SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 
20549  FORM 10-K  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  x  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934  For the fiscal year ended December 31, 2009  or  o  TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period
from                    to  Commission file number:  0-24168  TF FINANCIAL CORPORATION (Exact Name of
Registrant as Specified in Its Charter)  Delaware
  
  74-2705050(State or Other Jurisdiction of Incorporation
  or Organization)
  
  (I.R.S. Employer Identification No.)3 Penns Trail, Newtown, Pennsylvania
  
  18940(Address of Principal Executive Offices)
  
  (Zip Code)
  Registrants
telephone number, including area code: (215) 579-4000  Securities
registered pursuant to Section 12(b) of the Act:  Title of each class
  
  Name of each exchange on which registeredCommon Stock, par value $.10 per share
  
  The Nasdaq Stock Market LLC
  Securities
registered pursuant to Section 12(g) of the Act: None  Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.  YESo     NO x  Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Exchange Act.  YESo     NO x  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 filing requirements for
the past 90 days.  YESxNO o  Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Website, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).o YES o
NO  Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.o  Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2
of the Exchange Act.  Large accelerated filero
  
  Accelerated fileroNon-accelerated filero
  
  Smaller reporting companyx
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).  YESoNOx  The aggregate market
value of the voting common equity held by non-affiliates of the registrant,
based on the closing price of the registrants Common Stock as quoted on the
Nasdaq System on June 30, 2009, was $31.4 million (1,771,565 shares at
$17.71 per share).  As of March 08, 2010
there were outstanding 2,677,603 shares of the registrants Common Stock.  DOCUMENTS INCORPORATED BY REFERENCE  1.      Portions of the Annual Report to Stockholders for the Fiscal
Year Ended December 31, 2009. (Parts I, II and IV) 2.      Portions of the Proxy Statement for the 2010 Annual Meeting of
Stockholders. (Part III)


PART I  TF FINANCIAL CORPORATION
(THE COMPANY) MAY FROM TIME TO TIME MAKE WRITTEN OR ORAL FORWARD-LOOKING
STATEMENTS, INCLUDING STATEMENTS CONTAINED IN THE COMPANYS FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION (INCLUDING THIS ANNUAL REPORT ON FORM 10-K
AND THE EXHIBITS HERETO), IN ITS REPORTS TO STOCKHOLDERS AND IN OTHER
COMMUNICATIONS BY THE COMPANY, WHICH ARE MADE IN GOOD FAITH BY THE COMPANY
PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.  THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANYS
PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND INTENTIONS, THAT ARE SUBJECT TO CHANGE
BASED ON VARIOUS IMPORTANT FACTORS (SOME OF WHICH ARE BEYOND THE COMPANYS
CONTROL).  THE FOLLOWING FACTORS, AMONG
OTHERS, COULD CAUSE THE COMPANYS FINANCIAL PERFORMANCE TO DIFFER MATERIALLY
FROM THE PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND INTENTIONS EXPRESSED IN
SUCH FORWARD-LOOKING STATEMENTS: THE STRENGTH OF THE UNITED STATES ECONOMY IN
GENERAL AND THE STRENGTH OF THE LOCAL ECONOMIES IN WHICH THE COMPANY CONDUCTS
OPERATIONS; THE EFFECTS OF, AND CHANGES IN, MONETARY AND FISCAL POLICIES AND LAWS,
INCLUDING INTEREST RATE POLICIES OF THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM, INFLATION, INTEREST RATES, MARKET AND MONETARY FLUCTUATIONS;
THE TIMELY DEVELOPMENT OF AND ACCEPTANCE OF NEW PRODUCTS AND SERVICES OF THE
COMPANY AND THE PERCEIVED OVERALL VALUE OF THESE PRODUCTS AND SERVICES BY
USERS, INCLUDING THE FEATURES, PRICING AND QUALITY COMPARED TO COMPETITORS
PRODUCTS AND SERVICES; THE IMPACT OF CHANGES IN FINANCIAL SERVICES LAWS AND
REGULATIONS (INCLUDING LAWS CONCERNING TAXES, BANKING, SECURITIES AND
INSURANCE); TECHNOLOGICAL CHANGES; ACQUISITIONS; CHANGES IN CONSUMER SPENDING
AND SAVING HABITS; AND THE SUCCESS OF THE COMPANY AT MANAGING THE RISKS
INVOLVED IN THE FOREGOING.  THE COMPANY CAUTIONS THAT
THE FOREGOING LIST OF IMPORTANT FACTORS IS NOT EXCLUSIVE.  THE COMPANY DOES NOT UNDERTAKE TO UPDATE ANY
FORWARD-LOOKING STATEMENT, WHETHER WRITTEN OR ORAL, THAT MAY BE MADE FROM
TIME TO TIME BY OR ON BEHALF OF THE COMPANY.  Item
1.         Business  BUSINESS OF THE
COMPANY  On July 13, 1994,
the Company consummated its public offering of 5,290,000 shares of its common
stock and acquired Third Federal Bank (the Bank) as part of the Banks
mutual-to-stock conversion.  The Company
was incorporated under Delaware law in March 1994.  The Company is a savings and loan holding
company and is subject to regulation by the Office of Thrift Supervision (the OTS),
the Federal Deposit Insurance Corporation (the FDIC) and the Securities and
Exchange Commission (the SEC).  The
Company does not transact any material business other than through its direct
and indirect subsidiaries: Third Federal Bank, TF Investments Corporation,
Teragon Financial Corporation, Penns Trail Development Corporation and Third
Delaware Corporation. At December 31, 2009, the Company had total assets
of $714.1 million, total liabilities of $642.2 million and stockholders equity
of $71.9 million.  BUSINESS OF THE
BANK  The Bank is a
federally-chartered stock savings bank, which was originally chartered in 1921
as a Pennsylvania-chartered building and loan association.  The Banks deposits are insured up to the
maximum amount allowable by the FDIC.  The Bank is a community
oriented savings institution offering a variety of financial services to meet
the needs of the communities it serves. 
As of December 31, 2009 the Bank operated fourteen branch offices
in Bucks and Philadelphia Counties, Pennsylvania and in Mercer County, New
Jersey.  The Bank attracts
deposits from the general public and uses such deposits, together with
borrowings and other funds primarily to originate or purchase loans secured by
first mortgages on owner-occupied, one-to-four family residences in its market
area and to invest in mortgage-backed and investment securities.  At December 31, 2009, one-to-four family
residential mortgage loans totaled $272.7 million or 51% of the Banks total
loan portfolio.  At that same date, the
Bank had approximately $81.9 million or 11% of total assets invested in
mortgage-backed securities and $40.9 million or 6% of total assets in investment
securities. The Bank also originates commercial real estate and multi-family,
construction and consumer loans.  2


