SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

[ X ] Filed by the registrant

[ ] Filed by a party other than the registrant

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))

[ X ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12

PennFed Financial Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

September 25, 1998

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of PennFed Financial
Services, Inc., we cordially invite you to attend the Annual Meeting of
Stockholders of the Company. The Meeting will be held at 10:00 a.m., local time,
on Wednesday, October 28, 1998, at the Radisson Hotel, located at 690 Route 46
East, Fairfield, New Jersey.

An important aspect of the annual meeting process is the annual
stockholder vote on corporate business items. I urge you to exercise your rights
as a stockholder to vote and participate in this process. Stockholders are being
asked to consider and vote upon (i) the election of two directors of the Company
and (ii) the ratification of the appointment of the Company's auditors. In
addition, the Meeting will include management's report to you on the Company's
1998 financial and operating performance.

We encourage you to attend the Meeting in person. Whether or not you
plan to attend, however, please read the enclosed Proxy Statement and then
complete, sign and date the enclosed proxy and return it in the accompanying
postpaid return envelope as promptly as possible. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented at the Meeting.

Your Board of Directors and management are committed to the continued
success of PennFed Financial Services, Inc., and the enhancement of your
investment. As President, I want to express my appreciation for your confidence
and support.

Very truly yours,

/s/Joseph L. LaMonica
---------------------
Joseph L. LaMonica
President and Chief
Executive Officer

PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 28, 1998

Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of PennFed Financial Services, Inc. (the "Company") will be held at
the Radisson Hotel, located at 690 Route 46 East, Fairfield, New Jersey, at
10:00 a.m., local time, on Wednesday, October 28, 1998.

A Proxy Card and a Proxy Statement for the Meeting are enclosed.

The Meeting is for the purpose of considering and acting upon:

1. The election of two directors of the Company;

2. The ratification of the appointment of Deloitte &
Touche LLP as auditors for the Company for the fiscal
year ending June 30, 1999;

and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to come before the Meeting.

Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
September 11, 1998 are the stockholders entitled to vote at the Meeting and any
adjournments or postponements thereof. A complete list of stockholders entitled
to vote at the Meeting will be available for stockholders at the offices of the
Company during the ten days prior to the Meeting, as well as at the Meeting.

You are requested to complete and sign the enclosed Proxy Card which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The Proxy will not be used if you attend and vote at the
Meeting in person.

By Order of the Board of Directors

/s/William C. Anderson
----------------------
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 25, 1998

- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING.
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------

PROXY STATEMENT

PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366

ANNUAL MEETING OF STOCKHOLDERS
October 28, 1998

This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of PennFed Financial Services, Inc. (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Meeting") which will be held at the Radisson Hotel, located at 690
Route 46 East, Fairfield, New Jersey, on Wednesday, October 28, 1998, at 10:00
a.m., local time, and all adjournments or postponements of the Meeting. The
accompanying Notice of Annual Meeting and form of proxy and this Proxy Statement
are first being mailed to stockholders on or about September 25, 1998. Certain
of the information provided herein relates to Penn Federal Savings Bank ("Penn
Federal" or the "Bank"), a wholly-owned subsidiary of the Company.

At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of two directors of the Company and (ii) the
ratification of the appointment of Deloitte & Touche LLP as the Company's
auditors for the fiscal year ending June 30, 1999.

Vote Required and Proxy Information

All shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the nominees named herein
and for the ratification of the appointment of Deloitte & Touche LLP. The
Company does not know of any matters, other than as described in the Notice of
Annual Meeting of Stockholders, that are to come before the Meeting. If any
other matters are properly presented at the Meeting for action, the persons
named in the enclosed form of proxy and acting pursuant thereto will have the
discretion to vote on such matters in accordance with their best judgment.

Directors shall be elected by a plurality of the votes cast. In all
matters other than the election of directors, the affirmative vote of the
majority of the votes cast shall be the act of the stockholders. Proxies marked
to abstain with respect to a proposal will have the same effect as votes against
the proposal. Votes withheld (for the election of directors) and broker
non-votes will have no effect on the vote. The holders of at least one-third of
the shares of the Common Stock entitled to vote at the Meeting, present in
person or represented by proxy, shall constitute a quorum for purposes of the
Meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum.

A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Patrick D.
McTernan, Secretary, PennFed Financial Services, Inc., 622 Eagle Rock Avenue,
West Orange, New Jersey 07052-2989.

Voting Securities and Certain Holders Thereof

Stockholders of record as of the close of business on September 11,
1998 will be entitled to one vote for each share then held. As of that date, the
Company had 9,235,859 shares of Common Stock issued and outstanding. The
following table sets forth, as of September 11, 1998, information regarding
share ownership of: (i) those persons or entities known by management to
beneficially own more than five percent of the Common Stock; (ii) the Chief
Executive Officer of the Company and each of the executive officers of the
Company and the Bank whose salary and bonus for fiscal 1998 exceeded $100,000
(the "Named Officers"); and (iii) all directors and executive officers of the
Company and the Bank as a group. For information regarding the beneficial
ownership of Common Stock by directors of the Company, see "Proposal I. Election
of Directors--General."

