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, 1996

                                       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: (201) 669-7366 
--------------------------------------------------------------------------------

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

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

         As of November 1, 1996, there were 4,853,020 shares of the Registrant's
Common Stock, par value $.01, outstanding.
<PAGE>
PART I - Financial Information
Item 1.  Financial Statements
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Financial Condition
                                                                                      September 30,               June 30,
                                                                                          1996                     1996
                                                                                      ----------               ---------- 
                                                                                                (dollars in 000's)
<S>                                                                                  <C>                       <C>
Assets
Cash and cash equivalents.......................................................     $    12,443               $   11,629
Investment securities held to maturity, at amortized cost, market
   value of $16,475 and $21,502 at September 30, 1996 and
   June 30, 1996................................................................          16,289                   21,288
Mortgage-backed securities held to maturity, at amortized cost,
   market value of $331,751 and $344,331 at
   September 30, 1996 and June 30, 1996.........................................         331,238                  346,068
Loans held for sale.............................................................             ---                       88
Loans receivable, net of allowance for loan losses of $2,778 and
  $2,630 at September 30, 1996 and June 30, 1996................................         730,127                  652,483
Premises and equipment, net.....................................................          15,825                   16,035
Real estate owned, net..........................................................             968                    1,083
Federal Home Loan Bank of New York stock, at cost...............................           8,331                    8,052
Accrued interest receivable, net................................................           6,568                    6,742
Goodwill and other intangibles..................................................          17,794                   18,430
Other assets....................................................................           2,890                    4,626
                                                                                      ----------               ---------- 
                                                                                      $1,142,473               $1,086,524
                                                                                      ==========               ==========
Liabilities and Stockholders' Equity
Liabilities:
  Deposits......................................................................     $   853,989              $   836,416
  Federal Home Loan Bank of New York advances...................................         115,465                  105,000
  Other borrowings..............................................................          65,820                   41,700
  Mortgage escrow funds.........................................................           7,013                    5,930
  Due to banks..................................................................           6,429                    5,989
  Accounts payable and other liabilities........................................           3,609                      925
                                                                                     -----------              -----------
  Total liabilities.............................................................       1,052,325                  995,960
                                                                                     -----------              -----------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Financial Condition
(continued)
                                                                                      September 30,               June 30,
                                                                                          1996                     1996
                                                                                      ----------               ---------- 
                                                                                                (dollars in 000's)
<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,
    5,950,000  shares issued and 4,853,020 and 4,823,665  shares  outstanding at
    September 30, 1996 and June 30, 1996  (excluding  shares held in treasury of
    1,096,980 and 1,126,335 at September 30, 1996 and June 30,1996).............              60                       60
  Additional paid-in capital....................................................          57,163                   57,057
  Restricted stock - Management Recognition Plan................................          (1,593)                  (1,316)
  Employee Stock Ownership Plan Trust debt......................................          (3,963)                  (4,061)
  Retained earnings, substantially restricted...................................          54,402                   55,172
  Treasury stock, at cost, 1,096,980 and 1,126,335 shares at
    September 30, 1996 and June 30, 1996........................................         (15,921)                 (16,348)
                                                                                     -----------               ---------- 
  Total stockholders' equity....................................................          90,148                   90,564
                                                                                     -----------               ---------- 
                                                                                      $1,142,473               $1,086,524
                                                                                      ==========               ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Income

                                                       Three months ended September 30,
                                                              1996           1995
                                                        -----------    -----------
                                                          (dollars in 000's, except 
                                                           per share amounts)
<S>                                                     <C>            <C>   
Interest and Dividend Income:
  Interest and fees on loans ........................   $    13,344    $     9,582
  Interest and dividends on investment securities ...           501            561
  Interest on mortgage-backed securities ............         5,871          5,226
                                                        -----------    -----------
                                                             19,716         15,369
                                                        -----------    -----------
Interest Expense:
  Deposits ..........................................         9,475          7,920
  Borrowed funds ....................................         2,355            848
                                                        -----------    -----------
                                                             11,830          8,768
                                                        -----------    -----------
Net Interest and Dividend Income Before Provision
  for Loan Losses ...................................         7,886          6,601
Provision for Loan Losses ...........................           175            110
                                                        -----------    -----------
Net Interest and Dividend Income After
  Provision for Loan Losses .........................         7,711          6,491
                                                        -----------    -----------

