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

                                    FORM 10-Q

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

         For the quarterly period ended March 31, 1997

                                       OR

[ ]      TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the  transition  period from           to

                         Commission file number 0-24040 

       
                        PENNFED FINANCIAL SERVICES, INC.                        
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter) 

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

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

       Registrant's telephone number, including area code: (201) 669-7366 
--------------------------------------------------------------------------------

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

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

         As of May 7, 1997,  there  were  4,821,255  shares of the  Registrant's
Common Stock, par value $.01, outstanding.
<PAGE>
PART I - Financial Information
Item 1.  Financial Statements
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Financial Condition
                                                                      March 31,          June 30,
                                                                        1997               1996
                                                                     -----------      -----------
                                                                            (dollars in 000's)
<S>                                                                  <C>              <C>
Assets
Cash and cash equivalents ......................................     $     6,867      $    11,629
Investment securities held to maturity, at amortized cost,
   market value of $5,375 and $21,502 at March 31, 1997 and
   June 30, 1996 ...............................................           5,290           21,288
Mortgage-backed securities held to maturity, at amortized cost,
   market value of $300,982 and $344,331 at
   March 31, 1997 and June 30, 1996 ............................         301,448          346,068
Loans held for sale ............................................            --                 88
Loans receivable, net of allowance for loan losses of $2,755 and
  $2,630 at March 31, 1997 and June 30, 1996 ...................         883,035          652,483
Premises and equipment, net ....................................          16,457           16,035
Real estate owned, net .........................................             715            1,083
Federal Home Loan Bank of New York stock, at cost ..............          11,428            8,052
Accrued interest receivable, net ...............................           6,643            6,742
Goodwill and other intangibles .................................          16,539           18,430
Other assets ...................................................           3,965            4,626
                                                                     -----------      -----------
                                                                     $ 1,252,387      $ 1,086,524
                                                                     ===========      ===========
Liabilities and Stockholders' Equity
Liabilities:
  Deposits .....................................................     $   887,407      $   836,416
  Federal Home Loan Bank of New York advances ..................         185,465          105,000
  Other borrowings .............................................          70,392           41,700
  Mortgage escrow funds ........................................           7,912            5,930
  Due to banks .................................................           4,472            5,989
  Accounts payable and other liabilities .......................           2,466              925
                                                                     -----------      -----------
  Total liabilities ............................................       1,158,114          995,960
                                                                     -----------      -----------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Financial Condition (continued)
                                                                      March 31,          June 30,
                                                                        1997               1996
                                                                     -----------      -----------
                                                                            (dollars in 000's)
<S>                                                                  <C>              <C>
Stockholders' Equity:
  Serial preferred stock, $.01 par value, 7,000,000 shares
    authorized, no shares issued ...............................            --               --
  Common stock, $.01 par value, 15,000,000 shares authorized,
    5,950,000 shares issued and 4,821,255 and 4,823,665  shares
    outstanding at March 31,  1997 and June 30,  1996 (excluding
    shares  held in  treasury of 1,128,745 and 1,126,335 at
    March 31, 1997 and June 30,1996) ...........................              60               60
  Additional paid-in capital ...................................          57,387           57,057
  Restricted stock - Management Recognition Plan ...............          (1,593)          (1,316)
  Employee Stock Ownership Plan Trust debt .....................          (3,769)          (4,061)
  Retained earnings, substantially restricted ..................          58,750           55,172
  Treasury stock, at cost, 1,128,745 and 1,126,335 shares at
    March 31, 1997 and June 30, 1996 ...........................         (16,562)         (16,348)
                                                                     -----------      -----------
  Total stockholders' equity ...................................          94,273           90,564
                                                                     -----------      -----------
                                                                     $ 1,252,387      $ 1,086,524
                                                                     ===========      ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Income

                                                                 Three months ended               Nine months ended
                                                                      March 31,                         March 31,
                                                               1997             1996             1997             1996
                                                                     (dollars in 000's, except per share amounts)
<S>                                                       <C>              <C>              <C>              <C>
Interest and Dividend Income:
  Interest and fees on loans ........................     $    16,312      $    11,193      $    44,626      $    31,231
  Interest and dividends on investment securities ...             307              601            1,177            1,779
  Interest on mortgage-backed securities ............           5,382            5,710           16,893           16,475
                                                          -----------      -----------      -----------      -----------
                                                               22,001           17,504           62,696           49,485
                                                          -----------      -----------      -----------      -----------
Interest Expense:
  Deposits ..........................................          10,095            8,441           29,538           24,659
  Borrowed funds ....................................           3,602            1,559            8,960            3,586
                                                          -----------      -----------      -----------      -----------
                                                               13,697           10,000           38,498           28,245
                                                          -----------      -----------      -----------      -----------
Net Interest and Dividend Income Before Provision
  for Loan Losses ...................................           8,304            7,504           24,198           21,240
Provision for Loan Losses ...........................             154              150              481              410
                                                          -----------      -----------      -----------      -----------
Net Interest and Dividend Income After
  Provision for Loan Losses .........................           8,150            7,354           23,717           20,830
                                                          -----------      -----------      -----------      -----------