Shares Percent
Beneficially of
Beneficial Owner Owned Class
---------------- ----- -----

PennFed Financial Services, Inc. 942,381(1) 10.20%
Employee Stock Ownership Plan
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989

Tontine Financial Partners, L.P. 664,600(2) 7.20
Tontine Management, L.L.C.
Tontine Overseas Associates, L.L.C.
Jeffrey L. Gendell
200 Park Avenue
Suite 3900
New York, New York 10166

John Hancock Mutual Life Insurance Company and 611,000(3) 6.62
John Hancock Subsidiaries, Inc.
P.O. Box 111
Boston, Massachusetts 02117

and

The Berkeley Financial Group and
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199

Palisade Capital Management, L.L.C. 549,800(4) 5.95
One Bridge Plaza
Suite 695
Fort Lee, New Jersey 07024

Named Officers(5)

Joseph L. LaMonica 396,945 4.19
President and Chief
Executive Officer

Patrick D. McTernan 195,722 2.09
Executive Vice President,
General Counsel and Secretary

Lucy T. Tinker 185,776 1.99
Executive Vice President
and Chief Operating Officer

Jeffrey J. Carfora 52,167 0.56
Senior Vice President and
Chief Financial Officer

Shares Percent
Beneficially of
Beneficial Owner Owned Class
---------------- ----- -----

Barbara J. Sanders(6) 50,821 0.55
Senior Vice President and
Lending Group Executive of the Bank

Barbara A. Flannery 50,789 0.55
Senior Vice President and
Retail Banking Group Executive of the Bank

Directors and executive officers 1,621,178 15.91
of the Company and the Bank
as a group (10 persons)(7)

footnotes follow

(1) The amount reported represents shares held by the PennFed Financial
Services, Inc. Employee Stock Ownership Plan (the "ESOP"), 301,386 of
which have been allocated to accounts of participants. First Bankers
Trust Company, Quincy, Illinois, the trustee of the ESOP, may be deemed
to beneficially own the shares held by the ESOP which have not been
allocated to the accounts of participants. Pursuant to the terms of the
ESOP, participants in the ESOP have the right to direct the voting of
shares allocated to participant accounts. Unallocated shares are voted
by the trustee in the same proportion that the allocated shares are
voted pursuant to participant instructions.

(2) As reported by Tontine Financial Partners, L.P. ("TF"), Tontine
Management, L.L.C. ("TM"), Tontine Overseas Associates, L.L.C. ("TO")
and Jeffrey L. Gendell on a Schedule 13D dated July 16, 1998 filed with
the Securities and Exchange Commission (the "SEC"). TM is general
partner of TF and Mr. Gendell serves as the managing member of TM and
TO. With respect to the 664,600 shares listed, TF and TM each reported
shared voting and dispositive powers over 407,100 shares, TO reported
shared voting and dispositive powers over 257,500 shares and Mr.
Gendell reported shared voting and dispositive powers over all 664,600
shares.

(3) As reported by John Hancock Mutual Life Insurance Company ("JHMLIC"),
JHMLIC's wholly-owned subsidiary, John Hancock Subsidiaries, Inc.
("JHSI"), JHSI's wholly-owned subsidiary, The Berkeley Financial Group
("TBFG"), and TBFG's wholly-owned subsidiary, John Hancock Advisers,
Inc., ("JHA") in a statement as of December 31, 1997 on Amendment No. 3
to a Schedule 13G filed with the SEC. JHMLIC, JHSI, and TBFG reported
indirect beneficial ownership of these shares. JHA reported sole voting
and dispositive powers as to all of such shares.

(4) As reported by Palisade Capital Management, L.L.C. ("Palisade"), on
Amendment No. 1 to a Schedule 13G dated March 12, 1998 filed with the
SEC. Palisade reported sole voting and dispositive powers over all
shares listed.

(5) Includes shares held directly, including restricted shares and shares
allocated to the accounts of the Named Officers under the ESOP, as well
as shares held jointly with family members, in retirement accounts, in
a fiduciary capacity, by certain members of the Named Officers'
families, by trusts of which the Named Officer is a trustee or
substantial beneficiary, with respect to which the Named Officer may be
deemed to have sole voting and/or investment powers. Also includes
247,533, 121,760, 117,813, 28,800, 28,800 and 28,800 shares which Mr.
LaMonica, Mr. McTernan, Ms. Tinker, Mr. Carfora, Ms. Sanders and Ms.
Flannery, respectively, have the right to acquire pursuant to stock
options currently exercisable or which will become exercisable within
60 days of September 11, 1998.

