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, 2000

                                       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 12, 2001, there were issued and outstanding 7,975,770 shares
of the Registrant's Common Stock.

<PAGE>


PART I - Financial Information
Item 1.  Financial Statements

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

<TABLE>
<CAPTION>
                                                                                           December 31,             June 30,
                                                                                               2000                   2000
                                                                                           ------------          -------------
                                                                                                 (Dollars in thousands)
ASSETS
<S>                                                                                        <C>                   <C>
Cash and cash equivalents.............................................................     $     11,773          $      13,866
Investment securities held to maturity, at amortized cost, market value of
     $293,248 and $278,643 at December 31, 2000 and June 30, 2000.....................          302,989                303,026
Mortgage-backed securities held to maturity, at amortized cost, market value
     of $118,485 and $86,861 at December 31, 2000 and June 30, 2000...................          117,275                 87,561
Loans held for sale...................................................................            2,961                   ---
Loans receivable, net of allowance for loan losses of $4,065 and $3,983
     at December 31, 2000 and June 30, 2000...........................................        1,200,548              1,259,248
Premises and equipment, net...........................................................           20,260                 20,076
Real estate owned, net................................................................              824                    334
Federal Home Loan Bank of New York stock, at cost.....................................           22,488                 22,295
Accrued interest receivable, net......................................................           11,408                 10,227
Goodwill and other intangible assets..................................................            7,981                  8,996
Other assets..........................................................................            4,515                  3,590
                                                                                           ------------          -------------
                                                                                           $  1,703,022          $   1,729,219
                                                                                           ============          =============

LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
     Deposits.........................................................................     $  1,085,939          $   1,080,350
     Federal Home Loan Bank of New York advances......................................          404,465                364,465
     Other borrowings.................................................................           40,775                112,175
     Mortgage escrow funds............................................................           10,392                 11,888
     Due to banks.....................................................................            9,074                  7,908
     Accounts payable and other liabilities...........................................            4,979                  5,647
                                                                                           ------------          -------------
     Total liabilities................................................................        1,555,624              1,582,433
                                                                                           ------------          -------------

     Guaranteed Preferred Beneficial Interests in the Company's
         Junior Subordinated Debentures...............................................           34,500                 34,500
     Unamortized issuance expenses....................................................           (1,664)                (1,695)
                                                                                           ------------          -------------
     Net Trust Preferred securities...................................................           32,836                 32,805
                                                                                           ------------          -------------

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  7,998,570  and  8,396,019  shares  outstanding  at
           December  31,  2000 and  June  30,  2000  (excluding  shares  held in
           treasury of 3,901,430 and 3,503,981 at December 31, 2000 and
           June 30, 2000).............................................................               60                     60
     Additional paid-in capital.......................................................           61,001                 60,523
     Employee Stock Ownership Plan Trust debt.........................................           (2,061)                (2,320)
     Retained earnings, partially restricted..........................................           97,244                 91,840
     Treasury stock, at cost, 3,901,430 and 3,503,981 shares at
         December 31, 2000 and June 30, 2000..........................................          (41,682)               (36,122)
                                                                                           ------------          -------------
     Total stockholders' equity.......................................................          114,562                113,981
                                                                                           ------------          -------------
                                                                                           $  1,703,022          $   1,729,219
                                                                                           ============          =============
</TABLE>

See notes to consolidated financial statements.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                            Three months ended           Six months ended
                                                                               December 31,                 December 31,
                                                                         ------------------------     ------------------------
                                                                            2000          1999          2000           1999
                                                                         ---------      ---------     ---------      ---------
                                                                           (Dollars in thousands, except per share amounts)

Interest and Dividend Income:
<S>                                                                      <C>            <C>           <C>            <C>
     Interest and fees on loans......................................    $  22,734      $  20,073     $  46,061      $  39,110
     Interest on federal funds sold..................................           27             14            43             14
     Interest and dividends on investment securities.................        5,688          5,702        11,353         11,284
     Interest on mortgage-backed securities..........................        1,571          1,853         2,999          3,869
                                                                         ---------      ---------     ---------      ---------
                                                                            30,020         27,642        60,456         54,277
                                                                         ---------      ---------     ---------      ---------
Interest Expense:
     Deposits........................................................       13,501         11,479        26,703         22,889
     Borrowed funds..................................................        6,779          5,852        14,158         11,136
     Trust Preferred securities......................................          783            783         1,566          1,566
                                                                         ---------      ---------     ---------      ---------
                                                                            21,063         18,114        42,427         35,591
                                                                         ---------      ---------     ---------      ---------
Net Interest and Dividend Income Before Provision
     for Loan Losses.................................................        8,957          9,528        18,029         18,686
Provision for Loan Losses............................................          125            210           325            420
                                                                         ---------      ---------     ---------      ---------
Net Interest and Dividend Income After Provision
     for Loan Losses.................................................        8,832          9,318        17,704         18,266
                                                                         ---------      ---------     ---------      ---------

Non-Interest Income:
     Service charges.................................................          617            564         1,194          1,120
     Net gain (loss) from real estate operations.....................           (4)            51            (4)            81
     Net gain on sales of loans......................................          245            ---           559             33
     Other...........................................................          117            152           285            341
                                                                         ---------      ---------     ---------      ---------
                                                                               975            767         2,034          1,575
                                                                         ---------      ---------     ---------      ---------

Non-Interest Expenses:
     Compensation and employee benefits..............................        2,759          2,387         5,425          4,898
     Net occupancy expense...........................................          387            427           782            810
     Equipment.......................................................          467            453           915            893
     Advertising.....................................................           94             80           212            162
     Amortization of intangibles.....................................          506            525         1,016          1,087
     Federal deposit insurance premium...............................           55            159           110            318
     Other...........................................................          855            898         1,684          1,730
                                                                         ---------      ---------     ---------      ---------
                                                                             5,123          4,929        10,144          9,898
                                                                         ---------      ---------     ---------      ---------