Non-Interest Income:
  Service charges ...................................             406              390            1,252            1,209
  Net gain (loss) from real estate operations .......             (15)             (55)            (185)              59
  Net gain on sales of investment securities ........            --                 94             --                 94
  Other .............................................              78               78              216              293
                                                          -----------      -----------      -----------      -----------
                                                                  469              507            1,283            1,655
                                                          -----------      -----------      -----------      -----------
Non-Interest Expenses:
  Compensation and employee benefits ................           2,114            1,980            5,943            5,806
  Net occupancy expense .............................             284              319              834              872
  Equipment .........................................             375              401            1,144            1,188
  Advertising .......................................              88               56              266              163
  Amortization of intangibles .......................             625              652            1,891            1,981
  Federal deposit insurance premium .................             137              416              970            1,248
  SAIF recapitalization assessment ..................            --               --              4,813             --
  Other .............................................             780              713            2,158            2,027
                                                          -----------      -----------      -----------      -----------
                                                                4,403            4,537           18,019           13,285
                                                          -----------      -----------      -----------      -----------

Income Before Income Taxes ..........................           4,216            3,324            6,981            9,200
Income Tax Expense ..................................           1,590            1,304            2,726            3,616
                                                          -----------      -----------      -----------      -----------

Net Income ..........................................     $     2,626      $     2,020      $     4,255      $     5,584
                                                          ===========      ===========      ===========      ===========
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Income (continued)
                                                                 Three months ended                Nine months ended
                                                                      March 31,                         March 31,
                                                               1997             1996             1997             1996
                                                                     (dollars in 000's, except per share amounts)
<S>                                                       <C>              <C>              <C>              <C>
Weighted average number of common shares outstanding:
  Primary ...........................................       4,742,840        4,991,111        4,703,367        5,150,202
                                                          ===========      ===========      ===========      ===========
  Fully diluted .....................................       4,756,414        4,991,111        4,760,970        5,156,359
                                                          ===========      ===========      ===========      ===========

Net income per common share:
  Primary ...........................................     $      0.55      $      0.40      $      0.90      $      1.08
                                                          ===========      ===========      ===========      ===========
  Fully diluted .....................................     $      0.55      $      0.40      $      0.89      $      1.08
                                                          ===========      ===========      ===========      ===========

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows  
                                                                   Nine months ended March 31,
                                                                        1997           1996
                                                                    ---------      ---------
                                                                        (dollars in 000's)
<S>                                                                 <C>            <C>
Cash Flows From Operating Activities:
  Net income ..................................................     $   4,255      $   5,584
  Adjustments to reconcile net income to net cash
    provided by operating activities:
  Proceeds from sales of loans available for sale .............           585            123
  Originations of loans available for sale ....................          (497)          (123)
  Gain on sales of investment securities ......................          --              (94)
  Gain (loss) on sales of real estate owned ...................             8           (136)
  Amortization of investment and mortgage-backed
    securities premiums, net ..................................           202            326
  Depreciation and amortization ...............................           943            999
  Provision for losses on loans and real estate owned .........           580            418
  Amortization of cost of stock plans .........................         1,075            724
  Amortization of intangibles .................................         1,891          1,981
  Amortization of premiums on loans and loan fees .............           280            232
  Increase in accrued interest receivable, net of accrued
    interest payable ..........................................          (536)        (1,216)
  Decrease in other assets ....................................           660            737
  Increase (decrease) in accounts payable and other liabilities         1,233         (1,087)
  Increase in mortgage escrow funds ...........................         1,982            211
  Increase (decrease) in due to banks .........................        (1,517)         3,603
  Other, net ..................................................             4            (78)
                                                                    ---------      ---------
  Net cash provided by operating activities ...................        11,148         12,204
                                                                    ---------      ---------
Cash Flows From Investing Activities:
  Proceeds from maturities of investment securities ...........        16,000          6,314
  Purchases of investment securities ..........................          --          (10,000)
  Proceeds from sale of premises and equipment ................          --              326
  Net outflow from loan originations net of principal
    repayments of loans .......................................       (73,344)       (17,873)
  Purchases of loans ..........................................      (158,842)      (100,736)
  Proceeds from principal repayments of
    mortgage-backed securities ................................        44,416         48,550
  Purchases of mortgage-backed securities .....................          --          (81,298)
  Purchases of premises and equipment .........................        (1,365)          (500)
  Proceeds from sales of real estate owned ....................         1,133          1,313
  Purchases of Federal Home Loan Bank of New York stock .......        (3,376)        (1,864)
                                                                    ---------      ---------
  Net cash used in investing activities .......................      (175,378)      (155,588)
                                                                    ---------      ---------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows (continued)
                                                                   Nine months ended March 31,
                                                                        1997           1996
                                                                    ---------      ---------
                                                                        (dollars in 000's)
<S>                                                                 <C>            <C>
Cash Flows From Financing Activities:
  Net increase in deposits ....................................        51,626         80,536
  Advances from the Federal Home Loan Bank of
    New York and other borrowings .............................       109,157         73,070
  Cash dividends paid .........................................          (664)          --
  Purchases of treasury stock .................................          (651)        (8,311)
                                                                    ---------      ---------
  Net cash provided by financing activities ...................       159,468        145,295
                                                                    ---------      ---------
Net Increase (Decrease) in Cash and Cash Equivalents ..........        (4,762)         1,911
Cash and Cash Equivalents, Beginning of Period ................        11,629          9,736
                                                                    ---------      ---------
Cash and Cash Equivalents, End of Period ......................     $   6,867      $  11,647
                                                                    =========      =========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for:
  Interest ...................................................     $     38,571     $ 28,666
                                                                   ============     ========
  Income taxes ...............................................     $      2,075     $  3,724
                                                                   ============     ========