(6) Ms. Sanders resigned from the Bank effective September 3, 1998.

(7) This amount includes shares held directly, including restricted shares
and shares allocated to the accounts of executive officers under the
ESOP, as well as shares held jointly with family members, in retirement
accounts, in a fiduciary capacity, by certain of the group members'
families, by certain related entities or by trusts of which the group
member is a trustee or substantial beneficiary, with respect to which
shares the group member may be deemed to have sole or shared voting
and/or investment powers. This amount also includes an aggregate of
952,400 shares which directors and executive officers as a group have
the right to acquire pursuant to stock options currently exercisable or
which will become exercisable within 60 days of September 11, 1998, and
excludes 12,160 shares of which Mario Teixeira, Jr., a director of the
Company, disclaims beneficial ownership.

PROPOSAL I. ELECTION OF DIRECTORS

General

The Company's Board of Directors currently consists of six members,
each of whom is also a director of the Bank. Each of the current directors of
the Company has served in such capacity since its incorporation in March 1994.
The Board is divided into three classes, each of which contains one-third of the
Board. One-third of the directors are elected annually. Directors of the Company
are generally elected to serve for three-year terms or until their respective
successors are elected and qualified.

The following table sets forth certain information, as of September 11,
1998, regarding the composition of the Company's Board of Directors, including
each director's term of office. The Board of Directors acting as the nominating
committee has recommended and approved the nominees identified in the following
table. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to a nominee)
will be voted at the Meeting FOR the election of the nominees identified below.
If a nominee is unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute nominee as the Board of
Directors may recommend. At this time, the Board of Directors knows of no reason
why either nominee may be unable to serve, if elected. Except as disclosed
herein, there are no arrangements or understandings between the nominee and any
other person pursuant to which the nominee was selected.

Shares of
Common Stock Percent
Position(s) Held Director Term to Beneficially of
Name Age in the Company Since(1) Expire Owned(2) Class
---- --- -------------- -------- ------ -------- -----

NOMINEES
William C. Anderson 50 Chairman of the Board 1979 2001 381,844 4.03 %

Amadeu L. Carvalho 69 Director 1990 2001 89,522 0.96
DIRECTORS CONTINUING IN OFFICE
Patrick D. McTernan 46 Director, Executive Vice 1989 1999 195,722 2.09
President, General
Counsel and Secretary
Marvin D. Schoonover 48 Director 1990 1999 71,151 0.77
Joseph L. LaMonica 48 Director, President and 1987 2000 396,945 4.19
Chief Executive Officer
Mario Teixeira, Jr. 62 Director 1971 2000 146,441(3) 1.58

- -------------

(1) Includes service as a director of the Bank prior to the formation of the
Company.
(2) Amounts include shares held directly, including restricted shares, as well
as shares held jointly with family members, in retirement accounts, in a
fiduciary capacity, by certain members of the director's family, held by
certain related entities or held by trusts of which the director is a
trustee or substantial beneficiary, with respect to which shares the
respective director may be deemed to have sole or shared voting and/or
investment powers. Amounts also include 250,013, 44,747, 121,760, 40,747,
247,533 and 43,387 shares which Messrs. Anderson, Carvalho, McTernan,
Schoonover, LaMonica and Teixeira, respectively, have the right to acquire
pursuant to stock options currently exercisable or which will become
exercisable within 60 days. With respect to Messrs. LaMonica and McTernan,
amounts also include 10,410 shares which have been allocated to each of
their respective accounts under the ESOP.
(3) Amount excludes 12,160 shares of which Mr. Teixeira disclaims beneficial
ownership.

The principal occupation of each director of the Company and each of
the nominees for director is set forth below. All directors and nominees have
held their present principal occupation for at least five years unless otherwise
indicated.

William C. Anderson--Mr. Anderson has been Chairman of the Board of the
Company since its incorporation in March 1994. Mr. Anderson is also the Chairman
of the Board and President of John Young Company, Inc., a real estate agency
located in Caldwell, New Jersey.

Amadeu L. Carvalho--Mr. Carvalho, retired Controller of the Singer
Company, currently is in private accounting practice in Elizabeth, New Jersey.
His practice includes tax services and business and strategic planning for small
and medium size companies.

Patrick D. McTernan--Mr. McTernan has been Executive Vice President,
General Counsel and Secretary of the Company since its incorporation. He joined
Penn Federal in 1989 as Senior Vice President and General Counsel and was
promoted to Executive Vice President and General Counsel in 1992. He also serves
as corporate Secretary.

Prior to his employment with the Bank, he was a partner in the law firm of Adams
and McTernan located in South Orange, New Jersey. He is currently a member of
the Legal Committee of the New Jersey Savings League.