Income Before Income Taxes...........................................        4,684          5,156         9,594          9,943
Income Tax Expense...................................................        1,651          1,833         3,385          3,538
                                                                         ---------      ---------     ---------      ---------
Net Income...........................................................    $   3,033      $   3,323     $   6,209      $   6,405
                                                                         =========      =========     =========      =========

Weighted average number of common shares outstanding:
     Basic...........................................................    7,636,458      8,242,098     7,721,936      8,269,348
                                                                         =========      =========     =========      =========
     Diluted.........................................................    8,086,854      8,819,266     8,163,712      8,825,561
                                                                         =========      =========     =========      =========

Net income per common share:
     Basic...........................................................    $    0.40      $    0.40     $    0.80      $    0.77
                                                                         =========      =========     =========      =========
     Diluted.........................................................    $    0.38      $    0.38     $    0.76      $    0.73
                                                                         =========      =========     =========      =========
</TABLE>

See notes to consolidated financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                                Six months ended December 31,
                                                                                                2000                    1999
                                                                                              ---------              ---------
                                                                                                   (Dollars in thousands)
Cash Flows from Operating Activities:
     <S>                                                                                      <C>                    <C>
     Net income.......................................................................        $   6,209              $   6,405
     Adjustments to reconcile net income to net cash provided by
       operating activities:
     Net gain on sales of loans.......................................................             (559)                   (33)
     Proceeds from sales of loans held for sale.......................................           80,741                  5,324
     Net gain on sales of real estate owned...........................................              ---                    (89)
     Amortization of investment and mortgage-backed securities
       premium, net...................................................................               71                    112
     Depreciation and amortization....................................................              685                    709
     Provision for losses on loans and real estate owned..............................              328                    420
     Amortization of cost of stock plans..............................................              737                    829
     Amortization of intangibles......................................................            1,016                  1,087
     Amortization of premiums on loans and loan fees..................................            1,035                    738
     Amortization of Trust Preferred securities issuance costs........................               31                     31
     Increase in accrued interest receivable, net of accrued
       interest payable...............................................................           (2,700)                (2,610)
     Increase in other assets.........................................................             (925)                  (228)
     Increase (decrease) in accounts payable and other liabilities....................             (668)                 1,052
     Decrease in mortgage escrow funds................................................           (1,496)                  (135)
     Increase (decrease) in due to banks..............................................            1,166                   (776)
     Other, net.......................................................................              ---                    (49)
                                                                                              ---------              ---------
     Net cash provided by operating activities........................................           85,671                 12,787
                                                                                              ---------              ---------

Cash Flows from Investing Activities:
     Proceeds from maturities of investment securities................................              ---                 10,165
     Purchases of investment securities held to maturity..............................              ---                (19,991)
     Net outflow from loan originations net of principal repayments of loans..........          (50,426)               (41,733)
     Purchases of loans...............................................................          (23,450)               (51,710)
     Proceeds from principal repayments of mortgage-backed securities.................           17,913                 22,271
     Purchases of mortgage-backed securities..........................................              ---                   (220)
     Proceeds from sale of premises and equipment.....................................              ---                    250
     Purchases of premises and equipment..............................................             (869)                (1,164)
     Net inflow (outflow) from real estate owned activity.............................              (81)                 1,048
     Purchases of Federal Home Loan Bank of New York stock............................             (193)                (2,990)
                                                                                              ---------              ---------
     Net cash used in investing activities............................................          (57,106)               (84,074)
                                                                                              ---------              ---------

Cash Flows from Financing Activities:
     Net increase (decrease) in deposits..............................................            7,108                (21,078)
     Increase (decrease) in advances from the Federal Home Loan Bank
       of New York and other borrowings...............................................          (31,400)                98,337
     Cash dividends paid..............................................................             (627)                  (683)
     Purchases of treasury stock, net of reissuance...................................           (5,739)                (3,999)
                                                                                              ---------              ---------
     Net cash provided by (used in) financing activities..............................          (30,658)                72,577
                                                                                              ---------              ---------
Net Increase (Decrease) in Cash and Cash Equivalents..................................           (2,093)                 1,290
Cash and Cash Equivalents, Beginning of Period........................................           13,866                  9,900
                                                                                              ---------              ---------
Cash and Cash Equivalents, End of Period..............................................        $  11,773              $  11,190
                                                                                              =========              =========

                                       4
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                              Six months ended December 31,
                                                                                               2000                  1999
                                                                                             ----------           ---------
                                                                                                 (Dollars in thousands)

Supplemental Disclosures of Cash Flow Information:
     Cash paid during period for:
<S>                                                                                          <C>                  <C>
     Interest.........................................................................       $   43,479           $  37,095
                                                                                             ==========           =========
     Income taxes.....................................................................       $    3,651           $   3,903
                                                                                             ==========           =========

Supplemental Schedule of Non-Cash Activities:
     Transfer of loans receivable to real estate owned, net...........................       $      412           $     114
                                                                                             ==========           =========
     Transfer of loans receivable to loans held for sale, at market...................       $   83,143           $     111
                                                                                             ==========           =========
     Securitization of loans receivable and transfer to mortgage-backed
         securities...................................................................       $   47,661           $     ---
                                                                                             ==========           =========
       Transfer of premises and equipment, net to real estate owned, net..............       $      ---           $      50
                                                                                             ==========           =========
</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")  and  PennFed  Capital  Trust I. These  interim  consolidated  financial
statements  included  herein  should be read in  conjunction  with the Company's
Annual  Report  on Form  10-K for the year  ended  June 30,  2000.  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, 2000 and 1999.  The interim  results of
operations presented are not necessarily  indicative of the results for the full
year.