The Bank has two
subsidiaries, Third Delaware Corporation, which was incorporated in 1998 for
the purpose of holding and managing mortgage-backed securities and investment
securities for the Bank, and Teragon Financial Corporation which holds a 75%
limited partnership interest in a captive title insurance agency, Third Fed
Abstract, L. P. During 2006, Teragon Financial Corporation was granted approval
by the Commonwealth of Pennsylvania to conduct business as an insurance agency.  Market Area  The Bank offers a wide
range of consumer and business products at its fourteen full service branch
offices located in Bucks and Philadelphia Counties in Pennsylvania, and Mercer
County in New Jersey. Five of the branch offices are located in Bucks County,
the third wealthiest county in Pennsylvania. Bucks County is a growing region
offering opportunity for growth for the Bank. Seven branches are located in the
northeast section of Philadelphia where the Bank was founded. Although
Philadelphia County is experiencing population decline, the Banks branches in
this section of Philadelphia represent a deposit stronghold. The remaining
two branches are in Mercer County, New Jersey which has an expanding population
and represents another growth area for the Bank.  Competition  The Bank faces varying
degrees of competition from banks, thrift institutions and credit unions at its
various branch locations.  Stronger
competition has come from local and very large regional commercial banks based
in and around the Philadelphia area. 
Based upon the latest available data, at June 30, 2009 the Companys
share of deposits in each of the counties in which it operates was as follows:  County, State
  
  Market Share for
  Entire County
  
  Market Share for ZIP Codes
  Including Company BranchesPhiladelphia, Pennsylvania
  
  0.45
  %
  10.83
  %Bucks, Pennsylvania
  
  1.61
  %
  5.51
  %Mercer, New Jersey
  
  0.37
  %
  6.83
  %  Lending Activities  General.The Banks
loan portfolio composition consists primarily of adjustable-rate (ARM) and
fixed-rate first mortgage loans secured by one-to-four family residences.  The Bank also makes commercial real estate
and multi-family loans, construction loans and consumer and other loans.  At December 31, 2009, the Banks
mortgage loans outstanding were $437.0 million, of which $272.7 million were
secured by first mortgages on one-to-four family residential property.  Of the one-to-four family residential
mortgage loans outstanding at that date, 22% were ARMs and 78% were fixed-rate
loans.  At that same date, commercial
real estate and multi-family residential loans totaled $134.6 million, and
construction loans totaled $29.7 million. The construction loans are
predominately floating-rate, prime-rate-based loans.  Consumer and other loans
held by the Bank totaled $57.4 million or 11% of total loans outstanding at December 31,
2009, of which $54.8 million consisted of home equity and second mortgage
loans. At that same date commercial business loans totaled $41.0 million or 8%
of total loans.  The
following table sets forth the composition of the Banks loan portfolio and
mortgage-backed and related securities portfolios in dollar amounts and in
percentages of the respective portfolios at the dates indicated.  3