Supplemental Schedule of Non-Cash Activities:
  Transfer of loans receivable to real estate owned, net .....     $        782     $    960
                                                                   ============     ========
  Transfer of real estate owned to premises and equipment, net     $       --       $    256
                                                                   ============     ========
  Unrealized gain on investment securities available
    for sale .................................................     $       --       $    (59)
                                                                   ============     ========

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


1. Basis of Presentation

The interim  consolidated  financial  statements of PennFed Financial  Services,
Inc. ("PennFed") and subsidiary (with its subsidiary, the "Company") include the
accounts of PennFed and Penn Federal Savings Bank (the "Bank"), its wholly-owned
subsidiary.  These interim  consolidated  financial  statements  included herein
should be read in conjunction  with the Company's Annual Report on Form 10-K for
the year ended June 30,  1996.  The interim  consolidated  financial  statements
reflect  all normal and  recurring  adjustments  which  are,  in the  opinion of
management,  considered  necessary  for a fair  presentation  of  the  financial
condition and results of  operations  for the periods  presented.  There were no
adjustments  of a  non-recurring  nature  recorded  during the nine months ended
March 31, 1997 and 1996.  The interim  results of  operations  presented are not
necessarily indicative of the results for the full year.

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

2.  Adoption of Recently Issued Accounting Standards

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

Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125,  "Accounting for Transfers and Servicing of Financial  Assets
and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 supersedes  Statement
of Financial  Accounting  Standards No. 122,  "Accounting for Mortgage Servicing
Rights."  Under SFAS 125, after the transfer of a financial  asset,  the Company
recognizes the financial and servicing assets it controls and the liabilities it
has incurred. Furthermore, the Company no longer recognizes the financial assets
for  which  control  has  been   surrendered  and  liabilities  that  have  been
extinguished.  The adoption of SFAS 125 did not have an effect on the  financial
condition or results of operations of the Company.
<PAGE>
3. Stockholders' Equity and Regulatory Capital

The following is a reconciliation of the Bank's capital under generally accepted
accounting principles ("GAAP") and its tangible,  core and risk-based capital at
March 31, 1997:
<TABLE>
<CAPTION>

                                                   Tangible                      Core                     Risk-Based
                                                    Capital    Percentage       Capital    Percentage       Capital    Percentage
                                                    -------    ----------       -------    ----------       -------    ----------
                                                                                 (dollars in 000's)
<S>                                                <C>            <C>         <C>             <C>         <C>              <C>
GAAP capital................................       $ 86,771       6.88%       $  86,771       6.88%       $  86,771        6.88%
Goodwill....................................         (1,538)                     (1,538)                     (1,538)
Deposit premium intangible..................        (15,001)                    (15,001)                    (15,001)
Qualifying intangible assets................            ---                         488                         488
Allowances for loan and lease
  losses....................................            ---                         ---                       2,269
Equity investments and investments in
  real estate required to be deducted.......            ---                         ---                         (50)
                                                   --------                    --------                    -------- 
Regulatory capital..........................         70,232       5.66           70,720       5.70           72,939       12.31
Minimum capital requirement.................         18,602       1.50           49,625       4.00           47,383        8.00
                                                   --------       ----         --------       ----         --------      ------

Regulatory capital-excess...................        $51,630       4.16%         $21,095       1.70%         $25,556        4.31%
                                                    =======       ====          =======       ====          =======       =====

</TABLE>

4. Dividends

On October 25, 1996, the Company declared a quarterly cash dividend of $0.07 per
share  payable on November  29, 1996 to  stockholders  of record on November 14,
1996.  On January 27, 1997,  the Company  declared a quarterly  cash dividend of
$0.07 per share  payable  on  February  28,  1997 to  stockholders  of record on
February 14,  1997.  On April 29, 1997,  the Company  declared a quarterly  cash
dividend of $0.07 per share payable on May 30, 1997 to stockholders of record on
May 16, 1997.
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

General

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

The deposits of savings associations, such as the Bank, are presently insured by
the Savings Association Insurance Fund (the "SAIF"),  which, along with the Bank
Insurance  Fund (the "BIF"),  are the two insurance  funds  administered  by the
Federal Deposit Insurance Corporation ("FDIC"). Financial institutions which are
members of the BIF prior to September 30, 1996 experienced  substantially  lower
deposit  insurance  premiums  because the BIF had achieved its required level of
reserves while the SAIF had not yet achieved its required reserves.  As a result
of legislation signed into law on September 30, 1996, the SAIF  recapitalization
plan provided for a one-time  assessment of 0.657% of deposits which was imposed
on all SAIF  insured  institutions  to enable the SAIF to achieve  its  required
level of reserves.  The  assessment  was based on deposits as of March 31, 1995,
and the Bank's  special  assessment  was  approximately  $4.8  million,  or $3.1
million, net of taxes. Accordingly,  this special one-time SAIF recapitalization
assessment  significantly increased non-interest expenses and adversely effected
the Company's  results of  operations  for the nine months ended March 31, 1997.
Following the  recapitalization  assessment,  beginning  January 1, 1997 deposit
insurance premiums have decreased  significantly,  to approximately  0.065% from
the 0.23% of deposits previously paid by the Bank.