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

2. Adoption of Recently Issued Accounting Standards

Effective July 1, 2000, the Company  adopted  Statement of Financial  Accounting
Standards  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities" ("SFAS 133"), SFAS No. 137,  "Accounting for Derivative  Instruments
and Hedging  Activities - Deferral of the Effective  Date of FASB  Statement No.
133" ("SFAS 137") and SFAS No. 138,  "Accounting for Derivative  Instruments and
Hedging  Activities - an amendment of FASB Statement No. 133" ("SFAS 138"). SFAS
133 establishes  accounting and reporting standards for derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging purposes.  SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative. SFAS 138 adds to the
accounting guidance for derivative instruments and hedging activities.  SFAS 133
as amended by SFAS 138 is intended to be  comprehensive  guidance on  accounting
for derivatives and hedging activities. The Company did not have any derivatives
as defined under SFAS 133 which would have an effect on the Company's  financial
condition,  results of  operations or cash flows as of and for the three and six
months ended December 31, 2000.

The  Derivatives  Implementation  Group  ("DIG")  was  formed  by the  Financial
Accounting  Standards Board ("FASB") to assist in  interpreting  practice issues
related to the  application and  implementation  of SFAS 133 (as amended by SFAS
137 and SFAS 138).  In December  2000,  the DIG released a tentative  conclusion
that loan  commitments  on loans  that will be  classified  as held for sale are
derivatives  pursuant to SFAS 133. This  tentative  conclusion  has not yet been
cleared by the FASB.

The Company currently originates one- to four-family mortgage loans that will be
classified  as held for sale.  Should  the FASB clear the  tentative  conclusion
regarding loan commitments, these commitments to originate will be recognized in
the Company's  Consolidated  Statement of Financial Condition at fair value. Any
changes  in  fair  value  would  be  recognized  in the  Company's  Consolidated
Statement of Income in the period of change.  The financial  statement impact of
this DIG conclusion will be directly  related to the size and composition of the
Company's loan origination pipeline and market conditions.

                                       6
<PAGE>

3.  Computation of EPS

The computation of EPS is presented in the following table.

<TABLE>
<CAPTION>
                                                                      Three months ended      Six months ended
                                                                         December 31,           December 31,
                                                                    ---------------------- -----------------------
                                                                       2000        1999       2000         1999
                                                                    ----------  ---------- ----------   ----------
                                                                   (Dollars in thousands, except per share amounts)
<S>                                                                 <C>         <C>        <C>          <C>
Net income......................................................    $    3,033  $    3,323 $    6,209   $    6,405
                                                                    ==========  ========== ==========   ==========

Number of shares outstanding:
Weighted average shares issued..................................    11,900,000  11,900,000 11,900,000   11,899,686
Less: Weighted average shares held in treasury..................     3,851,353   3,145,498  3,752,898    3,105,858
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.......................       539,811     439,596    526,834      427,520
                                                                    ----------  ---------- ----------   ----------
Average basic shares............................................     7,636,458   8,242,098  7,721,936    8,269,348
Plus: Average common stock equivalents..........................       450,396     577,168    441,776      556,213
                                                                    ----------  ---------- ----------   ----------
Average diluted shares..........................................     8,086,854   8,819,266  8,163,712    8,825,561
                                                                    ==========  ========== ==========   ==========

Earnings per common share:
        Basic....................................................   $     0.40  $     0.40 $     0.80   $     0.77
                                                                    ==========  ========== ==========   ==========
        Diluted..................................................   $     0.38  $     0.38 $     0.76   $     0.73
                                                                    ==========  ========== ==========   ==========
</TABLE>

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)

As of December 31, 2000
<S>                                           <C>               <C>           <C>           <C>         <C>              <C>
Tangible capital, and ratio to
  adjusted total assets....................   $138,870          8.20%         $25,404       1.50%           N/A           N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................   $138,870          8.20%         $67,745       4.00%       $84,681          5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................   $138,870         15.77%         $35,219       4.00%       $52,829          6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................   $142,875         16.23%         $70,438       8.00%       $88,048         10.00%

As of June 30, 2000
Tangible capital, and ratio to
  adjusted total assets....................   $133,365          7.76%         $25,785       1.50%           N/A           N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................   $133,365          7.76%         $68,761       4.00%       $85,952          5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................   $133,365         15.07%         $35,395       4.00%       $53,093          6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................   $137,197         15.50%         $70,791       8.00%       $88,488         10.00%
</TABLE>

                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                             To Be Well
                                                                                For Minimum               Capitalized Under
                                                                             Capital Adequacy             Prompt Corrective
                                                     Actual                      Purposes                 Action Provisions
                                             -------------------------     ------------------------   -------------------------
                                                Amount         Ratio          Amount        Ratio        Amount         Ratio
                                              ----------       -----        -----------     -----      ----------       -----
                                                                            (Dollars in thousands)
As of December 31, 2000
<S>                                            <C>              <C>           <C>           <C>          <C>             <C>
Tangible capital, and ratio to
  adjusted total assets....................    $139,418         8.22%         $25,428       1.50%            N/A          N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................    $139,418         8.22%         $67,807       4.00%        $84,759         5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................    $139,418        16.01%         $34,830       4.00%        $52,245         6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................    $143,423        16.47%         $69,660       8.00%        $87,075        10.00%