At December 31,2009
  
  2008
  
  2007
  
  2006
  
  2005Amount
  
  Percent
  of Total
  
  Amount
  
  Percent
  of Total
  
  Amount
  
  Percent
  of Total
  
  Amount
  
  Percent
  of Total
  
  Amount
  
  Percent 
  of Total(Dollars in thousands)Loans receivable:Mortgage loans:One-to-four family
  
  $
  271,651
  
  50.85
  %
  $
  281,870
  
  51.48
  %
  $
  272,840
  
  52.55
  %
  $
  266,789
  
  54.91
  %
  $
  289,678
  
  58.76
  %Commercial real estate and multi-family
  
  134,584
  
  25.19
  %
  132,640
  
  24.23
  %
  109,740
  
  21.14
  %
  93,607
  
  19.26
  %
  89,489
  
  18.15
  %Construction
  
  29,671
  
  5.55
  %
  30,633
  
  5.60
  %
  35,507
  
  6.84
  %
  34,944
  
  7.19
  %
  24,888
  
  5.04
  %Total mortgage loans
  
  435,906
  
  81.59
  %
  445,143
  
  81.31
  %
  418,087
  
  80.53
  %
  395.340
  
  81.36
  %
  404,055
  
  81.95
  %Consumer loans:Home equity and second mortgage
  
  54,811
  
  10.26
  %
  56,233
  
  10.27
  %
  52,013
  
  10.02
  %
  46,864
  
  9.65
  %
  37,479
  
  7.60
  %Other consumer
  
  2,565
  
  0.48
  %
  2,287
  
  0.42
  %
  2,244
  
  0.43
  %
  3,206
  
  0.66
  %
  2,836
  
  0.58
  %Total consumer and other loans
  
  57,376
  
  10.74
  %
  58,520
  
  10.69
  %
  54,257
  
  10.45
  %
  50,070
  
  10.31
  %
  40,315
  
  8.18
  %Commercial loans:Commercial -business real estate secured
  
  33,514
  
  6.27
  %
  35,591
  
  6.50
  %
  41,473
  
  7.99
  %
  34,472
  
  7.09
  %
  42,217
  
  8.56
  %Commercial -business non-real estate secured
  
  7,462
  
  1.40
  %
  8,227
  
  1.50
  %
  5,377
  
  1.03
  %
  6,022
  
  1.24
  %
  6,440
  
  1.31
  %Total commercial-business loans
  
  40,976
  
  7.67
  %
  43,818
  
  8.00
  %
  46,850
  
  9.02
  %
  40,494
  
  8.33
  %
  48,657
  
  9.87
  %Total loans
  
  534,258
  
  100.00
  %
  547,481
  
  100.00
  %
  519,194
  
  100.00
  %
  485,904
  
  100.00
  %
  493,027
  
  100.00
  %Net of:Deferred loan origination costs and unamortized
  premiums
  
  609
  
  
  
  704
  
  
  
  675
  
  
  
  531
  
  
  
  505Allowance for loan losses
  
  (5,215
  )
  
  
  (3,855
  )
  
  
  (2,842
  )
  
  
  (2,865
  )
  
  
  (2,641
  )Total loans, held for investment, net
  
  $
  529,652
  
  
  
  $
  544,330
  
  
  
  $
  517,027
  
  
  
  $
  483,570
  
  
  
  $
  490,891Loans held for sale:Mortgage loans:One-to-four family
  
  $
  1,082
  
  100.00
  %
  $
  1,659
  
  100.00
  %
  $
  1,040
  
  100.00
  %
  $
  969
  
  100.00
  %
  $
  68
  
  100.00
  %Total loans held for sale
  
  $
  1,082
  
  100.00
  %
  $
  1,659
  
  100.00
  %
  $
  1,040
  
  100.00
  %
  $
  969
  
  100.00
  %
  $
  68
  
  100.00
  %Mortgage-backed securities
  held-to-maturity:Federal Home Loan Mortgage Corporation (FHLMC)
  
  $
  754
  
  20.22
  %
  $
  1,100
  
  23.04
  %
  $
  1,657
  
  26.90
  %
  $
  2,297
  
  29.84
  %
  $
  3,161
  
  31.06
  %Federal National Mortgage Association (FNMA)
  