Non-Interest Income:
  Service charges ...................................           440            423
  Net (loss) gain from real estate operations .......          (115)            80
  Other .............................................            84             61
                                                        -----------    -----------
                                                                409            564
                                                        -----------    -----------
Non-Interest Expenses:
  Compensation and employee benefits ................         1,919          1,902
  Net occupancy expense .............................           273            277
  Equipment .........................................           385            394
  Advertising .......................................           113             50
  Amortization of intangibles .......................           636            668
  Federal deposit insurance premium .................           458            421
  SAIF recapitalization assessment ..................         4,813           --
  Other .............................................           638            625
                                                        -----------    -----------
                                                              9,235          4,337
                                                        -----------    -----------

(Loss) Income Before Income Taxes ...................        (1,115)         2,718
Income Tax (Benefit) Expense ........................          (346)         1,070
                                                        -----------    -----------

Net (Loss) Income ...................................   $      (769)   $     1,648
                                                        ===========    ===========
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
(continued)

                                                      Three months ended September 30,
                                                            1996           1995
                                                        -----------    -----------
                                                        (dollars in 000's, except 
                                                         per share amounts)
<S>                                                     <C>            <C>   
Weighted average number of common shares outstanding:
  Primary ...........................................     4,636,176      5,326,050
                                                        ===========    ===========
  Fully diluted .....................................     4,658,203      5,333,190
                                                        ===========    ===========

Net (loss) income per common share:
  Primary ...........................................   $     (0.17)   $      0.31
                                                        ===========    ===========
  Fully diluted .....................................   $     (0.17)   $      0.31
                                                        ===========    ===========

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
                                                                   Three months ended 
                                                                       September 30,
                                                                  --------------------
                                                                     1996        1995
                                                                  ---------   -------- 
                                                                   (dollars in 000's)
<S>                                                               <C>         <C>
Cash Flows From Operating Activities:
  Net (loss) income ...........................................   ($   769)   $  1,648
  Adjustments to reconcile net income to net cash
    provided by operating activities:
  Proceeds from sales of loans available for sale .............        348        --
  Originations of loans available for sale ....................       (260)       --
  Loss (gain) on sales of real estate owned ...................          8         (73)
  Amortization of investment and mortgage-backed
    securities premiums, net ..................................         70         189
  Depreciation and amortization ...............................        315         333
  Provision for losses on loans and real estate owned .........        260          75
  Amortization of cost of stock plans .........................        352         238
  Amortization of intangibles .................................        636         668
  Amortization of premiums on loans and loan fees .............         59          88
  Decrease in accrued interest receivable, net of
    accrued interest payable ..................................      1,091         750
  Decrease in other assets ....................................      1,735         642
  Increase (decrease) in accounts payable and other liabilities      2,684        (858)
  Increase in mortgage escrow funds ...........................      1,083         175
  Increase in due to banks ....................................        440         408
  Other, net ..................................................          2           5
                                                                  --------    --------
  Net cash provided by operating activities ...................      8,054       4,288
                                                                  --------    --------
Cash Flows From Investing Activities:
  Proceeds from maturities of investment securities ...........      5,000         200
  Purchases of investment securities ..........................       --       (10,000)
  Net outflow from loan originations net of principal
    repayments of loans .......................................    (28,935)     (5,290)
  Purchases of loans ..........................................    (49,034)    (25,008)
  Proceeds from principal repayments of
    mortgage-backed securities ................................     14,759      14,232
  Purchases of mortgage-backed securities .....................       --       (20,915)
  Purchases of premises and equipment .........................       (104)       (109)
  Proceeds from sales of real estate owned ....................        112         817
  Purchases of Federal Home Loan Bank of New York stock .......       (278)       --
                                                                  --------    --------
  Net cash used in investing activities .......................    (58,480)    (46,073)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(continued)
                                                                   Three months ended 
                                                                       September 30,
                                                                  --------------------
                                                                     1996        1995
                                                                  ---------   -------- 
                                                                   (dollars in 000's)
<S>                                                               <C>         <C>

