21

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

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For the quarterly period ended December 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

             For the transition period from _________ to _________


                         Commission file number 0-24040


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

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

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

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


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



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

     As of February 8, 2002, there were issued and outstanding 7,451,698 shares
of the Registrant's Common Stock.



<PAGE>

<TABLE>
<CAPTION>
PART I - Financial Information
Item 1.  Financial Statements

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

                                                                                       December 31,             June 30,
                                                                                           2001                   2001
                                                                                       ------------             --------
                                                                                             (Dollars in thousands)
<S>                                                                                    <C>                   <C>
ASSETS
Cash and cash equivalents............................................................. $     17,657          $      15,771
Investment securities held for sale, at market value, amortized cost of
     $15 at December 31, 2001.........................................................           15                     --
Investment securities held to maturity, at amortized cost, market value of
     $187,320 and $327,245 at December 31, 2001 and June 30, 2001.....................      189,535                333,969
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $203,183 and $136,592 at December 31, 2001 and June 30, 2001..................      200,140                135,606
Loans held for sale...................................................................          866                     83
Loans receivable, net of allowance for loan losses of $5,166 and $4,248
     at December 31, 2001 and June 30, 2001...........................................    1,333,615              1,295,409
Premises and equipment, net...........................................................       20,159                 20,354
Real estate owned, net................................................................          241                    500
Federal Home Loan Bank of New York stock, at cost.....................................       27,078                 26,218
Accrued interest receivable, net......................................................        9,775                 11,590
Goodwill and other intangible assets..................................................        6,003                  6,983
Other assets..........................................................................        2,200                  2,894
                                                                                         ----------             ----------
                                                                                         $1,807,284             $1,849,377
                                                                                         ==========             ==========

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits.........................................................................   $1,117,275             $1,085,335
     Federal Home Loan Bank of New York advances......................................      474,465                454,465
     Other borrowings.................................................................       35,800                127,640
     Mortgage escrow funds............................................................       10,760                 11,979
     Accounts payable and other liabilities...........................................        9,547                 12,967
                                                                                         ----------             ----------
     Total liabilities................................................................    1,647,847              1,692,386
                                                                                         ----------             ----------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures...............................................       46,500                 46,500
     Unamortized issuance expenses....................................................       (2,001)                (2,039)
                                                                                         ----------             ----------
     Net Trust Preferred securities...................................................       44,499                 44,461
                                                                                         ----------             ----------

Stockholders' Equity:
     Serial preferred stock, $.01 par value, 7,000,000 shares
         authorized, no shares issued.................................................           --                     --
     Common stock, $.01 par value, 15,000,000 shares authorized, 11,900,000
         shares issued and 7,486,290 and 7,620,329 shares outstanding at
           December 31, 2001 and June 30, 2001 (excluding shares held in
           treasury of 4,413,710 and 4,279,671 at December 31, 2001 and
           June 30, 2001).............................................................           60                     60
     Additional paid-in capital.......................................................       63,043                 61,504
     Employee Stock Ownership Plan Trust debt.........................................       (1,523)                (1,801)
     Retained earnings, partially restricted..........................................      107,965                102,694
     Treasury stock, at cost, 4,413,710 and 4,279,671 shares at
         December 31, 2001 and June 30, 2001..........................................      (54,607)               (49,927)
                                                                                         ----------             ----------
     Total stockholders' equity.......................................................      114,938                112,530
                                                                                         ----------             ----------
                                                                                         $1,807,284             $1,849,377
                                                                                         ==========             ==========
</TABLE>

See notes to consolidated financial statements.


                                    2


<PAGE>


<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
                                                                          Three months ended            Six months ended
                                                                              December 31,                 December 31,
                                                                          -------------------          -------------------
                                                                           2001          2000          2001           2000
                                                                           ----          ----          ----           ----
                                                                           (Dollars in thousands, except per share amounts)

<S>                                                                    <C>            <C>           <C>            <C>
Interest and Dividend Income:
     Interest and fees on loans......................................    $23,666        $22,734       $47,521        $46,061
     Interest on federal funds sold..................................         --             27             1             43
     Interest and dividends on investment securities.................      4,105          5,688        10,029         11,353
     Interest on mortgage-backed securities..........................      2,559          1,571         4,713          2,999
                                                                         -------        -------       -------        -------
                                                                          30,330         30,020        62,264         60,456
                                                                         -------        -------       -------        -------
Interest Expense:
     Deposits........................................................     10,976         13,501        22,538         26,703
     Borrowed funds..................................................      7,624          6,779        15,841         14,158
                                                                         -------        -------       -------        -------
                                                                          18,600         20,280        38,379         40,861
                                                                         -------        -------       -------        -------
Net Interest and Dividend Income Before Provision
     for Loan Losses.................................................     11,730          9,740        23,885         19,595
Provision for Loan Losses............................................        375            125           925            325
                                                                         -------        -------       -------        -------
Net Interest and Dividend Income After Provision
     for Loan Losses.................................................     11,355          9,615        22,960         19,270
                                                                         -------        -------       -------        -------

Non-Interest Income:
     Service charges.................................................        762            617         1,409          1,194
     Net gain (loss) from real estate operations.....................         (7)            (4)          (46)            (4)
     Net gain on sales of loans......................................         45            245            87            559
     Other...........................................................        209            117           404            285
                                                                         -------        -------       -------        -------
                                                                           1,009            975         1,854          2,034
                                                                         -------        -------       -------        -------