  1,698
  
  45.47
  %
  2,141
  
  44.85
  %
  2,634
  
  42.76
  %
  3,084
  
  40.07
  %
  3,969
  
  39.00
  %Government National Mortgage Association (GNMA)
  
  1,281
  
  34.31
  %
  1,533
  
  32.11
  %
  1,869
  
  30.34
  %
  2,316
  
  30.09
  %
  3,040
  
  29.87
  %Real estate investment mortgage conduit(REMICs)
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  7
  
  0.07
  %Total mortgage-backed and related securities
  held-to-maturity
  
  $
  3,733
  
  100.00
  %
  $
  4,774
  
  100.00
  %
  $
  6,160
  
  100.00
  %
  $
  7,697
  
  100.00
  %
  $
  10,177
  
  100.00
  %Mortgage-backed securities
  available-for-sale:FHLMC
  
  $
  3,440
  
  4.40
  %
  $
  4,504
  
  4.20
  %
  $
  5,434
  
  5.54
  %
  $
  7,888
  
  10.61
  %
  $
  9,686
  
  11.60
  %FNMA
  
  9,146
  
  11.70
  %
  12,320
  
  11.49
  %
  11,183
  
  11.39
  %
  10,330
  
  13.90
  %
  12,173
  
  14.58
  %GNMA
  
  1,886
  
  2.41
  %
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  REMICs
  
  63,726
  
  81.49
  %
  90,393
  
  84.31
  %
  81,561
  
  83.07
  %
  56,120
  
  75.49
  %
  61,652
  
  73.82
  %Total mortgage-backed and related securities
  available-for-sale
  
  $
  78,198
  
  100.00
  %
  $
  107,217
  
  100.00
  %
  $
  98,178
  
  100.00
  %
  $
  74,338
  
  100.00
  %
  $
  83,511
  
  100.00
  %  4


Loan
Maturity and Repricing Information.  The
following table sets forth certain information at December 31, 2009,
regarding the dollar amount of loans maturing in the Banks loan portfolio
based on their maturity date.  Demand
loans, loans having no stated schedule of repayments and no stated
maturity, overdrafts and delinquent loans maturing prior to December 31,
2009, are reported as due in one year or less. 
The table does not include prepayments or scheduled principal
repayments.  Due 1/1/10 -
  12/31/10
  
  Due 1/1/11 -
  12/31/14
  
  Due After
  12/31/15(In thousands)Loans held for sale:One-to-four family
  
  $
  
  
  $
  
  
  $
  1,082Total loans held for sale
  
  $
  
  
  $
  
  
  $
  1,082Loans receivable:One-to-four family
  
  $
  869
  
  $
  6,918
  
  $
  263,864Commercial real estate and multi-family
  
  5,025
  
  7,104
  
  122,455Construction
  
  29,671
  
  
  
  Consumer and other
  
  212
  
  4,190
  
  52,974Commercial loans
  
  31,652
  
  2,825
  
  6,499Total loans receivable
  
  $
  67,429
  
  $
  21,037
  
  $
  445,792  The following table sets forth the dollar amount of
all loans due after December 31, 2010, which have predetermined interest
rates and which have floating or adjustable interest rates. Loans which have
rate adjustments after ten years are considered to have predetermined rates.  Predetermined
  Rates
  
  Floating or
  Adjustable Rate(In thousands)Loans held for sale:One-to-four family
  
  $
  1,082
  
  $
  Total loans held for sale
  
  $
  1,082
  
  $
  Loans receivable:One-to-four family
  
  $
  212,092
  
  $
  58,690Commercial real estate and multi-family
  
  3,014
  
  126,545Construction
  
  
  
  Consumer and other
  
  32,731
  
  24,433Commercial loans and leases
  
  7,550
  
  1,774Total loans receivable
  
  $
  255,387
  
  $
  211,442  One-to-Four
Family Mortgage Lending.The Bank offers first mortgage loans secured
by one-to-four family residences in the Banks lending area.  Typically, such residences are single-family
homes that serve as the primary residence of the owner.  The Bank generally originates and invests in
one-to-four family residential mortgage loans in amounts up to 80% of the
lesser of the appraised value or selling price of the mortgaged property.  Loans originated in amounts over 80% of the
lesser of the appraised value or selling price of the mortgaged property must
be owner-occupied and private mortgage insurance is typically required.  Loan originations are obtained through the Banks
retail banking channels, the local community, and referrals from established
builders and realtors within the Banks lending area using direct advertising
in local newspapers, branch signage and promotions, and word of mouth
referrals. The Bank also has a mortgage lending department that is separate as
to its sales efforts from the consumer lending area of the Bank. This department
employs a lending manager and several commissioned loan officers. The mortgage
loan officers support the Banks branches and customers, and additionally
engage in calling efforts directed toward realtors, builders, other loan
originators and others that can be sources of lending business for the Bank.  The Bank offers a variety of ARM loans with terms of
30 years which adjust at the end of 6 months, one, three, five, seven and ten
years and adjust by a maximum of 3% to 5% per adjustment with a lifetime cap of
5% to 6% over the life of the loan.  The Bank offers fixed-rate mortgage loans with terms
of 10 to 30 years, which are payable monthly. 
Interest rates charged on fixed-rate mortgage loans are competitively
priced based on market conditions.  The
origination fees for fixed-rate loans range from 0% to 3% depending on the
underlying loan coupon. Generally, the Banks standard underwriting guidelines
for fixed-rate mortgage loans conform to the FHLMC and FNMA guidelines.  5