Cash Flows From Financing Activities:
  Net increase in deposits ....................................     16,655       8,806
  Advances from the Federal Home Loan Bank of
    New York and other borrowings .............................     34,585      35,270
                                                                  --------    --------
  Net cash provided by financing activities ...................     51,240      44,076
                                                                  --------    --------
Net Increase in Cash and Cash Equivalents .....................        814       2,291
Cash and Cash Equivalents, Beginning of Period ................     11,629       9,736
                                                                  --------    --------
Cash and Cash Equivalents, End of Period ......................   $ 12,443    $ 12,027
                                                                  ========    ========
Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for:
  Interest ....................................................   $ 10,913    $  7,946
                                                                  ========    ========
  Income taxes ................................................   $    --     $    383
                                                                  ========    ========

Supplemental Schedule of Non-Cash Activities:
  Transfer of loans receivable to real estate owned, net.......   $     90    $    110
                                                                  ========    ========
  Unrealized gain on investment securities available
    for sale ..................................................   $    --     $     10
                                                                  ========    ========

See notes to consolidated financial statements.
</TABLE>
<PAGE>
                 PENNFED FINANCIAL SERVICES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation

The interim  consolidated  financial  statements of PennFed Financial  Services,
Inc. ("PennFed") and subsidiary (with its subsidiary, the "Company") include the
accounts of PennFed and Penn Federal Savings Bank (the "Bank"), its wholly-owned
subsidiary.  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,  1996.  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, 1996 and 1995. 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

Effective July 1, 1996, the Company  adopted  Statement of Financial  Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS 122"). SFAS
122 amends Statement of Financial  Accounting  Standards No. 65, "Accounting for
Certain  Mortgage  Banking  Activities,"  to  require  that a  mortgage  banking
enterprise  recognize as separate  assets rights to service  mortgage  loans for
others,  regardless of how those servicing rights are acquired.  The adoption of
SFAS 122 did not  have an  effect  on the  financial  condition  or  results  of
operations of the Company.

Also  effective  July 1,  1996,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 123,  "Accounting for Stock-Based  Compensation" ("SFAS
123"). SFAS 123 requires  companies to measure employee stock compensation plans
based on the fair value  method of  accounting  or continue to apply  Accounting
Principles Board No. 25,  "Accounting for Stock Issued to Employees,"  ("APB25")
and provide pro forma footnote  disclosures  under the fair value method in SFAS
123. The Company will continue to account for employee stock  compensation under
APB 25, and,  therefore,  the adoption of SFAS 123 did not have an effect on the
Company's financial condition or results of operations.
<PAGE>
3. Stockholders' Equity and Regulatory Capital

The following is a reconciliation of the Bank's capital under generally accepted
accounting principles ("GAAP") and its tangible,  core and risk-based capital at
September 30, 1996:
<TABLE>
<CAPTION>

                                                   Tangible                       Core                     Risk-Based
                                                   Capital    Percentage        Capital    Percentage       Capital    Percentage
                                                   -------    ----------        -------    ----------       -------    ----------
                                                                                 (dollars in 000's)
<S>                                               <C>            <C>          <C>             <C>         <C>             <C>
GAAP capital................................      $ 81,649       7.10%        $  81,649       7.10%       $  81,649        7.10%
Goodwill....................................        (1,785)                      (1,785)                     (1,785)
Deposit premium intangible..................       (16,009)                     (16,009)                    (16,009)
Excess qualifying purchased mortgage
  loan servicing rights.....................           (20)                         (20)                        (20)
Qualifying intangible assets................           ---                          589                         589
Allowances for loan and lease
  losses....................................           ---                          ---                       2,290
Equity investments and investments in
  real estate required to be deducted.......           ---                          ---                         (50)
                                                  ---------                 -------------                  ----------
Regulatory capital..........................        63,835       5.64            64,424       5.69           66,664       12.75
Minimum capital requirement.................        16,984       1.50            45,315       4.00           41,837        8.00
                                                   --------      ----          --------       ----          --------      ----- 

Regulatory capital-excess...................       $46,851       4.14%        $  19,109       1.69%       $  24,827        4.75%
                                                   =======       ====         =========       ====        =========        ==== 

</TABLE>
4. Subsequent Event

On October 25, 1996,  the Company  announced  that a quarterly  cash dividend of
$0.07 per share will be paid on November 29, 1996 to  stockholders  of record on
November 14, 1996.
<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 the net gain (loss) from
real  estate   operations.   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.