Non-Interest Expenses:
     Compensation and employee benefits..............................      3,180          2,759         6,415          5,425
     Net occupancy expense...........................................        388            387           794            782
     Equipment.......................................................        531            467         1,032            915
     Advertising.....................................................        120             94           240            212
     Amortization of intangibles.....................................        487            506           979          1,016
     Federal deposit insurance premium...............................         50            55            102            110
     Preferred securities expense....................................      1,092           783          2,184          1,566
     Other...........................................................        996            855         2,028          1,684
                                                                         -------        -------       -------        -------
                                                                           6,844          5,906        13,774         11,710
                                                                         -------        -------       -------        -------

Income Before Income Taxes...........................................      5,520          4,684        11,040          9,594
Income Tax Expense...................................................      1,949          1,651         3,916          3,385
                                                                         -------        -------       -------        -------
Net Income...........................................................    $ 3,571        $ 3,033       $ 7,124        $ 6,209
                                                                         -------        -------       -------        -------

Weighted average number of common shares outstanding:
     Basic...........................................................  7,284,562      7,636,458     7,295,748      7,721,936
                                                                       =========      =========     =========      =========
     Diluted.........................................................  7,779,361      8,086,854     7,828,602      8,163,712
                                                                       =========      =========     =========      =========

Net income per common share:
     Basic...........................................................    $  0.49        $  0.40       $  0.98        $  0.80
                                                                         -------        -------       -------        -------
     Diluted.........................................................    $  0.46        $  0.38       $  0.91        $  0.76
                                                                         -------        -------       -------        -------

</TABLE>

See notes to consolidated financial statements.


                                       3


<PAGE>


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

                                                                                           Six months ended December 31,
                                                                                           -----------------------------
                                                                                            2001                   2000
                                                                                           ------                 ------
                                                                                               (Dollars in thousands)
<S>                                                                                        <C>                  <C>
Cash Flows from Operating Activities:
     Net income.......................................................................     $ 7,124                $ 6,209
     Adjustments to reconcile net income to net cash provided by
       operating activities:
     Net gain on sales of loans.......................................................         (87)                  (559)
     Proceeds from sales of loans held for sale.......................................       8,706                 80,741
     Net gain on sales of real estate owned...........................................         (13)                    --
     Amortization of investment and mortgage-backed securities
       premium, net...................................................................         170                     71
     Depreciation and amortization....................................................         797                    685
     Provision for losses on loans and real estate owned..............................         951                    328
     Amortization of cost of stock plans..............................................       1,818                    737
     Amortization of intangibles......................................................         979                  1,016
     Amortization of premiums on loans and loan fees..................................       1,536                  1,035
     Amortization of Trust Preferred securities issuance costs........................          38                     31
     Increase in accrued interest receivable, net of accrued
       interest payable...............................................................        (349)                (2,700)
     (Increase) decrease in other assets..............................................         694                   (925)
     Increase (decrease) in accounts payable and other liabilities....................      (3,420)                   498
     Decrease in mortgage escrow funds................................................      (1,219)                (1,496)
     Other, net.......................................................................          (3)                    --
                                                                                           -------                -------
     Net cash provided by operating activities........................................      17,722                 85,671
                                                                                           -------                -------

Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities................................     254,575                     --
     Purchases of investment securities held to maturity..............................    (110,148)                    --
     Purchases of investment securities held for sale.................................         (15)                    --
     Net outflow from loan originations net of principal repayments of loans..........     (98,851)               (50,426)
     Purchases of loans...............................................................     (17,141)               (23,450)
     Proceeds from principal repayments of mortgage-backed securities.................      21,590                 17,913
     Purchases of mortgage-backed securities..........................................     (20,364)                    --
     Proceeds from sale of premises and equipment.....................................          14                     --
     Purchases of premises and equipment..............................................        (613)                  (869)
     Net inflow (outflow) from real estate owned activity.............................         246                    (81)
     Purchases of Federal Home Loan Bank of New York stock............................        (860)                  (193)
                                                                                           -------                -------
     Net cash provided by (used in) investing activities..............................      28,433                (57,106)
                                                                                           -------                -------

Cash Flows from Financing Activities:
     Net increase in deposits.........................................................      34,104                  7,108
     Decrease in advances from the Federal Home Loan Bank
       of New York and other borrowings...............................................     (71,840)               (31,400)
     Cash dividends paid..............................................................        (815)                  (627)
     Purchases of treasury stock, net of reissuance...................................      (5,718)                (5,739)
                                                                                           -------                -------
     Net cash used in financing activities............................................     (44,269)               (30,658)
                                                                                           -------                -------
Net Increase (Decrease) in Cash and Cash Equivalents..................................       1,886                 (2,093)
Cash and Cash Equivalents, Beginning of Period........................................      15,771                 13,866
                                                                                           -------                -------
Cash and Cash Equivalents, End of Period..............................................     $17,657                $11,773
                                                                                           =======                =======
</TABLE>


                                      4

<PAGE>


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

                                                                                           Six months ended December 31,
                                                                                           -----------------------------
                                                                                           2001                    2000
                                                                                           ----                    ----
                                                                                               (Dollars in thousands)
<S>                                                                                      <C>                     <C>
Supplemental Disclosures of Cash Flow Information:
     Cash paid during the period for:
     Interest.........................................................................   $  40,811               $ 43,479
                                                                                         =========               ========
     Income taxes.....................................................................   $   3,188               $  3,651
                                                                                         =========               ========
Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to real estate owned, net...........................   $      --               $    412
                                                                                         =========               ========
     Transfer of loans receivable to loans held for sale, at market...................   $   9,401               $ 83,143
                                                                                         =========               ========
     Securitization of loans receivable and transfer to mortgage-backed
         securities...................................................................   $  65,923               $ 47,661
                                                                                         =========               ========


</TABLE>

See notes to consolidated financial statements.