Marvin D. Schoonover--Mr. Schoonover is a Senior Account Executive with
the EMAR Group, Inc., an insurance agency located in Livingston, New Jersey, and
is responsible for the marketing, sales and servicing of commercial property and
casualty insurance. Mr. Schoonover first joined the EMAR Group, Inc. in 1980.
Mr. Schoonover also is a licensed real estate salesperson.

Joseph L. LaMonica--Mr. LaMonica has been President and Chief Executive
Officer of the Company since its incorporation in March 1994, and of Penn
Federal since 1988. Mr. LaMonica has served Penn Federal in various capacities
since joining the Bank in 1980. He also is a member of the Board of Directors of
the Saint James Foundation, a philanthropic organization, and serves in an
advisory capacity to the Ironbound Ambulance Squad. He currently serves on the
Board of Governors of the New Jersey Savings League.

Mario Teixeira, Jr.--Mr. Teixeira has been a licensed funeral director
since 1961. He is owner and President of the Buyus Funeral Home in Newark and
owns the Bernauer Funeral Home and the Rucki Funeral Home, both located in
Newark, as well as the Shaw-Buyus Home for Services, located in Kearny, New
Jersey. In addition, Mr. Teixeira is a partner in BRSB Preneed Association, a
partnership specializing in funerals.

Meetings and Committees of the Board of Directors

Meetings and Committees of the Company. Meetings of the Company's Board
of Directors are generally held on a monthly basis. For the fiscal year ended
June 30, 1998, the Board of Directors met 17 times. During fiscal 1998, no
incumbent director of the Company attended fewer than 75% of the aggregate of
the total number of meetings held by the committees of the Board of Directors on
which he served. The Board of Directors of the Company has standing Executive
and Audit Committees.

The Executive Committee is comprised of all members of the Board. The
Executive Committee meets on an as needed basis and exercises the power of the
Board of Directors between Board meetings, to the extent permitted by Delaware
law. This Committee did not meet during fiscal 1998.

The Audit Committee is composed of Chairman Anderson (Chairman) and
Directors Carvalho and Teixeira. The Audit Committee reviews audit reports and
related matters to ensure effective compliance with regulatory and internal
policies and procedures. The Audit Committee met two times in fiscal 1998.

The entire Board of Directors acts as a nominating committee for
selecting nominees for election as directors. While the Board of Directors of
the Company will consider nominees recommended by stockholders, the Board has
not actively solicited such nominations. Pursuant to the Company's Bylaws,
nominations by stockholders generally must be delivered in writing to the
Secretary of the Company at least 60 days prior to the date of the Meeting and
comply with certain other requirements specified in the Bylaws. The Board of
Directors met one time during fiscal 1998 in its capacity as a nominating
committee.

Meetings and Committees of the Bank. The Bank's Board of Directors
meets twice monthly and may have additional special meetings upon the written
request of the Chairman of the Board, the President or at least three directors.
The Bank's Board of Directors met 23 times during the year ended June 30, 1998.
During fiscal 1998, no incumbent director of the Bank attended fewer than 75% of
the aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he served.
The Bank has standing Audit, Human Resources and Compensation Committees, as
well as other committees which meet periodically. Set forth below is a
description of certain committees of the Bank.

The Audit Committee is responsible for the oversight of the Bank's
Internal Audit Department and for the review of the Bank's annual audit report
prepared by the Bank's independent auditors. Only non-employee directors may
serve on the Audit Committee. The current members of the committee are Chairman
Anderson (Chairman) and Directors Carvalho and Teixeira. The Audit Committee met
five times during fiscal 1998.

The Bank's Human Resources Committee is responsible for the review and
approval of the numerous personnel policies of the Bank. This Committee
addresses, among other things, the Bank's benefit programs and plans and
affirmative action plan. The current members of the Human Resources Committee
are Directors Teixeira (Chairman), Schoonover and LaMonica. The Committee met
two times during fiscal 1998.

The Bank's Compensation Committee, which acts as the compensation
committee of the Company and the Bank, determines salary ranges and incentive
compensation. This Committee is also responsible for administering the Stock
Option and Incentive Plan and Management Recognition Plan (the "MRP"). The
current members of the Compensation Committee are Directors Carvalho (Chairman)
and Teixeira. This Committee met three times during the fiscal year ended June
30, 1998.