Financial Condition

Total assets  increased  $165.9 million,  or 15.3%, to $1.3 billion at March 31,
1997 from  total  assets of $1.1  billion at June 30,  1996.  The  increase  was
primarily  attributable  to a $230.5 million  increase in net loans  receivable,
particularly in the Company's one- to four-family first mortgage loan portfolio.
At March 31, 1997, net loans  receivable were $883.0 million  compared to $652.5
million at June 30, 1996. The increase in loans  receivable was funded by retail
deposit growth, additional medium-term Federal Home Loan Bank of New York ("FHLB
of New York") advances and increased other  borrowings as well as funds received
on maturities of investment securities and principal payments on mortgage-backed
securities.

Non-performing assets at March 31, 1997 totaled $6.3 million, representing 0.51%
of total assets, compared to $7.3 million, or 0.67% of total assets, at June 30,
1996.   Non-performing  loans  decreased  to  $5.6  million  and  the  ratio  of
non-performing  loans to total loans decreased to 0.63% of total loans, at March
31, 1997 as compared to $6.2 million, or 0.94% of total loans, at June 30, 1996.
Real estate  owned  decreased to $715,000 at March 31, 1997 from $1.1 million at
June 30, 1996.
<PAGE>
Deposits increased $51.0 million to $887.4 million at March 31, 1997 from $836.4
million at June 30, 1996. FHLB of New York advances were $185.5 million at March
31, 1997,  an $80.5 million  increase  from $105.0  million at June 30, 1996. In
addition,  at March 31, 1997 the Company had $70.4 million of other  borrowings,
consisting of $60.4 million of short-term  and overnight  borrowings and a $10.0
million reverse repurchase agreement maturing in December 2001. Other borrowings
at June 30, 1996 totaled $41.7 million and consisted of short-term and overnight
borrowings.

Stockholders'  equity at March 31, 1997 totaled $94.3 million  compared to $90.6
million  at June 30,  1996.  The  increase  primarily  reflects  the net  income
recorded  for the nine months ended March 31, 1997 offset by the  repurchase  of
32,500 shares of the  outstanding  stock at an average price of $20.04 per share
and the declaration of dividends.

Results of Operations

General.  For the three months ended March 31, 1997 net income was $2.6 million,
or $0.55 per share.  These  results  compare to net income of $2.0  million,  or
$0.40 per share for the three months  ended March 31, 1996.  For the nine months
ended March 31, 1997, net income was $4.3 million, or $0.90 per share, including
the  effects  of  the  one-time  SAIF  recapitalization   assessment.  The  SAIF
recapitalization  assessment  for  the  Company  totaled  $4.8  million,  or  an
after-tax  cost of $3.1  million,  or $0.66 per share.  The results for the nine
months ended March 31, 1997, excluding the effects of the SAIF assessment, would
have compared  favorably to net income of $5.6 million,  or $1.08 per share, for
the nine months ended March 31, 1996.

Interest and  Dividend  Income.  Interest and dividend  income for the three and
nine months ended March 31, 1997  increased to $22.0 million and $62.7  million,
respectively, from $17.5 million and $49.5 million for the three and nine months
ended March 31, 1996,  respectively.  The  increases in the current year periods
were  due  to  an  increase  in  average   interest-earning   assets,  primarily
residential loans, partially offset by a decrease in the average yield earned on
interest-earning  assets. Average  interest-earning assets were $1.2 billion and
$1.1 billion for the three and nine months  ended March 31, 1997,  respectively,
compared to $917.6  million and $868.5  million  for the  comparable  prior year
periods.  The average yield on  interest-earning  assets  decreased to 7.46% and
7.48% for the three and nine month periods  ended March 31, 1997,  respectively,
from  7.63%  and  7.60% for the three  and nine  months  ended  March 31,  1996,
respectively.

Interest income on residential one- to four-family  mortgage loans for the three
and nine months ended March 31, 1997 increased $5.2 million, or 56.7%, and $13.4
million, or 53.5%,  respectively,  when compared to the prior year periods.  The
increase in interest  income on residential  one- to four-family  mortgage loans
was due to increases of $289.2 million and $249.4 million in the average balance
outstanding  for the three and nine months ended March 31,  1997,  respectively,
over the prior year periods.  The increase in the average balance on residential
one- to four-family  mortgage  loans was partially  offset by decreases of 0.22%
and 0.20% in the average  yield earned on this loan  portfolio for the three and
nine months ended March 31, 1997,  respectively,  from the comparable prior year
periods.
 
Interest Expense.  Interest expense increased to $13.7 million and $38.5 million
for the three and nine months  ended March 31,  1997,  respectively,  from $10.0
million and $28.2  million for the  comparable  1996  periods.  The increase was
attributable  to an increase in total average  deposits and  borrowings  coupled
<PAGE>
with an increase in the Company's cost of funds. Average deposits and borrowings
increased  $254.6 million and $242.5 million for the three and nine months ended
March 31, 1997,  respectively,  compared to the 1996  periods.  The average rate
paid on deposits and  borrowings  increased to 4.94% and 4.83% for the three and
nine months  ended March 31,  1997,  respectively,  from 4.63% and 4.60% for the
comparable prior year periods.