                                       5


<PAGE>


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


1. Basis of Presentation

The interim consolidated financial statements of PennFed Financial Services,
Inc. ("PennFed") and subsidiaries (with its subsidiaries, the "Company") include
the accounts of PennFed and its subsidiaries, Penn Federal Savings Bank (the
"Bank"), PennFed Capital Trust I and PennFed Capital Trust II. These interim
consolidated financial statements included herein should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended June 30, 2001.
The interim consolidated financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, considered necessary for a
fair presentation of the financial condition and results of operations for the
periods presented. There were no adjustments of a non-recurring nature recorded
during the six months ended December 31, 2001 and 2000. The interim results of
operations presented are not necessarily indicative of the results for the full
year.

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

2. Adoption of Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 supersedes Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). SFAS 144 retains the requirements of SFAS 121 for recognizing and
measuring the impairment loss of long-lived assets to be held and used. For
long-lived assets to be disposed of by sale, SFAS 144 requires a single
accounting model be used for all long-lived assets, whether previously held and
used or newly acquired. Long-lived assets to be disposed of other than by sale
would be considered held and used until disposition. SFAS 144 also broadens the
presentation of discontinued operations in the income statement to include more
disposal transactions. SFAS 144 is effective for fiscal years beginning after
December 15, 2001. The Company has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

3. Computation of EPS

<TABLE>
<CAPTION>
The computation of EPS is presented in the following table.
                                                                          Three months ended            Six months ended
                                                                              December 31,                 December 31,
                                                                          -------------------          -------------------
                                                                          2001           2000          2001           2000
                                                                          ----           ----          ----           ----
                                                                           (Dollars in thousands, except per share amounts)

<S>                                                                    <C>            <C>           <C>             <C>
Net income......................................................           $3,571         $3,033        $7,124          $6,209
                                                                        =========      =========     =========       =========
Number of shares outstanding:
Weighted average shares issued..................................       11,900,000     11,900,000    11,900,000      11,900,000
Less: Weighted average shares held in treasury..................        4,310,940      3,851,353     4,285,809       3,752,898
Less: Average shares held by the ESOP...........................          952,000        952,000       952,000         952,000
Plus: ESOP shares released or committed to be
          released during the fiscal year.......................          647,502        539,811       633,557         526,834
                                                                        ---------      ---------     ---------       ---------
Average basic shares............................................        7,284,562      7,636,458     7,295,748       7,721,936
Plus: Average common stock equivalents..........................          494,799        450,396       532,854         441,776
                                                                        ---------      ---------     ---------       ---------
Average diluted shares..........................................        7,779,361      8,086,854     7,828,602       8,163,712
                                                                        =========      =========     =========       =========

Earnings per common share:
        Basic....................................................           $0.49          $0.40         $0.98           $0.80
                                                                        =========      =========     =========       =========
        Diluted..................................................           $0.46          $0.38         $0.91           $0.76
                                                                        =========      =========     =========       =========

</TABLE>


                                       6


<PAGE>


4. Stockholders' Equity and Regulatory Capital

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

<TABLE>
<CAPTION>

                                                                                                       To Be Well
                                                                             For Minimum            Capitalized Under
                                                                           Capital Adequacy         Prompt Corrective
                                                        Actual                 Purposes             Action Provisions
                                                        ------             ----------------        ------------------
                                                  Amount      Ratio        Amount     Ratio        Amount       Ratio
                                                  ------      -----        ------     -----        ------       -----
                                                                             (Dollars in thousands)
<S>                                              <C>          <C>          <C>         <C>         <C>         <C>
As of December 31, 2001
Tangible capital, and ratio to
  adjusted total assets....................      $151,364      8.40%       $27,014     1.50%            N/A        N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $151,364      8.40%       $72,038     4.00%        $90,047      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $151,364     15.71%           N/A       N/A        $57,825      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $156,517     16.24%       $77,100     8.00%        $96,375     10.00%

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

</TABLE>

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

<TABLE>
<CAPTION>

                                                                                                              To Be Well
                                                                                 For Minimum               Capitalized Under
                                                                               Capital Adequacy            Prompt Corrective
                                                        Actual                      Purposes               Action Provisions
                                                  ------------------           -----------------           -----------------
                                                  Amount       Ratio            Amount     Ratio           Amount      Ratio
                                                  ------       -----            ------     -----           ------      -----
                                                                             (Dollars in thousands)
<S>                                              <C>          <C>               <C>         <C>            <C>         <C>
As of December 31, 2001
Tangible capital, and ratio to
  adjusted total assets....................      $145,247      8.06%            $27,031     1.50%              N/A        N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................      $145,247      8.06%            $72,081     4.00%          $90,102      5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................      $145,247     15.23%                N/A       N/A          $57,217      6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................      $150,173     15.75%            $76,290     8.00%          $95,362     10.00%

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

</TABLE>


                                       8


<PAGE>


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

General

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

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

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

Financial Condition

Total assets decreased $42.1 million to $1.807 billion at December 31, 2001 from
total assets of $1.849 billion at June 30, 2001. The decrease was primarily due
to a $144.4 million decrease in investment securities held to maturity offset by
a $64.5 million increase in mortgage-backed securities and a $38.2 million
increase in net loans receivable. Lower market interest rates have resulted in
certain investment securities being called before maturity while the lower
market interest rates and the resulting effect of loan refinancing activity has
led to growth in the loan portfolio.