As of June 30, 2000
Tangible capital, and ratio to
  adjusted total assets....................    $137,789         8.01%         $25,805       1.50%            N/A          N/A
Tier I (core) capital, and ratio to
  adjusted total assets....................    $137,789         8.01%         $68,814       4.00%        $86,018         5.00%
Tier I (core) capital, and ratio to
  risk-weighted assets.....................    $137,789        15.75%         $34,997       4.00%        $52,495         6.00%
Risk-based capital, and ratio to
  risk-weighted assets.....................    $141,621        16.19%         $69,993       8.00%        $87,492        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,  demand for loans in the Company's  market area
and  competition,  that could cause  actual  results to differ  materially  from
historical  earnings and those presently  anticipated or projected.  The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking  statements,  which speak only as of the date made.  The Company
wishes  to advise  readers  that the  factors  listed  above  could  affect  the
Company's financial performance and could cause the Company's actual results for
future periods to differ  materially  from any opinions or statements  expressed
with respect to future periods in any current statements.

The Company 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 $26.2 million to $1.703 billion at December 31, 2000 from
total assets of $1.729  billion at June 30, 2000. The decrease was primarily due
to the sales of one- to four-family  residential  mortgage loans.  The Company's
current  asset/liability  management  strategy  includes the sale of conforming,
fixed rate one- to four-family  residential  loan  production.  Loans sold under
this strategy  during the six months ended  December 31, 2000 totaled nearly $15
million.  In addition,  for the six months ended  December 31, 2000, the Company
sold  approximately  $65  million  of  longer  duration,   one-  to  four-family
residential mortgage loans in an effort to improve funding, liquidity,  interest
rate risk and net interest margin.

During the three  months  ended  December  31,  2000,  the  Company  securitized
approximately  $47 million of one- to  four-family  mortgage loans as Fannie Mae
mortgage-backed   securities.   These  securities  are  held  in  the  Company's
securities portfolio for collateral purposes.

Deposits  increased  slightly to $1.086 billion at December 31, 2000 from $1.080
billion at June 30,  2000.  An increase in core deposit  accounts was  partially
offset by a decrease in certificates of deposit. Federal Home Loan Bank ("FHLB")
of New York advances  increased  $40.0  million from $364.5  million at June 30,
2000 while other borrowings  decreased $71.4 million from $112.2 million at June
30, 2000 to $40.8 million at December 31, 2000. The decrease in other borrowings
primarily reflects the use of proceeds from loan sales to reduce borrowings.

Non-performing  assets at December 31, 2000 totaled $2.9  million,  representing
0.17% of total assets,  compared to $3.0 million,  or 0.18% of total assets,  at
June 30, 2000.  Non-accruing  loans at December  31, 2000 totaled $2.1  million,
with a ratio of non-accruing  loans to total loans of 0.17%, as compared to $2.7
million,  or 0.21% of total loans, at June 30, 2000. Real estate owned increased
to $824,000 at December 31, 2000 from $334,000 at June 30, 2000.

                                       9
<PAGE>

Stockholders'  equity at December 31, 2000 totaled  $114.6  million  compared to
$114.0 million at June 30, 2000. The increase  primarily reflects the net income
recorded for the six months ended  December 31, 2000 offset by the repurchase of
430,000 shares of the Company's  outstanding stock at an average market price of
$13.73 per share and the declaration of cash dividends.

Results of Operations

General.  For the three  months  ended  December  31,  2000 net  income was $3.0
million,  or $0.38 per diluted share, as compared to net income of $3.3 million,
or $0.38 per diluted share,  for the comparable  prior year period.  For the six
months ended December 31, 2000 net income was $6.2 million, or $0.76 per diluted
share. These results compare to net income of $6.4 million, or $0.73 per diluted
share, for the six months ended December 31, 1999.

Interest and Dividend Income. Interest and dividend income for the three and six
months ended  December 31, 2000  increased to $30.0  million and $60.5  million,
respectively,  from $27.6 million and $54.3 million for the three and six months
ended  December 31, 1999.  The increases in the current year periods were due to
increases  in average  interest-earning  assets and the average  yield earned on
these assets, when compared to the prior year periods.  Average interest-earning
assets were $1.652 billion and $1.671 billion for the three and six months ended
December 31, 2000,  respectively,  compared to $1.565 billion and $1.541 billion
for  the   comparable   prior  year   periods.   The  average  yield  earned  on
interest-earning  assets  increased to 7.25% for the three months ended December
31, 2000 from 7.05% for the three  months ended  December 31, 1999.  For the six
months  ended  December 31, 2000 the average  yield  earned on  interest-earning
assets increased to 7.22% from 7.03% 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, 2000 increased $1.6 million and $4.8 million,
respectively, when compared to the prior year periods. The increases in interest
income on residential  one- to four-family  mortgage loans were partially due to
increases of $65.8 million and $113.5 million in the average balance outstanding
for the three  and six  months  ended  December  31,  2000,  respectively,  when
compared to the prior year periods. The average yield earned on residential one-
to  four-family  mortgage  loans for the three  months  ended  December 31, 2000
increased to 7.15% from 6.98% for the three months ended  December 31, 1999. The
average  yield earned on this  portfolio  for the six months ended  December 31,
2000 increased to 7.12% from 6.96% for the comparable prior year period.

Interest  income on  commercial  and  multi-family  real estate loans  increased
$463,000  and  $875,000  for the three and six months  ended  December 31, 2000,
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 $17.8 million and $17.7 million in the average  outstanding balance
for the three  and six  months  ended  December  31,  2000,  respectively,  when
compared  to the prior  year  periods.  The  growth in  interest  income on this
portfolio  was also due to increases in the average  yield earned on  commercial
and  multi-family  real estate loans.  The average yield  increased to 8.69% and
8.61% for the current  three and six month  periods,  respectively,  compared to
8.34% for both the three and six months ended December 31, 1999.