Net Interest and Dividend Income. Net interest and dividend income for the three
and nine  months  ended  March 31,  1997 was $8.3  million  and  $24.2  million,
respectively,  reflecting  an  increase  from $7.5  million  and  $21.2  million
recorded  in the  comparable  prior year  periods.  The  increase  reflects  the
Company's  growth  in  assets,  primarily  in  residential  one- to  four-family
mortgage  loans.  The net interest  rate spread and net interest  margin for the
current  three months were 2.52% and 2.81%,  respectively,  a decline from 3.00%
and 3.27%,  respectively,  during the comparable 1996 quarter.  The net interest
rate spread and net interest margin were 2.65% and 2.89%, respectively,  for the
nine months ended March 31, 1997, compared to 3.00% and 3.26% for the comparable
prior year  period.  While the  interest  rate  environment  of recent years has
proven  beneficial  to  many  financial  institutions,  including  the  Company,
increases  in  market  rates of  interest  generally  adversely  affect  the net
interest income of most financial institutions.  Since the Company's liabilities
generally  reprice more quickly  than its assets,  interest  margins will likely
decrease if interest rates rise.

Provision for Loan Losses.  The provision for loan losses for the three and nine
months ended March 31, 1997 was $154,000 and $481,000, respectively, compared to
$150,000 and $410,000 for the prior year periods.  The allowance for loan losses
at March 31, 1997 of $2.8 million reflects a $125,000 increase from the June 30,
1996 level.  The  allowance  for loan losses as a percentage  of  non-performing
loans was 48.99% at March 31, 1997, compared to 42.52% at June 30, 1996.

Non-Interest  Income.  For the  three  and nine  months  ended  March  31,  1997
non-interest  income was $469,000 and $1.3  million,  respectively,  compared to
$507,000 and $1.7 million for the prior year periods. The decrease was partially
due to a  $94,000  gain on sale of  investments  available  for sale  which  was
recorded in the three months ended March 31, 1996. In addition,  the decrease in
the nine months ended March 31, 1997 was  partially  attributable  to a net loss
from real estate  operations of $185,000 compared to a net gain from real estate
operations of $59,000 for the prior year period.  The decrease in net gains from
real  estate   operations  is  partially   reflective  of  additional   reserves
established in accordance  with internal  policies and guidelines on real estate
properties  currently  owned by the Company.  Non- interest  income for the nine
months ended March 31, 1996  included a $62,000  gain on sale of a property,  no
longer used in operations.

Non-Interest Expenses. The Company's non-interest expenses were $4.4 million for
the three months ended March 31, 1997  compared to total  non-interest  expenses
for the three months ended March 31, 1996 of $4.5 million. Non-interest expenses
for the nine months ended March 31, 1997 of $18.0 million  included $4.8 million
for  the  one-time  SAIF  recapitalization   assessment.   Excluding  this  SAIF
assessment, non-interest expenses for the nine months ended March 31, 1997 would
have been  slightly  less than the $13.3  million  reported  for the nine months
ended March 31, 1996. The Company's  non-interest  expenses,  excluding the SAIF
assessment,  as a percent of average assets  declined to 1.49% and 1.70% for the
three and nine months ended March 31, 1997,  respectively,  from 1.86% and 1.92%
for the comparable prior year periods.
<PAGE>
As noted  above,  beginning  January 1, 1997  deposit  insurance  premiums  have
decreased  significantly,  to  approximately  0.065%  from the 0.23% of deposits
previously paid by the Bank.

Income Tax Expense. Income tax expense for the three and nine months ended March
31,  1997 was $1.6  million  and $2.7  million,  respectively,  compared to $1.3
million and $3.6 million for the prior year  periods.  Excluding  the effects of
the  one-time  SAIF  recapitalization  assessment,  income  tax  expense of $4.5
million was recorded for the 1997 nine month period.  The effective tax rate was
37.7% for the three months ended March 31, 1997  compared to 39.2% for the prior
year  period.  Excluding  the  effect  of  the  one-time  SAIF  recapitalization
assessment,  the  effective  tax rate was 38.0% for the nine month  period ended
March 31, 1997 compared to 39.3% for the nine months ended March 31, 1996.