During the three months ended December 31, 2001, the Company securitized
approximately $66 million of one- to four-family mortgage loans as Freddie Mac
mortgage-backed securities. These securities are held in the Company's
mortgage-backed securities portfolio for collateral purposes.

Deposits increased $31.9 million to $1.117 billion at December 31, 2001 from
$1.085 billion at June 30, 2001. An increase in core deposit accounts and
medium-term certificates of deposit was partially offset by a decrease in
short-term certificates of deposit, including municipal certificates of deposit.
Federal Home Loan Bank ("FHLB") of New York advances increased $20.0 million
from $454.5 million at June 30, 2001 to $474.5 million at December 31, 2001,
while other borrowings decreased $91.8 million from $127.6 million at June 30,
2001 to $35.8 million at December 31, 2001. The decrease in other borrowings
primarily reflects the use of funds received from investment securities being
called before maturity and the increase in deposit funds.

Non-performing assets at December 31, 2001 totaled $2.5 million, representing
0.14% of total assets, compared to $2.1 million, or 0.12% of total assets, at
June 30, 2001. Non-accruing loans at December 31, 2001 totaled $2.3 million,
with a ratio of non-accruing loans to total loans of 0.17%, as compared to $1.6
million, or 0.13% of total loans, at June 30, 2001. Real estate owned decreased
to $241,000 at December 31, 2001 from $500,000 at June 30, 2001.

Stockholders' equity at December 31, 2001 totaled $114.9 million compared to
$112.5 million at June 30, 2001. The

                                       9


<PAGE>


increase reflects the net income recorded for the six months ended December 31,
2001 and the exercise of stock options partially offset by the repurchase of
340,000 shares of the Company's outstanding stock at an average market price of
$20.95 per share and the declaration of cash dividends.

Results of Operations

General. For the three months ended December 31, 2001, net income was $3.6
million, or $0.46 per diluted share, as compared to net income of $3.0 million,
or $0.38 per diluted share, for the comparable prior year period. For the six
months ended December 31, 2001, net income was $7.1 million, or $0.91 per
diluted share. These results compare to net income of $6.2 million, or $0.76 per
diluted share, for the six months ended December 31, 2000.

Interest and Dividend Income. Interest and dividend income for the three and six
months ended December 31, 2001 increased to $30.3 million and $62.3 million,
respectively, from $30.0 million and $60.5 million for the three and six months
ended December 31, 2000. The increases in the current year periods were due to
increases in average interest-earning assets partially offset by decreases in
the average yield earned on these assets, when compared to the prior year
periods. Average interest-earning assets were $1.797 billion and $1.815 billion
for the three and six months ended December 31, 2001, respectively, compared to
$1.652 billion and $1.671 billion for the comparable prior year periods. The
average yield earned on interest-earning assets decreased to 6.73% for the three
months ended December 31, 2001 from 7.25% for the three months ended December
31, 2000. For the six months ended December 31, 2001, the average yield earned
on interest-earning assets decreased to 6.84% from 7.22% for the comparable
prior year period.

Interest income on residential one- to four-family mortgage loans for the three
and six months ended December 31, 2001 increased $625,000 and $588,000,
respectively, when compared to the prior year periods. The increases in interest
income on residential one- to four-family mortgage loans were due to increases
of $118.0 million and $75.6 million in the average balance outstanding for the
three and six months ended December 31, 2001, respectively, when compared to the
prior year periods. The increases in interest income on residential one- to
four-family mortgage loans were partially offset by decreases in the average
yield earned on these loans. For the three months ended December 31, 2001, the
average yield earned on residential one- to four-family mortgage loans decreased
to 6.63% from 7.15% for the three months ended December 31, 2000. The average
yield earned on this portfolio for the six months ended December 31, 2001
decreased to 6.75% from 7.12% for the comparable prior year period.

Interest income on commercial and multi-family real estate loans increased
$342,000 and $753,000 for the three and six months ended December 31, 2001,
respectively, when compared to the prior year periods. The increases in interest
income on commercial and multi-family real estate loans were attributable to
increases of $22.8 million and $22.4 million in the average outstanding balance
for the three and six months ended December 31, 2001, respectively, when
compared to the prior year periods. The growth in interest income on this
portfolio was partially offset by decreases in the average yield earned on
commercial and multi-family real estate loans. The average yield decreased to
8.14% and 8.22% for the current three and six month periods, respectively,
compared to 8.69% and 8.61% for the three and six months ended December 31,
2000.

Interest income on consumer loans decreased $35,000 and increased $119,000 for
the three and six months ended December 31, 2001, respectively, when compared to
the prior year periods. The decrease in interest income for this loan portfolio
for the three months ended December 31, 2001 was due to a decrease in the
average yield earned on consumer loans to 6.88% from 7.87% for the three months
ended December 31, 2000. Partially offsetting the decrease in interest income on
consumer loans for the current three month period was an increase of $13.1
million in the average balance outstanding, when compared to the prior year
period. For the six months ended December 31, 2001, the increase in interest
income on consumer loans was attributable to an increase of $15.3 million in the
average balance outstanding, when compared to the six months ended December 31,
2000. The average yield earned on consumer loans for the six months ended
December 31, 2001 decreased to 7.03% from 7.84% for the prior year period,
partially offsetting the increase in the average balance for the current six
month period.

