------------------
                                          Joseph L. LaMonica
                                          President and Chief
                                          Executive Officer





Date: November 12, 1999               By: /s/ Lucy T. Tinker
                                          ------------------
                                          Lucy T. Tinker
                                          Senior Executive Vice President and
                                          Chief Operating Officer
                                          (Principal Financial Officer)





Date: November 12, 1999               By: /s/ Jeffrey J. Carfora
                                          ----------------------
                                          Jeffrey J. Carfora
                                          Executive Vice President and
                                          Chief Financial Officer
                                          (Principal Accounting Officer)