The deposits of savings associations, such as the Bank, are presently insured by
the Savings Association Insurance Fund (the "SAIF"),  which, along with the Bank
Insurance  Fund (the  "BIF"),are  the two insurance  funds  administered  by the
Federal Deposit Insurance Corporation ("FDIC"). Financial institutions which are
members of the BIF have been experiencing  substantially lower deposit insurance
premiums  because the BIF has achieved its required  level of reserves while the
SAIF has not yet  achieved  its required  reserves.  As a result of  legislation
signed into law on September 30, 1996, the SAIF  recapitalization  plan provides
for a  one-time  assessment  of 0.657% of  deposits  to be  imposed  on all SAIF
insured  institutions  to  enable  the SAIF to  achieve  its  required  level of
reserves.  The  assessment  was based on deposits as of March 31, 1995,  and the
Bank's  special  assessment  amounts  to  approximately  $4.8  million,  or $3.1
million, net of taxes. Accordingly,  this special one-time SAIF recapitalization
assessment  significantly increased non-interest expenses and adversely effected
the  Company's  results of operations  for the three months ended  September 30,
1996.  Following  the  recapitalization  assessment,  future  deposit  insurance
premiums will be decreased significantly, to as low as 0.0654% from the 0.23% of
deposits  currently  paid by the  Bank,  and will have the  effect  of  reducing
non-interest expenses for future periods.

Financial Condition

Total assets  increased  $55.9 million,  or 5.1%, to $1.142 billion at September
30, 1996 from total assets of $1.087  billion at June 30, 1996. The increase was
primarily  attributable  to a $77.6  million  increase in net loans  receivable,
particularly in the Company's one- to four-family first mortgage loan portfolio.
At September 30, 1996,  net loans  receivable  were $730.1  million  compared to
$652.5 million at June 30, 1996. The increase in loans  receivable was funded by
retail deposit growth, additional medium-term Federal Home Loan Bank of New York
("FHLB  of New  York")  advances  and  increased  other  borrowings  as  well as
maturities on investment  securities and principal  payments on  mortgage-backed
securities.

Non-performing  assets at September 30, 1996 totaled $7.5 million,  representing
0.66% of total assets,  compared to $7.3 million,  or 0.67% of total assets,  at
June 30, 1996.  Non-performing  loans  increased to $6.5 million,  however,  the
ratio of non-performing  loans to total loans decreased to 0.89% of total loans,
at September 30, 1996 as compared to $6.2 million,  or 0.94% of total loans,  at
June 30,  1996.  Real estate owned  decreased to $968,000 at September  30, 1996
from $1.1 million at June 30, 1996.
<PAGE>
Deposits  increased  $17.6 million to $854.0  million at September 30, 1996 from
$836.4  million at June 30, 1996.  FHLB of New York advances were $115.5 million
at September 30, 1996, a $10.5 million  increase from $105.0 million at June 30,
1996. In addition,  at September 30, 1996 the Company had $65.8 million of other
borrowings, consisting of short-term and overnight borrowings, compared to $41.7
million of other borrowings at June 30, 1996.

Stockholders'  equity at September 30, 1996 totaled  $90.1  million  compared to
$90.6 million at June 30, 1996. The decrease reflects the net loss, attributable
to the one-time SAIF recapitalization assessment,  recorded for the three months
ended September 30, 1996.