Interest income on investment securities and other interest-earning assets
decreased $1.6 million and $1.3 million for the three and six months ended
December 31, 2001, respectively, compared to the prior year periods. The
decreases in interest income on these securities is partially attributable to a
$77.2 million and a $27.7 million decrease in the average balance outstanding
for the three and six months ended December 31, 2001, respectively, when
compared to


                                       10


<PAGE>

the prior year periods. In addition, the decreases in interest income on
investment securities and other interest-earning assets were due to declines in
the average yield earned on these securities. The average yield decreased to
6.61% and 6.74% for the current three and six month periods, respectively,
compared to 6.99% and 6.98% for the prior year periods.



Interest income on the mortgage-backed securities portfolio increased $988,000
and $1.7 million for the three and six months ended December 31, 2001,
respectively, compared to the prior year periods. The increases in interest
income on mortgage-backed securities primarily reflects a $69.9 million and a
$59.0 million increase in the average balance outstanding for the three and six
months ended December 31, 2001, respectively, compared to the prior year
periods. The increases in interest income were partially offset by decreases in
the average yield earned on the mortgage-backed securities portfolio to 6.46%
and 6.54% for the three and six months ended December 31, 2001, respectively,
compared to 7.10% and 7.03% for the three and six months ended December 31,
2000.

Interest Expense. Interest expense decreased $1.7 million and $2.5 million for
the three and six months ended December 31, 2001, respectively, from the
comparable December 2000 periods. The decrease in the current three month period
was attributable to an 80 basis point decrease in the Company's cost of funds
partially offset by a $124.6 million increase in total average deposits and
borrowings, when compared to the prior year period. For the six months ended
December 31, 2001, the cost of funds decreased 69 basis points while total
average deposits and borrowings increased $126.6 million, when compared to the
six months ended December 31, 2000. For the three and six months ended December
31, 2001, the average rate paid on deposits decreased to 3.84% and 3.96%,
respectively, from 4.85% and 4.80% for the three and six months ended December
31, 2000. The average balance of deposits increased $30.6 million and $25.8
million, respectively, from the $1.104 billion and $1.105 billion for the three
and six months ended December 31, 2000. The average cost of FHLB of New York
advances decreased 36 basis points and 29 basis points for the three and six
months ended December 31, 2001, respectively, while the average balance of FHLB
of New York advances increased $90.3 million and $90.7 million for the same
respective periods, when compared to the prior year periods. For the three and
six months ended December 31, 2001, the average rate paid on other borrowings
decreased to 4.65% and 4.44%, respectively, from 6.25% and 6.35% for the three
and six months ended December 31, 2000. The average balance of other borrowings
increased $3.7 million and $10.1 million, respectively, compared to the prior
year periods.

Net Interest and Dividend Income. Net interest and dividend income before
provision for loan losses for the three and six months ended December 31, 2001
was $11.7 million and $23.9 million, respectively, reflecting a $2.0 million and
$4.3 million increase from the $9.7 million and $19.6 million recorded in the
comparable prior year periods. The net interest rate spread and net interest
margin for the three months ended December 31, 2001 were 2.31% and 2.64%,
respectively, an increase from 2.03% and 2.40%, respectively, for the comparable
prior year period. For the six months ended December 31, 2001, the net interest
rate spread and net interest margin were 2.33% and 2.67%, respectively, an
increase from 2.02% and 2.38%, respectively, for the six months ended December
31, 2000. A decline in short-term market interest rates and growth in the
Company's loan portfolio and core deposit accounts contributed to the
improvements in net interest margin.

Provision for Loan Losses. The provision for loan losses for the three and six
months ended December 31, 2001 was $375,000 and $925,000, respectively, compared
to $125,000 and $325,000 for the comparable prior year periods. The Company
continues to closely monitor all delinquent loans, with special consideration of
the loans of those families affected by the World Trade Center disaster. The
allowance for loan losses at December 31, 2001 of $5.2 million reflects a
$918,000 increase from the June 30, 2001 level. The allowance for loan losses as
a percentage of non-accruing loans was 225.69% at December 31, 2001, compared to
259.50% at June 30, 2001. The allowance for loan losses was 0.39% of total loans
at December 31, 2001, an increase from 0.33% of total loans at June 30, 2001.

Non-Interest Income. For the three and six months ended December 31, 2001,
non-interest income was $1.0 million and $1.9 million, respectively, compared to
$975,000 and $2.0 million for the prior year periods. The increase in
non-interest income for the current three month period was primarily due to
increases in service charges and other non-interest income offset by a decrease
in the net gain on sales of loans, when compared to the three months ended
December 31, 2000. The decrease in non-interest income for the six months ended
December 31, 2001 was attributable to a decrease in the net gain on sales of
loans partially offset by increases in service charges and other


                                       11


<PAGE>

non-interest income, compared to the prior year period.

During the three and six months ended December 31, 2001, the net gain on sales
of loans was $45,000 and $87,000, respectively, as compared to $245,000 and
$559,000 for the three and six months ended December 31, 2000. Loan production
has been retained in portfolio during the current periods as a partial
replacement of the investment securities called before maturity. During the
three and six months ended December 31, 2000, nearly $7 million and $15 million
of conforming, fixed rate one- to four-family residential loans were sold,
respectively, generating gains of $43,000 and $150,000 for those respective
periods. In addition, during the three and six months ended December 31, 2000,
the Company sold approximately $19 million and $65 million, respectively, of
longer duration, one- to four-family residential mortgage loans in an effort to
improve funding, liquidity, interest rate risk and net interest margin and
recorded net gains on sales of loans of $200,000 and $407,000 for those
respective periods.