Director Compensation

The Company's directors are not paid fees for their service in such
capacity. Non-employee directors of the Bank were each paid a fee of $28,000 for
fiscal 1998 except for the Chairman who received $58,000. Each non-employee
director also received $350 for attendance at each meeting of the Board's
standing committees and $5,000 for the payment of an annual life insurance
premium. Chairman Anderson was awarded on July 22, 1997 an option to purchase
38,600 shares of Common Stock at an exercise price of $13.875 per share, with
60% of the option vesting immediately, an additional 20% vesting on April 28,
1998 and the remaining 20% scheduled to vest on April 28, 1999. In addition, on
December 9, 1997, Chairman Anderson was awarded an option to purchase 100,000
shares of Common Stock and Directors Carvalho, Schoonover and Teixeira were each
granted an option to purchase 20,000 shares of Common Stock, each at an exercise
price of $17.1875 per share, with one-third of the option vesting immediately,
an additional one-third scheduled to vest on December 9, 1998 and the remaining
one-third scheduled to vest on December 9, 1999. The number of shares underlying
and exercise prices of the options described above have been adjusted for the
two-for-one stock split in the form of a 100% stock dividend paid on the Common
Stock on February 10, 1998 (the "Stock Split").

Executive Compensation

The following table sets forth information regarding compensation paid
or granted to the Named Officers.

SUMMARY COMPENSATION TABLE

Long-Term
Compensation
Annual Compensation Awards
------------------------- -----------------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Award(s) Options Compensation
Name and Principal Position Year ($) ($) ($)(1) (#) ($)(2)
--------------------------- ---- -------- ------------ ------------ ---------- -------

Joseph L. LaMonica, 1998 $290,004 $ --- $ --- 100,000(3) $60,685
President and Chief 1997 290,004 29,000 --- --- 46,363
Executive Officer 1996 290,004 29,000 --- --- 30,299

Patrick D. McTernan, 1998 $183,762 $ --- $ --- 24,000(3) 53,222
Executive Vice President, 1997 181,500 18,500 --- --- 40,859
General Counsel and Secretary 1996 181,500 --- --- --- 26,189

Lucy T. Tinker, 1998 $185,000 $ --- $ --- 25,000(3) 56,611
Executive Vice President and 1997 184,760 18,500 --- --- 42,882
Chief Operating Officer 1996 172,067 --- --- --- 28,338

Jeffrey J. Carfora, 1998 $110,000 $ --- $ --- 15,000(3) 43,595
Senior Vice President and 1997 110,000 --- --- --- 32,385
Chief Financial Officer 1996 110,000 --- --- --- 19,395

Barbara J. Sanders, 1998 $123,878 $ --- $ --- 15,000(3) 47,432
Senior Vice President and 1997 118,906 --- --- --- 34,584
Lending Group Executive of the 1996 117,412 --- --- --- 20,558
Bank(4)

Barbara A. Flannery 1998 $110,000 $ --- $ --- 15,000(3) 43,425
Senior Vice President 1997 99,359 --- --- --- 30,332
and Retail Banking Group 1996 91,811 --- --- --- 16,379
Executive of the Bank
- ------------

(1) Based on the $16.5625 closing price per share of the Common Stock on the
Nasdaq National Market on June 30, 1998, the 23,800, 10,710, 10,710, 2,142,
2,142 and 2,142 restricted shares held by Mr. LaMonica, Mr. McTernan, Ms.
Tinker, Mr. Carfora, Ms. Sanders and Ms. Flannery, respectively, as of June
30, 1998, had aggregate market values of $394,188, $177,384, $177,384,
$35,477, $35,477 and $35,477, respectively.

(2) Includes term life insurance premiums, income attributable under whole-life
insurance policy, employer contributions to Penn Federal's 401(k) Plan and
ESOP allocations, respectively, for fiscal 1998, 1997 and 1996 as follows:
Mr. LaMonica - 1998: $1,148, $12,014, $2,496 and $45,027; 1997: $892,
$9,078, $2,732 and $33,661; and 1996: $1,577, $6,290, $2,248 and $20,184;
Mr. McTernan - 1998: $660, $5,495, $2,040 and $45,027; 1997: $700, $4,142,
$2,356 and $33,661; and 1996: $900, $2,859, $2,246 and $20,184; Ms. Tinker
- 1998: $732, $9,326, $1,526 and $45,027; 1997: $706, $7,129, $1,386 and
$33,661; and 1996: $893, $5,030, $2,231 and $20,184; Mr. Carfora - 1998:
$436, $0, $1,883 and $41,276; 1997: $462, $0, $1,650 and $30,273; and 1996:
$594, $0, $1,189 and $16,982; Ms. Sanders - 1998: $488, $0, $2,101 and
$44,843; 1997: $498, $0, $1,786 and $32,300; and 1996: $637, $0, $1,942 and
$17,979; and Ms. Flannery - 1998: $437, $0, $1,650 and $41,338; 1997 -
$419, $0, $1,490 and $28,423; and 1996 - $500, $0, $1,374 and $14,505.

(3) For additional information regarding these awards, see the table below
captioned "Option Grants in Last Fiscal Year."

(4) Ms. Sanders resigned from the Bank effective September 3, 1998.

The following table sets forth certain information concerning stock
options granted to the Named Officers in fiscal 1998. No stock appreciation
rights were granted to the Named Officers during fiscal 1998.

OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(4)
-------------------------------------------------------------- ----------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Year Price Expiration
Name (#)(1)(2) ($/Sh)(2) Date Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------

Joseph L. LaMonica 100,000 20.55 $17.1875 12/09/07 $1,080,913 $2,739,245
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick D. McTernan 24,000 4.93 $17.1875 12/09/07 $259,419 $657,419
- ------------------------------------------------------------------------------------------------------------------------------------
Lucy T. Tinker 25,000 5.14 $17.1875 12/09/07 $270,229 $684,812
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey J. Carfora 15,000 3.08 $17.1875 12/09/07 $162,137 $410,887
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara J. Sanders(3) 15,000 3.08 $17.1875 12/09/07 $162,137 $410,887
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. Flannery 15,000 3.08 $17.1875 12/09/07 $162,137 $410,887
====================================================================================================================================

(1) One third of the option vested immediately upon grant, with an additional
one-third scheduled to vest on December 9, 1998 and the remaining one-third
scheduled to vest on December 9, 1999.
(2) The number of shares and exercise prices have been adjusted for the Stock
Split.
(3) Ms. Sanders resigned from the Bank effective September 3, 1998.
(4) Each option has a term of ten years, commencing on December 9, 1997 and
expiring on December 9, 2007.

The following table sets forth certain information concerning stock
option exercises during the last fiscal year and the number and value of stock
options held by the Named Officers as of June 30, 1998.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
on Value Options at FY-End (#)(3) FY-End ($)(1)
Exercise Realized ---------------------------------------------------------------
Name (#)(3) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------ --- ----------- ------------- ----------- -------------

Joseph L. LaMonica --- --- 247,533 120,217 $2,423,138 $605,784

Patrick D. McTernan 10,000 127,500(2) 121,760 46,940 1,286,910 350,009

Lucy T. Tinker --- --- 117,813 44,037 1,238,493 309,623

Jeffrey J. Carfora --- --- 28,800 15,950 269,238 67,310

Barbara J. Sanders(4) --- --- 28,800 15,950 269,238 67,310

Barbara A. Flannery --- --- 28,800 15,950 269,238 67,310

- ----------------

(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the options granted based upon the exercise
price of the options and the closing price of the Common Stock ($16.5625)
on the Nasdaq National Market on June 30, 1998.
(2) Represents the difference between the aggregate market value of the shares
acquired upon exercise at the time of exercise (based on a market value per
share of $18.00) and the aggregate exercise price (based on an exercise
price per share of $5.25).
(3) Amounts have been adjusted for the Stock Split.
(4) Ms. Sanders resigned from the Bank effective September 3, 1998.

Employment Agreements

In connection with the Bank's mutual to stock conversion, the Bank
entered into employment agreements with Messrs. LaMonica and McTernan and Ms.
Tinker. Each employment agreement provides for an annual base salary in an
amount not less than the employee's then-current salary and an initial term of
three years. Each agreement provides for extensions of one year, in addition to
the then-remaining term under the agreement, on each anniversary of the
effective date of the agreement (i.e., each July 14), subject to a formal
performance evaluation performed by disinterested members of the Board of
Directors of the Bank. Each agreement provides for termination upon the
employee's death, for cause or in certain events specified by Office of Thrift
Supervision ("OTS") regulations. Each employment agreement is also terminable by
the employee upon 90 days notice to the Bank.

Each employment agreement provides for payment to the employee of the
greater of his or her salary for the remainder of the term of the agreement, or
299% of the employee's base compensation, in the event there is a "change in
control" of the Bank where employment terminates voluntarily or involuntarily in
connection with such change in control or within 12 months thereafter. This
termination payment is subject to reduction by the amount of all other
compensation to the employee deemed for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), to be contingent on a "change in control," and
may not exceed three times the employee's average annual compensation over the
most recent five year period or be non-deductible by the Bank for federal income
tax purposes. For purposes of the employment agreements, a "change in control"
is defined as any event which would require the filing of an application for
acquisition of control or notice of change in control pursuant to 12 C.F.R.
ss.ss. 574.3 or 574.4. Such events are generally triggered prior to the
acquisition of control of 10% of the Company's common stock. Each agreement also
guarantees participation in an equitable manner in employee benefits applicable
to executive personnel.

Based on his or her current salary, if Mr. LaMonica, Mr. McTernan and
Ms. Tinker had been terminated as of June 30, 1998, under circumstances
entitling him or her to severance pay as described above, he or she would have
been entitled to receive a lump sum cash payment of approximately $1,529,347,
$829,697 and $788,988, respectively.