Analysis of Net Interest Income

The  following  table sets forth certain  information  relating to the Company's
consolidated  statements of financial condition and the consolidated  statements
of income  for the three and nine  months  ended  March 31,  1997 and 1996,  and
reflects  the average  yield on assets and average cost of  liabilities  for the
periods  indicated.  Such  yields  and  costs are  derived  from  average  daily
balances.  The average balance of loans receivable includes  non-accruing loans.
The yields and costs include fees which are considered adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31,
                                                 -----------------------------------------------------------------------------------
                                                                   1997                                       1996
                                                 --------------------------------------     ----------------------------------------
                                                   Average        Interest                     Average       Interest
                                                 Outstanding      Earned/       Yield/      Outstanding       Earned/        Yield/
                                                   Balance         Paid         Rate(1)        Balance         Paid          Rate(1)
                                                   -------         ----         -------        -------         ----          -------
                                                                                  (dollars in 000's)
<S>                                              <C>            <C>              <C>         <C>            <C>              <C>
Interest-earning assets:
  One- to four-family mortgage loans ........    $  761,867     $   14,272       7.49%       $  472,649     $    9,108        7.71%
  Commercial and multi-family real
    estate loans ............................        54,342          1,232       9.07            49,296          1,167        9.47
  Consumer loans ............................        35,823            808       9.15            33,512            918       11.02
                                                 ----------     ----------                   ----------     ----------
    Total loans receivable ..................       852,032         16,312       7.66           555,457         11,193        8.06
  Mortgage-backed securities ................       310,283          5,382       6.94           329,059          5,710        6.94
  Investment securities and other ...........        17,683            307       6.95            33,044            601        7.28
                                                 ----------     ----------                   ----------     ----------
    Total interest-earning assets ...........     1,179,998     $   22,001       7.46           917,560     $   17,504        7.63
                                                                ==========                                  ==========
  Non-interest earning assets ...............        54,834                                      58,619
                                                 ----------                                  ----------
    Total assets ............................    $1,234,832                                  $  976,179
                                                 ==========                                  ==========
Deposits and borrowings:
 Money market and demand deposits ...........    $   79,908     $      245       1.25%       $   78,710     $      340        1.74%
 Savings deposits ...........................       172,560            950       2.23           179,454          1,003        2.25
 Certificate of deposit accounts ............       627,389          8,900       5.75           501,441          7,098        5.69
                                                 ----------     ----------                   ----------     ----------
   Total deposits ...........................       879,857         10,095       4.65           759,605          8,441        4.47
 FHLB of New York advances ..................       169,305          2,566       6.15            78,166          1,126        5.79
 Other borrowings ...........................        74,523          1,037       5.56            31,297            433        5.48
                                                 ----------     ----------                   ----------     ----------
   Total deposits and borrowings ............     1,123,685     $   13,698       4.94           869,068     $   10,000        4.63
                                                                ==========                                  ==========
 Other liabilities ..........................        18,194                                      13,452
                                                 ----------                                  ----------
   Total liabilities ........................     1,141,879                                     882,520
 Stockholders' equity .......................        92,953                                      93,659
                                                 ----------                                  ----------
   Total liabilities and stockholders' equity    $1,234,832                                  $  976,179
                                                 ==========                                  ==========

Net interest income and net interest rate
    spread ..................................                   $    8,302       2.52%                      $    7,504        3.00%
                                                                ==========       ====                       ==========        ===== 

Net interest-earning assets and interest
    margin ..................................    $   56,313                      2.81%       $   48,492                       3.27%
                                                 ==========                      ====        ==========                       ===== 

Ratio of interest-earning assets to
    deposits and borrowings .................        105.01%                                     105.58%
                                                     ======                                      ======
(1)  Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                    Nine months Ended March 31,
                                                       -------------------------------------------------------------------------
                                                                          1997                                  1996
                                                       -----------------------------------     --------------------------------- 
                                                         Average        Interest                  Average     Interest
                                                       Outstanding       Earned/   Yield/      Outstanding     Earned/   Yield/
                                                         Balance          Paid     Rate(1)       Balance        Paid     Rate(1)
                                                         -------          ----     -------       -------        ----     -------
                                                                                    (dollars in 000's)
<S>                                                    <C>              <C>         <C>          <C>           <C>        <C>
Interest-earning assets:
  One- to four-family mortgage loans.............      $  682,337       $38,475     7.52%        $432,910      $25,061     7.72%
  Commercial and multi-family real
    estate loans.................................          53,405         3,679     9.19           48,924        3,608     9.83
  Consumer loans.................................          35,088         2,472     9.38           33,100        2,562    10.30
                                                       ----------       -------                  --------      ------- 
    Total loans receivable.......................         770,830        44,626     7.72          514,934       31,231     8.09
  Mortgage-backed securities.....................         324,573        16,893     6.94          321,714       16,475     6.83
  Investment securities and other................          22,021         1,177     7.13           31,883        1,779     7.44
                                                       ----------       -------                 ---------      ------- 
    Total interest-earning assets................       1,117,424       $62,696     7.48          868,531      $49,485     7.60
                                                                        =======                                =======
  Non-interest earning assets....................          54,172                                  56,445
                                                       ----------                                -------- 
    Total assets.................................      $1,171,596                                $924,976
                                                       ==========                                ========
Deposits and borrowings:
 Money market and demand deposits................      $   79,763       $   732     1.22%       $  79,308      $ 1,050     1.76%
 Savings deposits................................         175,424         2,947     2.24          182,860        3,116     2.27
 Certificate of deposit accounts.................         604,761        25,859     5.70          474,835       20,493     5.74
                                                       ----------       -------                 ---------      --------
   Total deposits................................         859,948        29,538     4.58          737,003       24,659     4.45
 FHLB of New York advances.......................         133,697         6,136     6.11           56,611        2,487     5.84
 Other borrowings................................          67,797         2,824     5.47           25,288        1,099     5.69
                                                       ----------       --------                ---------      ------- 
   Total deposits and borrowings.................       1,061,442       $38,498     4.83          818,902      $28,245     4.60
                                                                        =======                                =======
 Other liabilities...............................          18,376                                  11,829
                                                       ----------                              ----------
   Total liabilities.............................       1,079,818                                 830,731
 Stockholders' equity............................          91,778                                  94,245
                                                       ----------                              ----------
   Total liabilities and stockholders' equity....      $1,171,596                                $924,976
                                                       ==========                                ========