Service charge income for the three and six months ended December 31, 2001 was
$762,000 and $1.4 million, respectively, increases of $145,000 and $215,000 over
the $617,000 and $1.2 million recorded for the prior year periods. Service
charges were positively impacted by fees associated with various loan
prepayments and refinances. For the three and six months ended December 31,
2001, the net loss from real estate operations was $7,000 and $46,000,
respectively, as compared to $4,000 loss for both the three and six months ended
December 31, 2000. Other non-interest income increased $92,000 and $119,000 to
$209,000 and $404,000 for the three and six months ended December 31, 2001,
respectively, from $117,000 and $285,000 for the three and six months ended
December 31, 2000. Other non-interest income included $76,000 and $92,000 of
increases in earnings from the Investment Services at Penn Federal program for
the three and six months ended December 31, 2001, respectively, when compared to
the prior year periods. Through this program, customers have convenient access
to financial consulting/advisory services and related uninsured non-deposit
investment and insurance products.

Non-Interest Expenses. Non-interest expenses were $6.8 million and $13.8 million
for the three and six months ended December 31, 2001, respectively, representing
increases over the $5.9 million and $11.7 million recorded during the prior year
periods. An increase in preferred securities expense due to the issuance of $12
million of Trust Preferred securities in March 2001, additional "non-cash"
expense related to the Employee Stock Ownership Plan, additional costs related
to the Bank's new Business Development department and expenses related to the
Company's development of an internet presence contributed to the increase in
non-interest expenses during the current year periods when compared to the prior
year periods. The Company's non-interest expenses as a percent of average assets
increased to 1.49% and 1.48% for the three and six months ended December 31,
2001, respectively, from 1.38% and 1.36% for the comparable prior year periods.

Income Tax Expense. Income tax expense for the three and six months ended
December 31, 2001 was $1.9 million and $3.9 million, respectively, compared to
$1.7 million and $3.4 million for the three and six months ended December 31,
2000. The effective tax rate for the three and six months ended December 31,
2001 was 35.3% and 35.5%, respectively, compared to 35.2% and 35.3% for the
three and six months ended December 31, 2000.

                                       12


<PAGE>


Analysis of Net Interest Income

The following tables set forth certain information relating to the Company's
consolidated statements of financial condition and the consolidated statements
of income for the three and six months ended December 31, 2001 and 2000, 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 December 31,
                                                    ---------------------------------------------------------------------------
                                                                     2001                                     2000
                                                                     ----                                     ----
                                                     Average       Interest                    Average      Interest
                                                   Outstanding      Earned/     Yield/       Outstanding     Earned/      Yield/
                                                     Balance         Paid      Rate (1)        Balance        Paid       Rate (1)
                                                   -----------     --------    --------      -----------    --------     --------
                                                                              (Dollars in thousands)
<S>                                                 <C>            <C>           <C>          <C>            <C>          <C>
Interest-earning assets:
    One- to four-family mortgage
       loans...................................     $1,153,700     $19,152       6.63%        $1,035,690     $18,527      7.15%
    Commercial and multi-family real
       estate loans............................        118,297       2,454       8.14             95,456       2,112      8.69
    Consumer loans.............................        118,815       2,060       6.88            105,675       2,095      7.87
                                                    ----------     -------                    ----------     -------
       Total loans receivable..................      1,390,812      23,666       6.78          1,236,821      22,734      7.33

    Federal funds sold.........................             --          --         --              1,677          27      6.39
    Investment securities and other............        248,272       4,105       6.61            325,489       5,688      6.99
    Mortgage-backed securities.................        158,367       2,559       6.46             88,499       1,571      7.10
                                                    ----------     -------                    ----------     -------
       Total interest-earning assets...........      1,797,451     $30,330       6.73          1,652,486     $30,020      7.25
                                                                   =======                                   =======
Non-interest earning assets....................         44,031                                    54,131
                                                    ----------                                ----------
       Total assets............................     $1,841,482                                $1,706,617
                                                    ==========                                ==========

Deposits and borrowings:
    Money market and demand deposits...........     $  138,881     $   272       0.78%        $  125,619     $   445      1.41%
    Savings deposits...........................        214,223       1,135       2.10            157,662         686      1.73
    Certificates of deposit....................        781,377       9,569       4.86            820,645      12,370      5.98
                                                    ----------     -------                    ----------     -------
       Total deposits..........................      1,134,481      10,976       3.84          1,103,926      13,501      4.85

    FHLB of New York advances..................        473,888       7,010       5.80            383,558       6,013      6.16
    Other borrowings...........................         51,723         614       4.65             47,984         766      6.25
                                                    ----------     -------                    ----------     -------
       Total deposits and borrowings...........      1,660,092     $18,600       4.42          1,535,468     $20,280      5.22
                                                                   =======                                   =======

Other liabilities..............................         21,063                                    24,541
                                                    ----------                                ----------
       Total liabilities.......................      1,681,155                                 1,560,009
Trust Preferred securities.....................         44,490                                    32,828
Stockholders' equity...........................        115,837                                   113,780
                                                    ----------                                ----------
       Total liabilities and stockholders'
           equity..............................     $1,841,482                                $1,706,617
                                                    ==========                                ==========

Net interest income and net
    interest rate spread.......................                    $11,730       2.31%                       $ 9,740      2.03%
                                                                   =======       ====                        =======      ====

Net interest-earning assets and
    interest margin............................     $  137,359                   2.64%        $  117,018                  2.40%
                                                    ==========                   ====         ==========                  ====

Ratio of interest-earning assets to
    deposits and borrowings....................                                108.27%                                  107.62%
                                                                               ======                                   ======

(1)  Annualized.