The
Bank sells a portion of its conforming fixed-rate mortgage loan originations in
the secondary market to FHLMC or FNMA while retaining the servicing rights on
these loans. As of December 31, 2009, the Banks portfolio of loans serviced
for FHLMC or FNMA totaled approximately $76.8 million. The Bank also brokers a
small portion of its loan closings to correspondents on a servicing released
basis. However, the Bank is primarily a portfolio lender.  Commercial Real Estate and Multi-Family
Lending.The Bank
originates permanent loans secured by commercial real estate including
non-owner occupied residential, multi-family dwelling units, professional
office buildings and hotels/motels. The Bank generally originates commercial
real estate and multi-family loans up to 75% of the appraised value of the
property securing the loan.  Currently,
it is the Banks philosophy to originate commercial real estate and
multi-family loans primarily on properties in its general market area.  The commercial real estate and multi-family
loans in the Banks portfolio consist of fixed-rate, ARM and balloon loans
originated at prevailing market rates for terms of up to 25 years and typically
either have a scheduled interest rate reset or are callable by the Bank, after
a 5 to 10 year period.  Loans secured by commercial and multi-family real
estate are generally larger and involve a greater degree of risk than
one-to-four family residential mortgage loans. 
Of primary concern in commercial and multi-family real estate lending is
the the feasibility and cash flow potential of the project and the borrowers
creditworthiness. Loans secured by income properties are generally larger and
involve greater risks than residential mortgage loans because payments on loans
secured by income properties are often dependent on successful operation or
management of the properties.  As a
result, repayment of such loans may be subject by a greater extent to adverse
conditions in the real estate market or the economy than residential real
estate loans.  In order to monitor cash
flows on income properties, the Bank requires borrowers and loan guarantors, if
any, to provide annual financial statements and rent rolls on multi-family
loans.  Similarly, on commercial office
buildings and hotel properties, the Bank requires minimum debt service coverage
and obtains operating statements of such properties. At December 31, 2009,
the five largest commercial real estate and multi-family loans totaled $26.2
million with no single loan larger than $7.3 million.  Construction and Land Acquisition
Lending.At December 31,
2009, the Banks construction and land acquisition loans were $29.7 million or
6% of the Banks total loan portfolio. 
Construction financing is generally considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate.  Risk of loss on a construction
loan is dependent largely upon the accuracy of the initial estimate of the
propertys value at completion of construction or development and the estimated
cost (including interest) of construction. 
During the construction phase, a number of factors could result in
delays and cost overruns.  If the
estimate of construction costs proves to be inaccurate, the Bank may be
required to advance funds beyond the amount originally committed to permit
completion of the construction.  If the
estimate of value proves to be inaccurate, the Bank may be confronted, at or
prior to the maturity of the loan, with a project having a value which is
insufficient to assure full repayment. Land acquisition lending is susceptible
to the risks of obtaining necessary approvals and permits, and the feasibility
of the project once such approvals are obtained. At December 31, 2009, the
five largest construction land acquisition loans totaled $17.8 million with no
single loan larger than $5.5 million.  Consumer and Other Loans.The Bank also offers consumer and other loans
in the form of home equity and second mortgage loans (referred to hereinafter
collectively as second mortgage loans), automobile loans and student
loans.  These loans totaled $57.4 million
or 11% of the Banks total loan portfolio at December 31, 2009.  The Bank originates consumer loans through
its retail banking channel and mortgage loan department.  In connection with consumer loan applications, the
Bank verifies the borrowers income and reviews a credit bureau report.  In addition, the relationship of the loan to
the value of the collateral is evaluated. 
All automobile loan applications are reviewed and approved by the
Bank.  The Bank reviews the credit report
of the borrower as well as the value of the vehicle which secures the loan.  Consumer loans tend to be originated at higher
interest rates than conventional residential mortgage loans and for shorter
terms, thus facilitating the Banks interest rate risk management.  Consumer loans can have a higher risk of
default than residential mortgage loans. 
However, at December 31, 2009, $107,000 or 0.2% of the Banks
consumer loans were delinquent more than 90 days, compared to $1.1 million or
0.4% of residential one-to-four family loans.  The Bank offers second
mortgage loans on one-to-four family residences.  At December 31, 2009, second mortgage
and home equity loans totaled $54.8 million, or 10% of the Banks total loan
portfolio.  Second mortgage loans are
offered as fixed-rate loans for a term not to exceed 15 years or
prime-rate-based floating rate loans with amortization periods up to 15 years
and in some cases, an interest-only period of up to the first 60 months of the
loan term.  Such loans are only made on
owner-occupied one-to-four family residences and are subject to a 90% combined
loan to value ratio.  The underwriting
standards for second mortgage loans are the same as the Banks standards
applicable to one-to-four family residential loans.  Business Lending.The Bank makes commercial business loans
predominantly on a secured or guaranteed basis. 
The terms of these loans generally do not exceed five years. These loans
can have floating interest rates which adjust with changes in market interest
rates, usually the prime rate, or have a fixed rate related to their term to
maturity.  The Banks commercial business
loans primarily consist of short-term loans for equipment, working capital,
business expansion and inventory financing, and typically have some real estate
collateral.  6