Results of Operations

General.  For the three months ended  September 30, 1996 the Company  recorded a
net loss of $0.8  million,  or a net  loss of $0.17  per  share,  including  the
effects   of  the   one-time   SAIF   recapitalization   assessment.   The  SAIF
recapitalization  assessment  for  the  Company  totaled  $4.8  million,  or  an
after-tax cost of $3.1 million,  or $0.66 per share. The results,  excluding the
effects of the SAIF assessment,  would have compared  favorably to net income of
$1.6 million, or $0.31 per share, for the three months ended September 30, 1995.

Interest and Dividend Income.  Interest and dividend income for the three months
ended  September 30, 1996  increased to $19.7 million from $15.4 million for the
three months ended  September 30, 1995.  The increase in the current year period
was due to an increase in average interest-earning assets, primarily residential
loans,  and to a lesser  extent,  an  increase in the  average  yield  earned on
interest-earning  assets. Average  interest-earning assets were $1.1 billion for
the three  months  ended  September  30,  1996,  versus  $824.9  million for the
comparable  prior year  period.  The average  yield  earned on  interest-earning
assets  increased to 7.50% for the three months  ended  September  30, 1996 from
7.45% for the prior year period.

Interest income on residential one- to four-family  mortgage loans for the three
months ended September 30, 1996 increased $3.8 million,  or 49.9%, when compared
to the prior year period. The increase in interest income on residential one- to
four-family  mortgage  loans was due to an  increase  of $205.3  million  in the
average  balance  outstanding for the three months ended September 30, 1996 over
the prior year period.  The increase in the average balance on residential  one-
to four-family mortgage loans was partially offset by a decrease of 0.11% in the
average yield earned on this loan portfolio for the three months ended September
30, 1996 from the comparable prior year period.

Interest  income on the  mortgage-backed  securities  portfolio  increased  $0.6
million,  or 12.3%, for the three months ended September 30, 1996 as compared to
the prior year  period.  The  increase  in  interest  income on  mortgage-backed
securities  primarily reflects  increases in the average balance  outstanding of
$18.1 million for the three months ended  September 30, 1996 over the comparable
prior year period.  In addition,  the average  yield earned on these  securities
increased  0.41% for the current  year period when  compared to the three months
ended September 30, 1995.

Interest on investment  securities and other  interest-earning  assets decreased
$59,000 for the three months ended September 30, 1996 from the comparable  prior
year period due to a decrease in the average balance outstanding for the current
year period and a decrease in the average yield earned on these securities.
<PAGE>
Interest  Expense.  Interest  expense  increased to $11.8  million for the three
months  ended  September  30,  1996 from $8.8  million for the  comparable  1995
period.   The  increase  was  attributable  to  an  increase  in  total  average
interest-bearing  liabilities  coupled with an increase in the Company's cost of
funds.  Average  interest-bearing  liabilities  increased $225.4 million for the
three months ended  September 30, 1996 compared to the 1995 period.  The average
rate  paid on  interest-bearing  liabilities  increased  to 4.70%  for the three
months ended September 30, 1996 from 4.50% for the comparable prior year period.

Net Interest and Dividend Income. Net interest and dividend income for the three
months ended  September 30, 1996 was $7.9  million,  reflecting an increase from
$6.6 million recorded in the comparable prior year period. The increase reflects
the Company's  growth in assets,  primarily in  residential  one- to four-family
mortgage  loans.  The net  interest  rate spread was 2.80% for the three  months
ended  September  30, 1996 and 2.95% for the three  months ended  September  30,
1995.  Net interest  margin for the three months  ended  September  30, 1996 was
3.00%, a decline from 3.20% during the comparable  prior year period.  While the
interest  rate  environment  of  recent  years  has  proven  beneficial  to most
financial  institutions,  including  the  Company,  increases in market rates of
interest  generally  adversely  affect the net interest income of most financial
institutions.  Since the Company's  liabilities  generally  reprice more quickly
than its assets, interest margins will likely decrease if interest rates rise.

Provision  for Loan Losses.  The  provision for loan losses for the three months
ended  September  30, 1996 was $175,000  compared to $110,000 for the prior year
period.  The  allowance  for loan losses at  September  30, 1996 of $2.8 million
reflects a $148,000  increase  from the June 30, 1996 level.  The  allowance for
loan losses as a percentage of non-performing  loans was 42.47% at September 30,
1996, compared to 42.52% at June 30, 1996.