</TABLE>


                                       13


<PAGE>


<TABLE>
<CAPTION>
                                                                             Six Months Ended December 31,
                                                    ---------------------------------------------------------------------------
                                                                     2001                                     2000
                                                                     ----                                     ----
                                                     Average       Interest                    Average      Interest
                                                   Outstanding      Earned/     Yield/       Outstanding     Earned/      Yield/
                                                     Balance         Paid      Rate (1)        Balance        Paid       Rate (1)
                                                   -----------     --------    --------      -----------    --------     --------
                                                                              (Dollars in thousands)
<S>                                                 <C>            <C>           <C>          <C>            <C>          <C>
Interest-earning assets:
    One- to four-family mortgage
       loans...................................     $1,138,821     $38,496       6.75%        $1,063,220     $37,908      7.12%
    Commercial and multi-family real
       estate loans............................        115,363       4,832       8.22             92,990       4,079      8.61
    Consumer loans.............................        118,340       4,193       7.03            103,040       4,074      7.84
                                                    ----------     -------                    ----------     -------
       Total loans receivable..................      1,372,524      47,521       6.90          1,259,250      46,061      7.29

    Federal funds sold.........................             67           1       3.33              1,331          43      6.38
    Investment securities and other............        297,733      10,029       6.74            325,446      11,353      6.98
    Mortgage-backed securities.................        144,227       4,713       6.54             85,271       2,999      7.03
                                                    ----------     -------                    ----------     -------
       Total interest-earning assets...........      1,814,551     $62,264       6.84          1,671,298     $60,456      7.22
                                                                   =======                                   =======
Non-interest earning assets....................         47,831                                    55,282
                                                    ----------                                ----------
       Total assets............................     $1,862,382                                $1,726,580
                                                    ==========                                ==========

Deposits and borrowings:
    Money market and demand deposits...........     $  134,828     $   580       0.85%        $  125,348     $   886      1.40%
    Savings deposits...........................        204,613       2,140       2.07            156,513       1,308      1.66
    Certificates of deposit....................        790,880      19,818       4.97            822,658      24,509      5.91
                                                    ----------     -------                    ----------     -------
       Total deposits..........................      1,130,321      22,538       3.96          1,104,519      26,703      4.80

    FHLB of New York advances..................        466,327      13,934       5.86            375,619      11,758      6.15
    Other borrowings...........................         84,091       1,907       4.44             74,012       2,400      6.35
                                                    ----------     -------                    ----------     -------
       Total deposits and borrowings...........      1,680,739     $38,379       4.51          1,554,150     $40,861      5.20
                                                                   =======                                   =======
Other liabilities..............................         22,206                                    25,912
                                                    ----------                                ----------
       Total liabilities.......................      1,702,945                                 1,580,062
Trust Preferred securities.....................         44,480                                    32,821
Stockholders' equity...........................        114,957                                   113,697
                                                    ----------                                ----------
       Total liabilities and stockholders'
           equity..............................     $1,862,382                                $1,726,580
                                                    ==========                                ==========

Net interest income and net
    interest rate spread.......................                    $23,885       2.33%                       $19,595      2.02%
                                                                   =======       ====                        =======      ====

Net interest-earning assets and
    interest margin............................     $  133,812                   2.67%        $  117,148                  2.38%
                                                    ==========                   ====         ==========                  ====

Ratio of interest-earning assets to
    deposits and borrowings....................                                107.96%                                  107.54%
                                                                               ======                                   ======

</TABLE>

(1)  Annualized.


                                       14


<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>
                                                                                               December 31,            June 30,
                                                                                                  2001                   2001
                                                                                               ------------            --------
                                                                                                    (Dollars in thousands)
<S>                                                                                              <C>                    <C>
Non-accruing loans:
     One- to four-family..............................................................           $1,953                 $1,219
     Commercial and multi-family......................................................               --                     49
     Consumer.........................................................................              336                    369
                                                                                                 ------                 ------
         Total non-accruing loans.....................................................            2,289                  1,637

Real estate owned, net................................................................              241                    500
                                                                                                 ------                 ------
         Total non-performing assets..................................................            2,530                  2,137
                                                                                                 ------                 ------
         Total risk elements..........................................................           $2,530                 $2,137
                                                                                                 ======                 ======

Non-accruing loans as a percentage of total loans.....................................             0.17%                  0.13%
                                                                                                 ======                 ======
Non-performing assets as a percentage of total assets.................................             0.14%                  0.12%
                                                                                                 ======                 ======
Total risk elements as a percentage of total assets...................................             0.14%                  0.12%
                                                                                                 ======                 ======

</TABLE>

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

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

Although management believes that it uses the best information available to
determine the allowances, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to record additions to the
allowance level based upon their assessment of the information available to them
at the time of examination. At December 31, 2001, the Company had a total
allowance for loan losses of $5.2 million representing 225.69% of total
non-accruing loans and 0.39% of total loans.