Net interest income and net interest rate
    spread.......................................                       $24,198     2.65%                      $21,240     3.00%
                                                                        =======     ====                       =======     ====
Net interest-earning assets and interest
    margin.......................................      $  55,982                    2.89%       $  49,629                  3.26%
                                                       =========                    ====        =========                  ====
Ratio of interest-earning assets to
    deposits and borrowings......................         105.27%                                  106.06%
                                                      ==========                                ========= 
(1)  Annualized.
</TABLE>
<PAGE>
Non-Performing Assets

The  table  below  sets  forth  the   Company's   amounts  and   categories   of
non-performing  assets and troubled debt restructured loans. Loans are placed on
non-accrual  status when the  collection  of principal  and/or  interest  become
delinquent  more than 90 days.  Foreclosed  assets  include  assets  acquired in
settlement  of loans  and are  shown  net of  valuation  allowances.  All of the
Company's  troubled debt  restructured  loans are performing  according to their
modified terms.
<TABLE>
<CAPTION>
                                                             March 31,  June 30,
                                                               1997       1996
                                                             (dollars in 000's)
<S>                                                           <C>        <C>
Non-performing loans:
  One- to four-family ....................................    $3,423     $4,009
  Commercial and multi-family real estate ................     1,329        913
  Consumer ...............................................       872      1,264
                                                              ------     ------
    Total non-performing loans ...........................     5,624      6,186
                                                              ------     ------

Real estate owned, net ...................................       715      1,083
                                                              ------     ------
    Total non-performing assets ..........................     6,339      7,269

Troubled debt restructured loans .........................     2,317      2,340
                                                              ------     ------
    Total risk elements ..................................    $8,656     $9,609
                                                              ======     ======

Non-performing loans as a percentage of total loans ......      0.63%      0.94%
                                                              ======     ======
Non-performing assets as a percentage of total assets ....      0.51%      0.67%
                                                              ======     ======
Total risk elements as a percentage of total assets ......      0.69%      0.88%
                                                              ======     ======
</TABLE>

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

Real estate properties acquired through foreclosure are recorded at the lower of
cost or estimated fair value less costs to dispose of such  properties.  If fair
value at the date of  foreclosure is lower than the balance of the related loan,
the difference  will be charged-off to the allowance for loan losses at the time
of transfer.  Valuations are periodically updated by management and if the value
declines, a specific provision for losses on real estate owned is established by
a charge to operations.
<PAGE>
Although  management  believes  that it uses the best  information  available to
determine  the  allowances,   unforeseen   market  conditions  could  result  in
adjustments and net earnings could be  significantly  affected if  circumstances
differ   substantially   from  the   assumptions   used  in  making   the  final
determination.  Future additions to the Company's  allowances will be the result
of periodic loan,  property and collateral  reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination  process,  periodically  review  the  Company's  allowance  for loan
losses.  Such  agencies  may  require  the  Company to record  additions  to the
allowance level based upon their judgement of the information  available to them
at the time of their  examination.  At March 31,  1997,  the Company had a total
allowance  for  loan  losses  of  $2.8  million  representing  48.99%  of  total
non-performing loans.

Interest Rate Sensitivity Analysis

Interest Rate Gap. The interest rate risk inherent in assets and liabilities may
be determined by analyzing the extent to which such assets and  liabilities  are
"interest  rate  sensitive"  and by measuring  an  institution's  interest  rate
sensitivity  "gap".  An asset or liability is said to be interest rate sensitive
within a defined time period if it matures or reprices  within that period.  The
difference or mismatch between the amount of interest-earning assets maturing or
repricing within a defined period and the amount of interest-bearing liabilities
maturing or  repricing  within the same period is defined as the  interest  rate
sensitivity  gap.  In an attempt to manage its  exposure  to changes in interest
rates, management closely monitors the Company's exposure to interest rate risk.

At March 31, 1997,  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 $102.2  million,  representing a one year negative
gap of 8.16% of total  assets.  At June 30, 1996,  the one year negative gap was
13.97% of total  assets.  As a result of having a negative gap, the yield on the
Company's  interest-earning  assets may adjust to changes in interest rates at a
slower rate than the cost of its  deposits  and  borrowings.  During a period of
rising  interest rates, a negative gap would tend to result in a decrease in net
interest  income.  The opposite  tendency  would be expected  during a period of
declining interest rates.

In evaluating the Company's exposure to interest rate risk, certain shortcomings
inherent in the method of analysis  must be  considered.  For example,  although
certain  assets  and  liabilities  may have  similar  maturities  or  periods to
repricing,  they may react in  different  degrees to changes in market  interest
rates.  Also, the interest rates on certain types of assets and  liabilities may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other types may lag behind changes in market  interest  rates.  Additionally,
certain assets, such as adjustable rate mortgages,  have features which restrict
changes  in  interest  rates in the  short-term  and over the life of the asset.
Further,  in the  event of a change  in  interest  rates,  prepayment  and early
withdrawal  levels may deviate  significantly  from those assumed in calculating
the gap position.  Finally,  the ability of many borrowers to service their debt
may decrease in the event of an interest rate  increase.  The Company  considers
all of these factors in monitoring its exposure to interest rate risk.
<PAGE>
Net Portfolio  Value.  The Bank's interest rate sensitivity is also monitored by
management  through the review of selected  interest rate risk ("IRR")  measures
produced by the Office of Thrift Supervision ("OTS"). Using data from the Bank's
quarterly  Thrift  Financial  Reports,  coupled  with  non-institution  specific
assumptions  which are based on national  averages,  the OTS measures the Bank's
IRR by modeling  the change in net  portfolio  value  ("NPV")  over a variety of
interest  rate  scenarios.  NPV is the present value of expected cash flows from
assets,  liabilities  and  off-balance  sheet  contracts.  An NPV ratio,  in any
interest rate scenario,  is defined as the NPV in that rate scenario  divided by
the market value of assets in the same scenario.