The
Bank customarily requires a personal guaranty of payment by the principals of
any borrowing entity and reviews the financial statements and income tax
returns of the guarantors.  At December 31,
2009, the Bank had approximately $41.0 million outstanding in commercial
business loans, which represented approximately 8% of its total loan portfolio.
At December 31, 2009, the five largest commercial business loans totaled
$20.0 million with no single loan larger than $5.5 million.  Loan Approval Authority and
Underwriting.The Board of
Directors of the Bank sets the authority to approve loans based on the amount, type
of loan (i.e., secured or unsecured) and total exposure to the borrower.  Where there are one or more existing loans to
a borrower, the level of approval required is governed by the proposed total
exposure including the new loan.  The
Board has approved loan authority and limits for certain of the Banks lending
personnel and senior officers, including the president of the Bank.  Individual approval authority ranges from
$75,000 to $750,000 for secured loans, and $10,000 to $100,000 for unsecured
loans. Members of an in-house loan committee including four senior members of
management can approve in certain combinations all loans over $750,000 up to
$2.5 million. The committee has the authority to approve secured loans up to
$2.5 million and unsecured loans up to $200,000. All loans greater than $2.5
million through $5.0 million require the approval of the Directors Board Loan
Committee composed of four members of the Board of Directors of the Bank. All
loans over $5 million or loans that cause the aggregate lending relationship to
exceed $5.0 million must be approved by the Banks Board of Directors.  One-to-four
family residential mortgage loans are generally underwritten according to FHLMC
and FNMA guidelines.  For all loans
originated by the Bank, upon receipt of a completed loan application from a
prospective borrower, a credit report is obtained, income and certain other
information is verified and, if necessary, additional financial information may
be required.  The Bank does not engage in
sub-prime, stated income or no-doc style portfolio lending. An appraisal of
the real estate intended to secure the proposed loan is required and is
performed by an independent appraiser designated and approved by the Bank.  The Bank makes construction/permanent loans
on individual properties.  Funds advanced
during the construction phase are held in a loan-in-process account and
disbursed based upon various stages of completion.  An independent appraiser or loan officer
determines the stage of completion based upon a physical inspection of the
construction and funds are advanced only for work in place.  It is the Banks policy to obtain title
insurance or a title opinion on all real estate first mortgage loans in excess
of $500,000.  Borrowers must also obtain
hazard or flood insurance (for loans on property located in a flood zone) prior
to closing the loan.  Loans to One Borrower.Current regulations limit loans to one
borrower in an amount equal to 15% of unimpaired capital and retained income on
an unsecured basis and an additional amount equal to 10% of unimpaired capital
and retained income if the loan is secured by readily marketable collateral
(generally, financial instruments, not real estate) or $500,000, whichever is
higher.  Penalties for violations of the
loan-to-one borrower statutory and regulatory restrictions include cease and
desist orders, the imposition of a supervisory agreement and civil money
penalties.  The Banks maximum
loan-to-one borrower limit was approximately $10.3 million as of December 31,
2009 and the Banks five largest aggregate lending relationships pursuant to
the loans to one borrower regulations had balances ranging from $6.5 to $9.0
million.  Mortgage-Backed Securities  To supplement lending activities, the Bank invests
in residential mortgage-backed securities. 
Although the majority of such securities are available for sale. In
addition, they serve as collateral for borrowings and, through repayments, are
a source of liquidity.  The mortgage-backed securities portfolio as of December 31,
2009, consisted of pass-through certificates issued by the FHLMC ($4.2
million), GNMA, ($3.2 million), FNMA ($10.8 million), and REMICs formed from
pass-through certificates issued by these same agencies ($58.2 million), and
issued by private issuers ($5.5 million).  At December 31, 2009, the amortized cost of
mortgage-backed securities totaled $79.7 million, or 11% of total assets, and
the fair value of such securities totaled approximately $82.2 million.  The Banks mortgage-backed securities which are
so-called pass-through represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments on
which are passed through intermediaries (generally quasi-governmental agencies)
to investors such as the Bank.  Such
quasi-governmental agencies, which guarantee the payment of principal and
interest to investors, include FHLMC, FNMA and GNMA. The REMIC securities are
composed of the same loan types as the pass-through certificates, but offer differing
characteristics as to their expected cash flows depending on the class of such
securities purchased. The Banks REMICs are primarily planned amortization
classes (PAC) and very accurately defined maturity (VADM) classes that,
when purchased, offered a high probability of predictable cash flows.  7