Interest  income on consumer loans  increased  $621,000 and $1.3 million for the
three and six months  ended  December 31,  2000,  respectively,  compared to the
prior year  periods.  The increases in interest  income for this loan  portfolio
were due to increases of $25.2 million and $25.6 million in the average  balance
outstanding for the three and six months ended December 31, 2000,  respectively,
when  compared to the prior year  periods.  Also  contributing  to  increases in
interest  income on consumer loans were increases in the average yield earned on
these loans.  The average  yield  increased to 7.87% and 7.84% for the three and
six months ended  December 31, 2000,  respectively,  compared to 7.27% and 7.21%
for the prior year periods.

                                       10
<PAGE>

Interest income on the mortgage-backed  securities  portfolio decreased $282,000
and $870,000 for the three and six months ended December 31, 2000, respectively,
compared  to the  prior  year  periods.  The  decrease  in  interest  income  on
mortgage-backed  securities  primarily  reflects  a  $21.1  million  and a $30.0
million decrease in the average balance outstanding for the three and six months
ended December 31, 2000,  respectively,  compared to the prior year periods. The
decreases  in the average  balance  were  partially  offset by  increases in the
average yield earned on the  mortgage-backed  securities  portfolio to 7.10% and
7.03%  for the three and six  months  ended  December  31,  2000,  respectively,
compared  to 6.76% and 6.71% for the three and six  months  ended  December  31,
1999.

Interest  Expense.  Interest expense increased $2.9 million and $6.8 million for
the three  and six  months  ended  December  31,  2000,  respectively,  from the
comparable  1999  periods.  The  increase in the current  three month period was
attributable to an $84.1 million increase in total average deposits,  borrowings
and Trust  Preferred  securities  coupled with a 48 basis point  increase in the
Company's  cost of funds,  when  compared to the prior year period.  For the six
months ended  December 31, 2000,  total average  deposits,  borrowings and Trust
Preferred securities increased $125.1 million and the cost of funds increased 46
basis points when  compared to the six months ended  December 31, 1999.  For the
three and six months ended December 31, 2000, average deposit balances increased
$39.3  million  and $46.7  million,  respectively,  from the $1.065  billion and
$1.058 billion for the three and six months ended December 31, 1999. The average
rate paid on deposits for the current three and six month  periods  increased to
4.85% and 4.80%, respectively, from 4.28% and 4.30% for the three and six months
ended  December 31,  1999.  Average FHLB of New York  advances  increased  $48.8
million and $71.3 million for the three and six months ended  December 31, 2000,
respectively,  while the average cost of advances  increased 19 basis points and
20 basis points for the same respective periods, when compared to the prior year
periods.  For the three and six months  ended  December  31,  2000,  the average
balance of other  borrowings  decreased $4.1 million and increased $7.0 million,
respectively, compared to the prior year periods. The average rate paid on these
borrowings  increased  to 6.25% and 6.35%  for the  three and six  months  ended
December  31,  2000,  respectively,  from  5.80% and 5.65% for the three and six
months ended December 31, 1999.

Net Interest  and Dividend  Income.  Net  interest  and dividend  income  before
provision  for loan losses for the three and six months ended  December 31, 2000
was $9.0  million and $18.0  million,  respectively,  reflecting  a $571,000 and
$657,000 decrease from $9.5 million and $18.7 million recorded in the comparable
prior  year  periods.  The  decline  in net  interest  and  dividend  income was
attributable  to a compressed net interest  margin.  The net interest  margin of
2.21% for the three months ended December 31, 2000 reflects a decline from 2.46%
for the comparable prior year period. The net interest margin for the six months
ended  December  31,  2000 was 2.20%,  a decrease  from 2.45% for the six months
ended  December  31,  1999.  The  compression  in the net  interest  margin  was
attributable  to increased  short-term  interest rates and the resulting rise in
the  Company's  cost of funds,  as well as continued  stock  repurchases  by the
Company.

Provision  for Loan Losses.  The provision for loan losses for the three and six
months ended December 31, 2000 was $125,000 and $325,000, respectively, compared
to $210,000 and $420,000 for the comparable  prior year periods.  The reductions
in the  provision  for loan losses in the current year  periods  were  primarily
attributable  to continuing  improvement in asset  quality,  one- to four-family
residential  mortgage loan sales and the  securitization  of one- to four-family
residential mortgage loans as mortgage-backed securities during the three months
ended  December 31, 2000. The allowance for loan losses at December 31, 2000 was
$4.1 million.  The  allowance  for loan losses as a percentage  of  non-accruing
loans was 194.40% and 0.34% of total loans at December 31, 2000.