Non-Interest  Income. For the three months ended September 30, 1996 non-interest
income was $409,000 compared to $564,000 for the prior year period. The decrease
was primarily due to a net loss from real estate  operations of $115,000 for the
three months ended  September  30, 1996  compared to a net gain from real estate
operations  of $80,000 for the prior year  period.  The  decrease in real estate
operations reflects additional reserves  established in accordance with internal
policies  and  guidelines  on real  estate  properties  currently  owned  by the
Company.

Non-Interest Expenses. The Company's non-interest expenses were $9.2 million for
the three  months  ended  September  30, 1996 and include  $4.8  million for the
one-time  SAIF  recapitalization  assessment.  Excluding  this SAIF  assessment,
non-interest  expenses for the three months ended  September 30, 1996 would have
been  relatively  unchanged from the $4.3 million  reported for the three months
ended  September 30, 1995. The Company's  non-interest  expenses,  excluding the
SAIF assessment,  as a percent of average assets declined to 1.60% for the three
months ended September 30, 1996 from 1.97% for the comparable prior year period.

As noted  above,  future  deposit  insurance  premiums  are expected to decrease
significantly, to as low as 0.0654% from the 0.23% of deposits currently paid by
the Bank, and will have the effect of reducing  non-interest expenses for future
periods.
<PAGE>
Income Tax Expense.  For the three months ended  September 30, 1996, the Company
recorded  an income  tax  benefit  of  $346,000.  Excluding  the  effects of the
one-time SAIF  recapitalization  assessment,  income tax expense of $1.4 million
was recorded for the 1996 period, compared to income tax expense of $1.1 million
for  the  prior  year  period.   Excluding  the  effect  of  the  one-time  SAIF
recapitalization  assessment,  the  effective  tax rate was  38.2% for the three
month  period  ended  September  30, 1996 and 39.4% for the three  months  ended
September 30, 1995.

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, 1996 and 1995,  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.
<PAGE>
<TABLE>
<CAPTION>

                                                                             Three Months Ended September 30,
                                                                       1996                                      1995
                                                         ----------------------------------     ----------------------------------- 
                                                           Average      Interest                  Average      Interest
                                                         Outstanding     Earned/    Yield/      Outstanding     Earned/     Yield/
                                                           Balance        Paid      Rate(1)       Balance        Paid       Rate(1)
                                                                                    (dollars in 000's)
<S>                                                      <C>              <C>         <C>          <C>           <C>        <C>
Interest-earning assets:
  One- to four-family mortgage loans.................    $  598,942       $11,317     7.56%        $393,600      $ 7,548     7.67%
  Commercial and multi-family real
    estate loans.....................................        52,305         1,212     9.27           48,949        1,208     9.88
  Consumer loans.....................................        34,200           815     9.45           32,781          826    10.00
                                                         ----------       -------                  --------      ------- 
    Total loans receivable...........................       685,447        13,344     7.79          475,330        9,582     8.06
  Mortgage-backed securities.........................       338,772         5,871     6.93          320,656        5,226     6.52
  Investment securities and other....................        27,997           501     7.17           28,865          561     7.77
                                                         ----------       -------                  --------      ------- 
    Total interest-earning assets....................     1,052,216       $19,716     7.50          824,851      $15,369     7.45
                                                                          =======                                =======
  Non-interest earning assets........................        53,952                                  53,992
                                                         ----------                                -------- 
    Total assets.....................................    $1,106,168                                $878,843
                                                         ==========                                ========