Mortgage-Backed Securities Carrying Value.The following
table sets forth the carrying value of the Banks mortgage-backed securities
held in portfolio at the dates indicated.  At December 31,2009
  
  2008
  
  2007(In thousands)Held to maturity:GNMA-fixed rate
  
  $
  1,281
  
  $
  1,533
  
  $
  1,869FHLMC ARMs
  
  16
  
  19
  
  27FHLMC-fixed rate
  
  738
  
  1,081
  
  1,630FNMA-fixed rate
  
  1,698
  
  2,141
  
  2,634Total mortgage-backed securities held to maturity
  
  $
  3,733
  
  $
  4,774
  
  $
  6,160Available-for-sale:GNMA-fixed rate
  
  $
  1,886
  
  $
  
  
  $
  FHLMC-fixed rate
  
  3,440
  
  4,504
  
  5,434FNMA-fixed rate
  
  9,146
  
  12,320
  
  11,183REMICs-fixed rate
  
  63,726
  
  90,393
  
  81,561Total mortgage-backed securities available-for-sale
  
  $
  78,198
  
  $
  107,217
  
  $
  98,178  Mortgage-Backed Securities Maturity.The following table sets forth the maturity
and the weighted average coupon (WAC) of the Banks mortgage-backed securities
portfolio at December 31, 2009.  The
table does not include estimated prepayments. 
Adjustable-rate mortgage-backed securities are shown as maturing based
on contractual maturities.  Contractually
  Due
  
  Held
  to maturity
  
  WAC
  
  Available
  -for-sale
  
  WAC(Dollars in thousands)Less than 1 year
  
  
  
  
  %
  
  
  
  %1 to 3 years
  
  43
  
  7.76
  %
  893
  
  4.38
  %3 to 5 years
  
  
  
  
  %
  12,729
  
  4.71
  %5 to 10 years
  
  618
  
  4.94
  %
  21,774
  
  4.78
  %10 to 20 years
  
  2,264
  
  6.78
  %
  20,493
  
  4.71
  %Over 20 years
  
  808
  
  5.31
  %
  22,309
  
  4.98
  %Total mortgage-backed securities
  
  $
  3,733
  
  6.17
  %
  $
  78,198
  
  4.80
  %  Non-Performing and
Problem Assets  Loan Collection.When a borrower fails to make a required
payment on a loan, the Bank takes a number of steps to have the borrower cure
the delinquency and restore the loan to current status.  In the case of residential mortgage loans and
consumer loans, the Bank generally sends the borrower a written notice of
non-payment after the loan is 15 days past due. 
In the event payment is not then received, additional letters and phone
calls are made.  If the loan is still not
brought current and it becomes necessary for the Bank to take legal action,
which typically occurs after a loan is delinquent more than 90 days, the Bank
will commence foreclosure proceedings against any real property that secures
the loan and attempt to repossess any personal property that secures a consumer
loan.  If a foreclosure action is
instituted and the loan is not brought current, paid in full, or refinanced
before the foreclosure sale, the real property securing the loan generally is
obtained by the Bank at foreclosure.  In the case of commercial
real estate and multi-family loans, and construction loans, the Bank generally
attempts to contact the borrower by telephone after any loan payment is ten
days past due and a senior loan officer reviews all collection efforts made if
payment is not received after the loan is 30 days past due.  Decisions as to when to commence foreclosure
actions for commercial real estate and multi-family loans and construction
loans are made on a case by case basis. 
The Bank may consider loan work-out arrangements with these types of
borrowers in certain circumstances.  On mortgage loans or loan participations purchased
by the Bank and serviced by others, the Bank receives monthly reports from its
loan servicers with which it monitors the loan portfolio.  Based upon servicing agreements with the
servicers of the loan, the Bank relies upon the servicer to contact delinquent
borrowers, collect delinquent amounts and to initiate foreclosure proceedings,
when necessary, all in accordance with applicable laws, regulations and the
terms of the servicing agreements between the Bank and its servicing agents. At
December 31, 2009 the Bank used third-party servicers to service $6.7
million in mortgage loans. All of the Banks third-party mortgage loan
servicers are regulated financial institutions or are approved by either HUD,
FNMA, or FHLMC to service loans on their behalf.  8