Certain Transactions

The Bank has followed a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for consumer purposes. All loans by the Bank to
its senior officers and directors are subject to OTS regulations restricting
loans and other transactions with affiliated persons of the Bank. Under
applicable law, all loans or extensions of credit to executive officers and
directors must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
the general public and must not involve more than the normal risk of repayment
or present other unfavorable features. In this regard, all outstanding loans to
the Bank's directors and senior officers have been made in the ordinary course
of business and on the same terms, including collateral and interest rates, as
those prevailing at the time for comparable transactions and did not involve
more than the normal risk of collectibility.

Compensation Committee Report on Executive Compensation

The Compensation Committee of the subsidiary Bank's Board of Directors
has furnished the following report on executive compensation:

Penn Federal's Compensation Committee has responsibility for reviewing
the compensation policies and plans for the subsidiary Bank and its affiliates.
The policies and plans established are designed to enhance both short-term and
long-term operational performance of the Bank and to build stockholder value
through anticipated appreciation in the Company's Common Stock price.

One of the Committee's primary objectives in the compensation area is
to develop and maintain compensation plans which provide the Bank with the means
of attracting and retaining quality executives at competitive compensation
levels and to implement compensation plans which seek to motivate executives to
perform to the full extent of their abilities and which seek to enhance
stockholder value by aligning closely the financial interests of the Company's
executives with those of its stockholders. In determining compensation levels,
plans and adjustments, the Committee takes into account, among other things,
compensation reviews made by third parties each year. These studies primarily
compare the compensation of the Bank's officers to officers of other local
financial institutions.

With respect to Mr. LaMonica's base salary in the fiscal year ended
June 30, 1998, the Committee took into account a comparison of salaries of chief
executive officers of local financial institutions. Likewise, each executive
officer's base salary was determined utilizing financial institution
compensation surveys. Mr. LaMonica's base salary for fiscal year 1998 was
unchanged from the level set by the Committee for fiscal year 1997 because it
was the judgment of the Committee that the competitive salary data indicated
that Mr. LaMonica's base salary was appropriate for fiscal year 1998.

The Bank and the Company have included stock option and restricted
stock awards as key elements in its total compensation package. Equity based
compensation provides a long-term alignment of interests and results achieved
for stockholders with the compensation rewards provided to executive officers by
providing those executives and others on whom the continued success of the
Company most depends with a proprietary interest in the Company. In fiscal 1995,
the Stock Option Plan and the MRP were adopted providing for the grant of
several types of equity-based awards including stock option and restricted stock
awards. These plans were ratified by the Company's stockholders in fiscal 1995,
and an amendment to the Stock Option Plan increasing the number of shares
available for issuance thereunder was approved by the Company's stockholders in
fiscal 1998.

In fiscal year 1995, all of the Bank's executive officers were granted
stock option and restricted stock awards, vesting over a five-year schedule. In
fiscal 1998, all of the Bank's executive officers were granted additional stock
options, with one-third of each option vesting immediately upon grant, one-third
scheduled to vest on the first anniversary of the grant date and the remaining
one-third scheduled to vest on the second anniversary of the grant date. See the
table captioned "Option Grants in Last Fiscal Year" elsewhere in this Proxy
Statement for additional

information. During fiscal 1998, options to purchase 53,550 and 33,333 shares of
Common Stock at exercise prices of $5.25 and $17.1875, respectively, vested for
Mr. LaMonica. In addition, 23,800 shares of restricted stock held by Mr.
LaMonica vested during fiscal 1998.

Through the compensation programs described above, a significant
portion of the Bank's executive compensation is linked directly to individual
and corporate performance. The Committee will continue to review all elements of
compensation to ensure that the compensation objectives and plans meet the
Company's business objectives and philosophy of linking executive compensation
to stockholder interests of corporate performance as discussed above.

In 1993, Congress amended the Internal Revenue Code to add Section
162(m) to limit the corporate deduction for compensation paid to a corporation's
five most highly compensated officers to $1.0 million per executive per year,
with certain exemptions. The Committee carefully reviewed the impact of this
legislation on the cost of the Bank's current executive compensation plans.
Under the legislation and regulations adopted thereunder, it is not expected
that any portion of the Company's (or subsidiaries) employee remuneration will
be non-deductible in fiscal 1998 or in future years by reason of compensation
awards granted in fiscal 1998. The Committee intends to review the Company's
(and its subsidiaries') executive compensation policies on an ongoing basis, and
propose appropriate modifications, if the Committee deems them necessary, to
these executive compensation plans with a view toward implementing the Company's
compensation policies in a manner that avoids or minimizes any disallowance of
tax deductions under Section 162(m).

The foregoing report is furnished by the Compensation Committee of the
Board of Directors:

Amadeu L. Carvalho, Chairman Mario Teixeira, Jr.