Deposits and borrowings:
 Money market and demand deposits....................        78,935       $   236     1.19%        $ 80,477      $   365     1.80%
 Savings deposits....................................       176,793           998     2.24          186,901        1,072     2.28
 Certificate of deposit accounts.....................       583,823         8,241     5.60          448,740        6,483     5.73
                                                         ----------       -------                  ---------     ------- 
   Total deposits....................................       839,551         9,475     4.48          716,118        7,920     4.39
 FHLB of New York advances...........................       106,394         1,629     6.07           37,556          557     5.88
 Other borrowings....................................        52,497           726     5.41           19,388          291     5.88
                                                         ----------       --------                 --------      -------  
   Total deposits and borrowings.....................       998,441       $11,830     4.70          773,062      $ 8,768     4.50
                                                                          =======                                ======= 
 Other liabilities...................................        15,687                                  10,715
                                                         ----------                                -------- 
   Total liabilities.................................     1,014,129                                 783,777
 Stockholders' equity................................        92,039                                  95,066
                                                         ----------                                -------- 
   Total liabilities and stockholders' equity........    $1,106,168                                $878,843
                                                         ==========                                ========
Net interest income and net interest rate
    spread...........................................                     $ 7,886     2.80%                      $ 6,601     2.95%
                                                                          =======     ====                       =======     ====

Net interest-earning assets and interest
    margin...........................................     $  53,774                   3.00%        $51,789                  3.20%
                                                          =========                   ====         =======                  ====

Ratio of interest-earning assets to
    deposits and borrowings..........................        105.39%                                106.70%
                                                         ==========                                ======== 
(1)  Annualized.
</TABLE>
<PAGE>
Non-Performing Assets

The  table  below  sets  forth  the   Company's   amounts  and   categories   of
non-performing  assets and troubled debt restructured loans. Loans are placed on
non-accrual  status when the  collection  of principal  and/or  interest  become
delinquent  more than 90 days.  Foreclosed  assets  include  assets  acquired in
settlement  of loans  and are  shown  net of  valuation  allowances.  All of the
Company's  troubled debt  restructured  loans are performing  according to their
modified terms.
<TABLE>
<CAPTION>
                                                                     September 30,           June 30,
                                                                         1996                  1996
                                                                         ----                  ----
                                                                             (dollars in 000's)
<S>                                                                     <C>                   <C>
Non-performing loans:
  One- to four-family .............................................     $4,310                $4,009
  Commercial and multi-family real estate .........................      1,027                   913
  Consumer ........................................................      1,204                 1,264
                                                                        ------                ------
    Total non-performing loans ....................................      6,541                 6,186
                                                                        ------                ------

Real estate owned, net ............................................        968                 1,083
                                                                        ------                ------
    Total non-performing assets ...................................      7,509                 7,269

Troubled debt restructured loans ..................................      2,332                 2,340
                                                                        ------                ------
    Total risk elements ...........................................     $9,841                $9,609
                                                                        ======                ======

Non-performing loans as a percentage of total  loans ..............       0.89%                 0.94%
                                                                        ======                ======
Non-performing assets as a percentage of  total assets ............       0.66%                 0.67%
                                                                        ======                ======
Total risk elements as a percentage of  total assets ..............       0.86%                 0.88%
                                                                        ======                ======
</TABLE>

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

Real estate properties acquired through foreclosure are recorded at the lower of
cost or estimated fair value less costs to dispose of such  properties.  If fair
value at the date of  foreclosure is lower than the balance of the related loan,
the difference  will be charged-off to the allowance for loan losses at the time
of transfer.  Valuations are periodically updated by management and if the value
declines, a specific provision for losses on real estate owned is established by
a charge to operations.
<PAGE>
Although  management  believes  that it uses the best  information  available to
determine  the  allowances,   unforeseen   market  conditions  could  result  in
adjustments and net earnings could be  significantly  affected if  circumstances
differ   substantially   from  the   assumptions   used  in  making   the  final
determination.  Future additions to the Company's  allowances will be the result
of periodic loan,  property and collateral  reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination  process,  periodically  review  the  Company's  allowance  for loan
losses.  Such  agencies  may  require  the  Company to record  additions  to the
allowance level based upon their judgement of the information  available to them
at the time of their examination. At September 30, 1996, the Company had a total
allowance  for  loan  losses  of  $2.8  million  representing  42.47%  of  total
non-performing loans.

Interest Rate Sensitivity Analysis

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.  In an attempt to manage its  exposure  to changes in interest
rates, management closely monitors the Company's exposure to interest rate risk.