                                       11
<PAGE>

Non-Interest  Income.  For the three and six months  ended  December  31,  2000,
non-interest  income was $975,000 and $2.0  million,  respectively,  compared to
$767,000  and  $1.6  million  for the  prior  year  periods.  The  increases  in
non-interest  income were primarily due to increases in the net gain on sales of
loans during the current year periods when  compared to the prior year  periods.
During the three and six months ended  December 31, 2000,  the net gain on sales
of loans was $245,000 and  $559,000,  respectively,  as compared to no gains for
the three months ended  December 31, 1999 and $33,000 for the December  1999 six
month period.  Under the Company's  strategy of selling  conforming,  fixed rate
one- to  four-family  residential  loan  production,  nearly $7 million  and $15
million of such loans were sold during the three and six months  ended  December
31,  2000,  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.  For the three months ended December 31, 1999, there
were no loans sold. For the six months ended December 31, 1999,  $5.3 million of
one- to  four-family  residential  mortgage  loans  were  sold in the  secondary
market. Non-interest income for the three and six months ended December 31, 2000
was  augmented  by $53,000  and  $74,000 of  increased  service  charge  income,
respectively,  when compared to the prior year periods. Partially offsetting the
increases in  non-interest  income for the current year periods were $55,000 and
$85,000 decreases in the net gain (loss) from real estate operations and $35,000
and $56,000 decreases in other non-interest  income for the three and six months
ended December 31, 2000, respectively,  when compared to the prior year periods.
Other non-interest  income for the six months ended December 31, 1999 included a
$48,000  gain on the sale of a former  branch  location.  For the  three and six
months ended December 31, 2000,  other  non-interest  income  included a $19,000
increase and a $2,000 decrease in earnings from the Investment  Services at Penn
Federal program, 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 $5.1 million and $10.1 million
for the three and six months ended December 31, 2000, respectively, representing
slight  increases  over the $4.9  million and $9.9 million  recorded  during the
prior year periods. However, the Company's non-interest expenses as a percent of
average  assets  decreased to 1.20% and 1.18% for the three and six months ended
December 31, 2000, respectively, from 1.22% and 1.24% for the prior year periods
due to the  increase in average  assets  during the current  three and six month
periods.

Income Tax  Expense.  Income  tax  expense  for the three and six  months  ended
December 31, 2000 was $1.7 million and $3.4 million,  respectively,  compared to
$1.8 million and $3.5  million for the three and six months  ended  December 31,
1999.  The  effective  tax rate for the three and six months ended  December 31,
2000 was 35.2% and 35.3%, respectively. The effective tax rate was 35.6% for the
three and six months ended December 31, 1999.

Analysis of Net Interest Income

The  following  table sets forth certain  information  relating to the Company's
consolidated  statements of financial condition and the consolidated  statements
of income for the three and six months  ended  December  31, 2000 and 1999,  and
reflects  the average  yield on assets and average cost of  liabilities  for the
periods  indicated.  Such  yields  and  costs are  derived  from  average  daily
balances.  The average balance of loans receivable includes  non-accruing loans.
The yields and costs include fees which are considered adjustments to yields.

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                          Three Months Ended December 31,
                                                  ------------------------------------------------------------------------------
                                                                     2000                                     1999
                                                  -------------------------------------     ------------------------------------
                                                     Average       Interest                    Average      Interest
                                                   Outstanding      Earned/     Yield/       Outstanding     Earned/     Yield/
                                                     Balance         Paid      Rate (1)        Balance        Paid      Rate (1)
                                                  -------------   ----------   --------     -------------  ----------   --------
                                                                              (Dollars in thousands)
Interest-earning assets:
<S>                                                 <C>            <C>           <C>         <C>             <C>          <C>
    One- to four-family mortgage
       loans...................................     $1,035,690     $18,527       7.15%       $   969,884     $16,950      6.98%
    Commercial and multi-family real
       estate loans............................         95,456       2,112       8.69             77,618       1,649      8.34
    Consumer loans.............................        105,675       2,095       7.87             80,426       1,474      7.27
                                                    ----------     -------                   -----------     -------
       Total loans receivable..................      1,236,821      22,734       7.33          1,127,928      20,073      7.09

    Federal funds sold.........................          1,677          27       6.39              1,024          14      5.35
    Investment securities and other............        325,489       5,688       6.99            326,112       5,702      6.99
    Mortgage-backed securities.................         88,499       1,571       7.10            109,622       1,853      6.76
                                                    ----------     -------                   -----------     -------
       Total interest-earning assets...........      1,652,486     $30,020       7.25          1,564,686     $27,642      7.05
                                                                   =======                                   =======

    Non-interest earning assets................         54,131                                    53,921
                                                    ----------                               -----------
       Total assets............................     $1,706,617                               $ 1,618,607
                                                    ==========                               ===========

Deposits, borrowings and Trust
     Preferred securities:
    Money market and demand deposits...........    $   125,619     $   445       1.41%       $   113,438     $   308      1.08%
    Savings deposits...........................        157,662         686       1.73            164,298         690      1.67
    Certificates of deposit....................        820,645      12,370       5.98            786,884      10,481      5.29
                                                   -----------     -------                   -----------     -------
       Total deposits..........................      1,103,926      13,501       4.85          1,064,620      11,479      4.28

    FHLB of New York advances..................        383,558       6,013       6.16            334,763       5,080      5.97
    Other borrowings...........................         47,984         766       6.25             52,068         772      5.80
                                                   -----------     -------                   -----------     -------
       Total deposits and borrowings...........      1,535,468      20,280       5.22          1,451,451      17,331      4.73
    Trust Preferred securities.................         32,828         783       9.54             32,766         783      9.56
                                                   -----------     -------                   -----------     -------
       Total deposits, borrowings and
           Trust Preferred securities..........      1,568,296     $21,063       5.31          1,484,217     $18,114      4.83
                                                                   =======                                   =======

Other liabilities..............................         24,541                                    23,653
                                                   -----------                               -----------
       Total liabilities.......................      1,592,837                                 1,507,870
Stockholders' equity...........................        113,780                                   110,737
                                                   -----------                               -----------
       Total liabilities and stockholders'
           equity..............................    $ 1,706,617                               $ 1,618,607
                                                   ===========                               ===========

Net interest income and net
    interest rate spread.......................                    $ 8,957       1.94%                      $  9,528      2.22%
                                                                   =======       ====                       ========      ====

Net interest-earning assets and
    interest margin............................    $    84,190                   2.21%       $    80,469                  2.46%
                                                   ===========                   ====        ===========                  ====

Ratio of interest-earning assets to
    deposits, borrowings and Trust
      Preferred securities.....................                                105.37%                                  105.42%
                                                                               ======                                   ======
</TABLE>

(1)  Annualized.