Stock Performance Presentation

The line graph below compares the cumulative total stockholder return
on the Common Stock to the cumulative total return of a broad index (all Nasdaq
U.S. Stocks) and a savings and loan industry index for the period July 14, 1994
(the date the Company became a publicly-traded company) through June 30, 1998.
While the Company's Common Stock was sold at $10.00 per share in the initial
public offering, the stock closed at $13.125 per share on July 14, 1994, its
first day of trading (adjusted for the Stock Split, such prices would amount to
$5.00 and $6.5625, respectively). The graph assumes that $100 was invested on
July 14, 1994 to purchase shares of the Common Stock at the closing price on
such date and not at the initial offering price.

[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]

Period Ending
--------------------------------------------------
Index 7/15/94 6/30/95 6/30/96 6/30/97 6/30/98
- --------------------------------------------------------------------------------
PennFed Financial Services 100.00 96.19 118.09 209.50 256.89
NASDAQ - Total US 100.00 131.21 168.46 204.84 270.33
SNL $1B - $5B Thrift Index 100.00 111.96 142.84 231.42 338.36

PROPOSAL II. RATIFICATION OF THE APPOINTMENT OF AUDITORS

The Board of Directors has renewed the Company's arrangement for
Deloitte & Touche LLP to be its auditors for the 1999 fiscal year, subject to
the ratification of the appointment by the Company's stockholders. A
representative of Deloitte & Touche LLP is expected to attend the Meeting to
respond to appropriate questions and will have an opportunity to make a
statement if he or she so desires.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1999.

STOCKHOLDER PROPOSALS

In order to be eligible for inclusion in the Company's proxy materials
for the next Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's administrative office
located at 622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989, no later
than May 28, 1999. Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, as with any stockholder proposal (regardless of whether
included in the Company's proxy materials), the Company's Certificate of
Incorporation and Bylaws and Delaware law. Under the proxy rules, in the event
the Company receives notice of a stockholder proposal to take action at the next
Annual Meeting that is not submitted for inclusion in the Company's proxy
materials, or is submitted for inclusion but is properly excluded from such
proxy materials, the persons named in the form of proxy sent by the Company to
its stockholders intend to exercise their discretion to vote on such proposal in
accordance with their best judgment if notice of the proposal is not received at
the administrative office of the Company by the Deadline (as defined below). In
addition to the provision of the proxy rules regarding discretionary voting
authority described in the preceding sentence, the Company's Bylaws provide that
if notice of a stockholder proposal to take action at the next Annual Meeting is
not received at the main office of Company by the Deadline, such proposal will
not be recognized as a matter proper for submission to the Company's
stockholders and will not be eligible for presentation at such meeting. The
"Deadline" means August 29, 1999; however, in the event the next Annual Meeting
is held before October 8, 1999 or after December 27, 1999, the "Deadline" means
the close of business on the later of the 60th day prior to the date of such
meeting or the tenth day following the day on which notice of the meeting was
first mailed or public announcement of the date of such meeting was first made.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons owning more than 10% of a registered class of the
Company's equity securities, to file periodic reports of ownership and changes
in ownership with the SEC and to provide the Company with copies of such
reports. Based solely upon information provided to the Company by the directors
and officers subject to Section 16(a), all Section 16(a) filing requirements
applicable to such persons were complied with during fiscal 1998.

OTHER MATTERS

The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.

The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company and/or the Bank may
solicit proxies personally or by telegraph or telephone without additional
compensation.

BY ORDER OF THE BOARD OF DIRECTORS

/s/William C. Anderson
----------------------
William C. Anderson
Chairman of Board

West Orange, New Jersey
September 25, 1998

REVOCABLE PROXY
PENNFED FINANCIAL SERVICES, INC.

[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE

ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1998

The undersigned hereby appoints the Board of Directors of PennFed Financial
Services, Inc. (the "Company"), and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held on Wednesday,
October 28, 1998 at the Radisson Hotel, located at 690 Route 46 East, Fairfield,
New Jersey, at 10:00 a.m., local time, and at any and all adjournments thereof,
as directed herein:

I. The election of the following directors for three-year terms:

WILLIAM C. ANDERSON AMADEU L. CARVALHO

[ ] FOR [ ] WITHHOLD [ ] EXCEPT

INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.

- --------------------------------------------------------------------------------

II. The ratification of the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending June 30, 1999.

In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.

The Board of Directors recommends a vote "FOR" the nominees named herein and
"FOR" the ratification of the appointment of Deloitte & Touche LLP.

THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED HEREIN AND FOR THE RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP. IF ANY OTHER BUSINESS IS PRESENTED
AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.

Please be sure to sign and date
this Proxy in the box below.

_________________________________________
Date

_________________________________________
Stockholder sign above

_________________________________________
Co-holder (if any) sign above

PENNFED FINANCIAL SERVICES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

This Proxy may be revoked at any time before it is voted by: (i) filing with
the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.

The above signor(s) acknowledge(s) receipt from the Company, prior to the
execution of this Proxy, of a Notice of the Meeting, a Proxy Statement and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 1998.

Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.