At September 30, 1996, the Company's total interest-bearing liabilities maturing
or repricing within one year exceeded its total interest-earning assets maturing
or repricing within one year by $132.0 million, representing a one year negative
gap of 11.55% of total assets.  At June 30, 1996,  the one year negative gap was
13.97% of total  assets.  As a result of having a negative gap, the yield on the
Company's  interest-earning  assets may adjust to changes in interest rates at a
slower rate than the cost of its interest-bearing  liabilities.  During a period
of rising  interest  rates, a negative gap would tend to result in a decrease in
net interest income.  The opposite tendency would be expected during a period of
declining interest rates.

In evaluating the Company's exposure to interest rate risk, certain shortcomings
inherent in the method of 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  interest  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.
<PAGE>
Net Portfolio Value.  The Company's  interest rate sensitivity is also monitored
by management  through selected  interest rate risk ("IRR") measures produced by
the Office of Thrift Supervision  ("OTS").  Using data from the Bank's quarterly
Thrift  Financial  Reports,  the OTS measures the  Company's IRR by modeling 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.

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 decline in the NPV ratio, in basis points,  caused by
a 2% increase or decrease in rates, whichever produces a larger decline.

As of June 30, 1996 (the latest date for which  information is  available),  the
Company's  initial NPV ratio, as measured by the OTS, was 6.95%.  Following a 2%
increase in interest rates, the Company's  "Post-Shock" NPV ratio was 3.20%. The
change in the NPV ratio or the Company's  Sensitivity Measure was 3.75%. Had the
OTS final rule with respect to interest rate risk exposure been  effective,  the
increased  capital  requirement  necessary to compensate for the greater than 2%
change in the NPV would have had no effect on the Bank's  ability to comply with
its risk-based capital requirement.

Management   reviews  the  quarterly  OTS  measurements  and  compares  them  to
evaluations   produced  on  a  quarterly  basis  through  internally   generated
simulation  models.  In  addition  to  monitoring   selected  measures  on  NPV,
management also monitors  effects on net interest income resulting from parallel
and  non-parallel  increases or decreases in rates.  These  measures are used in
conjunction with NPV measures to identify excessive IRR.

At September 30, 1996, based on its internally  generated simulation models, the
Company's  consolidated  net  interest  income  projected  for one year  forward
decreased  $5.0  million or 14.0% 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.

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 and is currently 5% of net  withdrawable  deposits
and  borrowings  payable on demand or in one year or less  during the  preceding
calendar month.  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
<PAGE>
maturities of less than five years.  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, 1996 and June
30, 1996, the Bank's liquidity ratios were 12.85% and 15.17%, respectively, both
in excess of the 5% minimum regulatory requirement.

The Company uses its liquid resources  principally to meet ongoing  commitments,
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.

In addition to cash provided by operating  activities,  the Company's cash needs
for the three months ended September 30, 1996 and 1995 were principally provided
by increased  deposits and an increase in advances from the FHLB of New York and
other  borrowings.  For the three months ended  September 30, 1996 and 1995, the
cash provided was principally used for investing activities,  which included the
origination and purchase of loans.

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,
1996, the Bank substantially exceeded all regulatory capital standards (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
             None.

<PAGE>

                                   SIGNATURES


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


                                          PENNFED FINANCIAL SERVICES, INC.



Date: November 13, 1996                  By:/s/ Joseph L. LaMonica
                                            ----------------------
                                                Joseph L. LaMonica
                                                President and Chief
                                                Executive Officer




Date: November 13, 1996                  By:/s/ Lucy T. Tinker
                                            ------------------
                                                Lucy T. Tinker
                                                Executive Vice President and
                                                Chief Operating Officer
                                                (Principal Financial Officer)





Date: November 13, 1996                  By:/s/ Jeffrey J. Carfora
                                            ----------------------
                                                Jeffrey J. Carfora
                                                Senior Vice President and
                                                Chief Financial Officer
                                                (Principal Accounting Officer)

<PAGE>
PennFed Financial Services, Inc. and Subsidiary
Index of Exhibits

Exhibit     

11.  Statement regarding computation of per share earnings  

27.  Financial Data Schedule