                                       13

<PAGE>

<TABLE>
<CAPTION>
                                                                           Six Months Ended December 31,
                                                  ------------------------------------------------------------------------------
                                                                     2000                                     1999
                                                  -------------------------------------     ------------------------------------
                                                     Average       Interest                    Average      Interest
                                                   Outstanding      Earned/     Yield/       Outstanding     Earned/     Yield/
                                                     Balance         Paid      Rate (1)        Balance        Paid      Rate (1)
                                                  -------------   ----------   --------     -------------  ----------   --------
                                                                              (Dollars in thousands)
Interest-earning assets:
<S>                                                 <C>            <C>           <C>          <C>            <C>          <C>
    One- to four-family mortgage
       loans...................................     $1,063,220     $37,908       7.12%        $  949,704     $33,092      6.96%
    Commercial and multi-family real
       estate loans............................         92,990       4,079       8.61             75,333       3,204      8.34
    Consumer loans.............................        103,040       4,074       7.84             77,438       2,814      7.21
                                                    ----------     -------                    ----------     -------
       Total loans receivable..................      1,259,250      46,061       7.29          1,102,475      39,110      7.07

    Federal funds sold.........................          1,331          43       6.38                512          14      5.34
    Investment securities and other............        325,446      11,353       6.98            322,864      11,284      6.99
    Mortgage-backed securities.................         85,271       2,999       7.03            115,295       3,869      6.71
                                                    ----------     -------                    ----------     -------
       Total interest-earning assets...........      1,671,298     $60,456       7.22          1,541,146     $54,277      7.03
                                                                   =======                                   =======

Non-interest earning assets....................         55,282                                    55,029
                                                    ----------                                ----------
       Total assets............................     $1,726,580                                $1,596,175
                                                    ==========                                ==========

Deposits, borrowings and Trust
     Preferred securities:
    Money market and demand deposits...........     $  125,348     $   886       1.40%        $  112,210     $   597      1.06%
    Savings deposits...........................        156,513       1,308       1.66            164,755       1,383      1.67
    Certificates of deposit....................        822,658      24,509       5.91            780,829      20,909      5.33
                                                    ----------     -------                    ----------     -------
       Total deposits..........................      1,104,519      26,703       4.80          1,057,794      22,889      4.30

    FHLB of New York advances..................        375,619      11,758       6.15            304,334       9,202      5.95
    Other borrowings...........................         74,012       2,400       6.35             66,966       1,934      5.65
                                                    ----------     -------                    ----------     -------
       Total deposits and borrowings...........      1,554,150      40,861       5.20          1,429,094      34,025      4.72
    Trust Preferred securities.................         32,821       1,566       9.54             32,759       1,566      9.56
                                                    ----------     -------                    ----------     -------
       Total deposits, borrowings and
           Trust Preferred securities..........      1,586,971     $42,427       5.29          1,461,853     $35,591      4.83
                                                                   =======                                   =======

Other liabilities..............................         25,912                                    24,529
                                                    ----------                                ----------
       Total liabilities.......................      1,612,883                                 1,486,382
Stockholders' equity...........................        113,697                                   109,793
                                                    ----------                                ----------
       Total liabilities and stockholders'
           equity..............................     $1,726,580                                $1,596,175
                                                    ==========                                ==========

Net interest income and net
    interest rate spread.......................                    $18,029       1.93%                       $18,686      2.20%
                                                                   =======       ====                        =======      ====

Net interest-earning assets and
    interest margin............................     $   84,327                   2.20%        $   79,293                  2.45%
                                                    ==========                   ====         ==========                  ====

Ratio of interest-earning assets to
    deposits, borrowings and Trust
      Preferred securities.....................                                105.31%                                  105.42%
                                                                               ======                                   ======
</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,
                                                                            2000              2000
                                                                        --------------    ------------
                                                                            (Dollars in thousands)
Non-accruing loans:
<S>                                                                       <C>              <C>
     One- to four-family...........................................       $  1,635         $  2,152
     Commercial and multi-family...................................             49               95
     Consumer......................................................            407              468
                                                                          --------         --------
         Total non-accruing loans..................................          2,091            2,715

Real estate owned, net.............................................            824              334
                                                                          --------         --------

         Total non-performing assets...............................          2,915            3,049
                                                                          --------         --------

         Total risk elements.......................................       $  2,915         $  3,049
                                                                          ========         ========

Non-accruing loans as a percentage of total loans..................           0.17%            0.21%
                                                                          ========         ========

Non-performing assets as a percentage of total assets..............           0.17%            0.18%
                                                                          ========         ========

Total risk elements as a percentage of total assets................           0.17%            0.18%
                                                                          ========         ========
</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 their examination.  At December 31, 2000, the Company had a total
allowance  for  loan  losses  of $4.1  million  representing  194.40%  of  total
non-accruing loans and 0.34% of total loans.