The  IRR  measures  used  by the  OTS  include  an  IRR  "Exposure  Measure"  or
"Post-Shock" NPV ratio and a "Sensitivity Measure." A low "Post-Shock" NPV ratio
indicates  greater  exposure  to IRR.  Greater  exposure  can result  from a low
initial  NPV  ratio or high  sensitivity  to  changes  in  interest  rates.  The
Sensitivity Measure is the decline in the NPV ratio, in basis points,  caused by
a 2% increase or decrease in rates, whichever produces a larger decline.

As of December 31, 1996 (the latest date for which  information  is  available),
the Bank's initial NPV ratio, as measured by the OTS, was 6.96%.  Following a 2%
increase in interest rates,  the Bank's  "Post-Shock"  NPV ratio was 3.26%.  The
change in the NPV ratio or the Bank's Sensitivity Measure was 3.70%.

Management   reviews  the  quarterly  OTS  measurements  and  compares  them  to
evaluations  produced through  internally  generated  simulation  models,  which
utilize institution specific  assumptions.  Generally,  the internally generated
simulation results reflect lower levels of interest rate risk (i.e., higher post
shock NPV ratio and lower sensitivity measure) than the OTS results.

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

At March 31, 1997,  based on its internally  generated  simulation  models,  the
Company's  consolidated net interest income projected for one year forward would
decrease  13.0%  from  the base  case,  or  current  market,  as a result  of an
immediate and sustained 2% increase in interest rates.

Liquidity and Capital Resources

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

Federal  regulations  require  the Bank to  maintain  minimum  levels  of liquid
assets. The required percentage has varied from time to time based upon economic
conditions  and savings flows and is currently 5% of net  withdrawable  deposits
and  borrowings  payable on demand or in one year or less  during the  preceding
calendar month.  Liquid assets for purposes of this ratio include cash,  accrued
interest  receivable,  certain  time  deposits,  U.S.  Treasury  and  Government
agencies  and  other  securities  and  obligations  generally  having  remaining
<PAGE>
maturities of less than five years.  The  Company's  most liquid assets are cash
and cash equivalents, short term investments and mortgage-backed securities. The
levels of these assets are dependent on the Bank's operating, financing, lending
and investing activities during any given period. At March 31, 1997 and June 30,
1996, the Bank's liquidity ratios were 10.71% and 15.17%, respectively,  both in
excess of the 5% minimum regulatory requirement.

The Company uses its liquid resources  principally to meet ongoing  commitments,
to fund maturing  certificates of deposit and deposit  withdrawals,  to purchase
loans and securities, to fund existing and future loan commitments,  and to meet
operating  expenses.  Management believes that loan repayments and other sources
of funds will be adequate to meet the Company's foreseeable liquidity needs.

In addition to cash provided by operating  activities,  the Company's cash needs
for the nine months ended March 31, 1997 and 1996 were  principally  provided by
increased  deposits  and an increase  in advances  from the FHLB of New York and
other  borrowings.  For the nine months ended March 31, 1997 and 1996,  the cash
provided was  principally  used for  investing  activities,  which  included the
origination and purchase of loans.

Current  regulatory  standards  impose the  following  capital  requirements:  a
risk-based capital standard expressed as a percentage of risk adjusted assets; a
leverage ratio of core capital to total adjusted assets;  and a tangible capital
ratio expressed as a percentage of total adjusted assets.  As of March 31, 1997,
the  Bank  substantially  exceeded  all  regulatory  capital  standards  and was
considered a well capitalized  institution  (see Note 3. - Stockholders'  Equity
and Regulatory Capital, in the Notes to Consolidated Financial Statements).
<PAGE>
PART II - Other Information

Item 1.      Legal Proceedings
             None.

Item 2.      Changes in Securities
             None.

Item 3.      Defaults Upon Senior Securities
             None.

Item 4.      Submission of Matters to a Vote of Security Holders
             None.

Item 5.      Other Information
             None.

Item 6.      Exhibits and Reports on Form 8-K
             None.
<PAGE>



                                   SIGNATURES


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


                                            PENNFED FINANCIAL SERVICES, INC.



Date: May 14, 1997                             By:/s/ Joseph L. LaMonica
                                                  ----------------------
                                                  Joseph L. LaMonica
                                                  President and Chief
                                                  Executive Officer




Date: May 14, 1997                             By:/s/ Lucy T. Tinker
                                                  ------------------
                                                  Lucy T. Tinker
                                                  Executive Vice President and
                                                  Chief Operating Officer
                                                  (Principal Financial Officer)




Date: May 14, 1997                             By:/s/ Jeffrey J. Carfora
                                                  ----------------------
                                                  Jeffrey J. Carfora
                                                  Senior Vice President and
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)