Interest Rate Sensitivity

Interest Rate Sensitivity Gap. The interest rate risk inherent in assets and
liabilities may be determined by analyzing the extent to which such assets and
liabilities are "interest rate sensitive" and by measuring an institution's
interest rate sensitivity "gap." An asset or liability is said to be interest
rate sensitive within a


                                       15


<PAGE>


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

At December 31, 2001, the Company's total deposits and borrowings maturing or
repricing within one year exceeded its total interest-earning assets maturing or
repricing within one year by $72.3 million, representing a one year negative gap
of 4.00% of total assets, compared to a one year negative gap of 14.48% of total
assets at June 30, 2001. The Company's gap position changed from June 30, 2001
primarily due to investment securities that have been called or are assumed to
be called. The decline in market interest rates has resulted in certain
investment securities being called before maturity, the proceeds of which were
used to reduce short-term borrowings. Also contributing to the change in the gap
position was an increase in core deposits and medium-term certificates of
deposit coupled with a decrease in short-term certificates of deposit, including
municipal certificates of deposit.

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

As of December 31, 2001, the Bank's internally generated initial NPV ratio was
4.95%. Following a 2% increase in interest rates, the Bank's Post-Shock NPV
ratio was 4.93%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was 0.02%. As of December 31, 2001, the Company's internally generated initial
NPV ratio was 4.61%, the Post-Shock ratio was 4.50%, and the Sensitivity Measure
was 0.11%. The duration of assets has declined as certain investment securities
are assumed to be called in both the base and post-shock scenarios. Conversely,
the duration of liabilities has extended in both scenarios principally due to
the call features on convertible FHLB of New York advances. Variances between
the Bank's and the Company's NPV ratios are attributable to balance sheet items
which are adjusted during consolidation, such as investments, intercompany
borrowings and capital.

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

The OTS measures the Bank's (unconsolidated) IRR on a quarterly basis using data
from the quarterly Thrift Financial


                                       16


<PAGE>


Reports filed by the Bank with the OTS, coupled with non-institution specific
assumptions which are based on national averages. As of September 30, 2001 (the
latest date for which information is available), the Bank's initial NPV ratio,
as measured by the OTS, was 7.77%, the Bank's Post-Shock ratio was 5.34% and the
Sensitivity Measure was 2.43%.

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 December 31, 2001, based on its internally generated simulation models, the
Company's consolidated net interest income projected for one year forward would
decrease 1% from the base case, or current market, as a result of an immediate
and sustained 2% increase in interest rates.

Liquidity and Capital Resources

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

The Bank maintains appropriate levels of liquid assets. The Company's most
liquid assets are cash and cash equivalents, U.S. government agency securities
and mortgage-backed securities. The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period. At December 31, 2001 and June 30, 2001, the Bank's liquidity ratios were
19.96% and 21.50%, 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 six months ended December 31, 2001 were
provided by operating activities, proceeds from maturities of investment
securities, increased deposits and principal repayments of loans and
mortgage-backed securities. During this period, the cash provided was used for
the origination and purchase of loans, the purchase of investment and
mortgage-backed securities, as well as to reduce borrowings. During the six
months ended December 31, 2000, the cash needs of the Company were provided by
operating activities, primarily from proceeds from the sales of loans, increased
deposits and principal repayments of loans and mortgage-backed securities.
During this period, the cash provided was used for investing activities, which
included the origination and purchase of loans, as well as to reduce borrowings.

Current regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percentage of risk-adjusted assets; a
ratio of core capital to risk-adjusted assets; a leverage ratio of core capital
to total adjusted assets; and a tangible capital ratio expressed as a percentage
of total adjusted assets. As of December 31, 2001, the Bank exceeded all
regulatory capital requirements and qualified as a "well-capitalized"
institution (see Note 4. - Stockholders' Equity and Regulatory Capital, in the
Notes to Consolidated Financial Statements).


                                       17


<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
        (a) The Annual Meeting of Stockholders (Annual Meeting) was held on
            October 24, 2001.

        (b)  Directors elected:
             William C. Anderson
             Amadeu L. Carvalho

        (c)  At the Annual Meeting the stockholders considered:
             (i)  the election of two directors,
             (ii) the ratification of the appointment of Deloitte & Touche LLP
                  as independent auditors for the Company for the fiscal year
                  ending June 30, 2002.

                 The vote on the election of two directors was as follows:

                                                FOR                  WITHHELD
                                             ---------               --------
                 William C. Anderson         6,197,131                544,540
                 Amadeu L. Carvalho          6,194,431                547,240

                 There were no broker non-votes with respect to the proposal.

                 The vote on the ratification of the appointment of Deloitte &
                 Touche LLP as independent auditors for the Company for the
                 fiscal year ending June 30, 2002 was as follows:

                    FOR                    AGAINST                      ABSTAIN
                 ---------                 -------                      -------
                 6,705,575                  14,198                      21,898

                 There were no broker non-votes with respect to the proposal.

Item 5. Other Information
        None.

Item 6. Exhibits and Reports on Form 8-K

        (a)  Exhibits
              Exhibit 10(f): Employment Agreement with Jeffrey J. Carfora.
              Exhibit 11: Statement Regarding Computation of Per Share Earnings.

        (b)  Reports on Form 8-K
              On October 24, 2001, PennFed Financial Services, Inc.
              (the Company) issued a press release announcing its first quarter
              results and an increased dividend.  In addition, the script of the
              financial presentation from the Company's Annual Meeting of
              Stockholders was set forth in this Form 8-K.


                                       18


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





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





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


                                       19


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