Interest Rate Sensitivity

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

                                       15
<PAGE>

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,  2000,  the  Company's  total  deposits,  borrowings  and Trust
Preferred  securities  maturing or repricing  within one year exceeded its total
interest-earning assets maturing or repricing within one year by $275.1 million,
representing  a one year negative gap of 16.16% of total  assets,  compared to a
one year negative gap of 22.12% of total assets at June 30, 2000.  The Company's
improvement  in the  negative  gap  position  from June 30,  2000 was  partially
brought  about by the sale of $80.3 million of one- to  four-family  residential
mortgage loans, the proceeds of which were used to reduce short-term borrowings.
Additionally,   short-term   certificates   of  deposit,   including   municipal
certificates  of deposit,  have  decreased  while  medium-term  certificates  of
deposit have increased. Also contributing to the improvement in the negative gap
position  was an increase  in core  deposits  and  medium-term  borrowings.  The
Company  continued to focus on  increasing  balances of fixed and variable  rate
commercial and multi-family real estate loans and consumer loan products,  whose
repayment and repricing  characteristics  are typically  faster than their fixed
rate one- to four-family  residential  mortgage loan  counterparts.  At June 30,
2000,  the Company had $30  million in notional  amount of interest  rate swaps,
designed to synthetically  lengthen the maturities of short-term deposits. As of
December 31, 2000,  these  interest  rate swaps have matured or were  terminated
early. This elimination of the hedge portfolio  partially offset the improvement
in the negative gap position from June 30, 2000.

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 also 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, 2000, the Bank's  internally  generated initial NPV ratio was
10.59%.  Following a 2% increase in interest  rates,  the Bank's  Post-Shock NPV
ratio was 8.80%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was 1.79%.  Though NPV is "measured" on an  unconsolidated  basis for regulatory
purposes,  it is managed on a consolidated  basis.  As of December 31, 2000, the
Company's  internally  generated  initial NPV ratio was 10.60%,  the  Post-Shock
ratio was 8.75%, and the Sensitivity  Measure was 1.86%.  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.

                                       16
<PAGE>

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

The OTS measures the Bank's (unconsolidated) IRR on a quarterly basis using data
from the  quarterly  Thrift  Financial  Reports  filed by the Bank with the OTS,
coupled with  non-institution  specific  assumptions which are based on national
averages.  As of September  30, 2000 (the latest date for which  information  is
available), the Bank's initial NPV ratio, as measured by the OTS, was 7.72%, the
Bank's Post-Shock ratio was 5.00% and the Sensitivity Measure was 2.72%.

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, 2000, based on its internally  generated  simulation models, the
Company's  consolidated net interest income projected for one year forward would
decrease  14.59%  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.  The current  required  percentage  is 4% of net
withdrawable  deposits  payable on demand or in one year or less and  borrowings
payable  on demand or in one year or less,  both as of the end of the  preceding
calendar quarter. Liquid assets for purposes of this ratio include cash, accrued
interest  receivable,  certain  time  deposits,  U.S.  Treasury  and  government
agencies  and  other  securities  and  obligations  generally  having  remaining
maturities  of  less  than  five  years.  All  mortgage-backed   securities  are
includable in liquid assets,  as well. The Company's most liquid assets are cash
and cash equivalents,  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, 2000 and June 30, 2000, the Bank's  liquidity  ratios were 11.62% and 8.71%,
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,  2000 were
provided by operating  activities,  primarily  from  proceeds  from the sales of
loans,  increased deposits and principal repayments on loans and mortgage-backed
securities.  During  this  period,  the cash  provided  was  used for  investing
activities,  which included the origination and purchase of loans, as well as to
reduce borrowings. During the six months ended December 31, 1999, the cash needs
of the Company were provided by operating  activities,  proceeds from maturities
of investment securities,  an increase in advances from the FHLB of New York and
principal  repayments  on loans  and  mortgage-backed  securities.  During  this
period,  the cash  provided  was  primarily  used to  offset a net  decrease  in
deposits and to fund investing  activities,  which included the  origination and
purchase of loans and the purchase of investment securities.

Current  regulatory  standards  impose the  following  capital  requirements:  a
risk-based capital standard expressed as a percentage of risk-adjusted assets; a
ratio of core capital to risk-adjusted  assets; a leverage ratio of core capital
to total adjusted assets; and a tangible capital ratio expressed as a percentage
of total  adjusted  assets.  As of December  31,  2000,  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 25, 2000.

          (b)  Directors elected:
               Joseph L. LaMonica
               Mario Teixeira, Jr.

          (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, 2001.

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

                                                FOR             WITHHELD
                                            -----------         --------
               Joseph L. LaMonica            6,825,734           939,857
               Mario Teixeira, Jr.           6,941,998           823,593

               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, 2001 was as follows:

                             FOR             AGAINST         ABSTAIN
                         -----------         -------         -------
                          7,721,570          23,215          20,806

               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 3(ii): Bylaws.
                  Exhibit 11: Statement Regarding Computation of Per Share
                               Earnings.
                  Exhibit 27: Financial Data Schedule.

           (b)  Reports on Form 8-K
                  On October 25, 2000,  PennFed  Financial  Services,  Inc. (the
                  Company)  issued a press release  announcing its first quarter
                  results and stock repurchases.  In addition, the script of the
                  financial  presentation  from the Company's  Annual Meeting of
                  Stockholders was set forth in this Form 8-K.

                  On  November  1,  2000,  the  Company  issued a press  release
                  announcing  its completion of a stock  repurchase  program and
                  the commencement of its new repurchase program.

                                       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, 2001                 By:  /s/ Joseph L. LaMonica
                                            ------------------------------------
                                             Joseph L. LaMonica
                                             President and Chief
                                             Executive Officer





Date: February 14, 2001                 By:  /s/ Lucy T. Tinker
                                            ------------------------------------
                                             Lucy T. Tinker
                                             Senior Executive Vice President and
                                             Chief Operating Officer
                                             (Principal Financial Officer)





Date: February 14, 2001                 By:  /s/ Jeffrey J. Carfora
                                            ------------------------------------
                                             Jeffrey J. Carfora
                                             Executive Vice President and
                                             Chief Financial Officer
                                             (Principal Accounting Officer)


                                       19