Delinquent Loans.Generally, the Bank reserves for uncollected
interest on loans past due more than 90 days; these loans are included in the
table of nonaccrual loans below.  Loans
also are placed on a nonaccrual status when, in the judgment of management, the
probability of collection of interest is deemed to be insufficient to warrant
further accrual.  When a loan is placed
on nonaccrual status, previously accrued but unpaid interest is deducted from
interest income and the further accrual of interest ceases unless the
underlying facts that prompted a nonaccrual determination are deemed to have
improved significantly.  Non-Performing Assets.The following table sets forth information
regarding non-accrual loans and real estate owned by the Bank at the dates
indicated.  The Bank had no loans
contractually past due more than 90 days for which accrued interest has been
recorded.  At December 31,2009
  
  2008
  
  2007
  
  2006
  
  2005(Dollars in thousands)Loans accounted for on a non-accrual basis:Mortgage loans:One-to-four family
  
  $
  1,117
  
  $
  780
  
  $
  165
  
  $
  141
  
  $
  392Commercial real estate and multi-family
  
  2,506
  
  606
  
  39
  
  61
  
  877Construction
  
  4,554
  
  3,017
  
  3,280
  
  
  
  Consumer and other
  
  107
  
  126
  
  34
  
  68
  
  170Commercial-business loans
  
  
  
  750
  
  1,840
  
  1,840
  
  150Total non-accrual loans
  
  8,284
  
  5,279
  
  5,358
  
  2,110
  
  1,589Real estate owned, net
  
  1,279
  
  
  
  
  
  
  
  700Total non-performing assets
  
  $
  9,563
  
  $
  5,279
  
  $
  5,358
  
  $
  2,110
  
  $
  2,289Total non-accrual loans to loans
  
  1.56
  %
  0.96
  %
  1.03
  %
  0.43
  %
  0.32
  %Total non-accrual loans to total assets
  
  1.16
  %
  0.72
  %
  0.76
  %
  0.32
  %
  0.24
  %Total non-performing assets to total assets
  
  1.34
  %
  0.72
  %
  0.76
  %
  0.32
  %
  0.35
  %  Non-performing
assets included a construction loan with a balance of $2.4 million, secured by
a largely completed and partially occupied commercial office building, and the
personal guarantee of the borrowers.  At December 31,
2009, this loan was impaired and the Bank had allocated a portion of the
allowance for loan losses equal to the difference between the loan balance and
the value based upon a recent appraisal, while the borrower attempted to find
additional tenants or a buyer of the building. 
Subsequent to year end, the Bank initiated foreclosure proceedings.  Non-performing
assets also included a construction loan with a balance of $1.5 million secured
by two contiguous parcels of commercial real estate and a first-position lien
on the guarantors personal residence. 
The combined value of the collateral based on recent appraisals was in
excess of the loan balance, and the Bank was in the midst of foreclosure
proceedings at year end.  Subsequent to
year end, the borrower has filed for bankruptcy protection under Chapter 11 of
the U.S. Bankruptcy Code, and there is a dispute with another bank as to the
validity of the lien on the personal residence.  Real
estate owned included one property with a carrying value of $906,000.  Subsequent to year end, the Bank has accepted
an offer to purchase the property, which will result in estimated net proceeds
of $790,000 if this transaction is consummated. 
The Bank expects to establish a valuation allowance of $116,000 by means
of a charge to earnings during the first quarter of 2010.  Not
included in non-performing assets at December 31, 2009 are two loans with
a combined balance of $5.9 million to a single borrower, secured by undeveloped
commercial real estate and personal guarantees of several individuals.  These loans were current at year end.  However, subsequent to year end the borrower
has informed the Bank that it will not be able to continue to make the loan
payments in full. The Bank has placed these loans on non-accrual status and is
negotiating with the borrower in order to resolve the matter.  A recent appraisal of the property indicated
an appraised value in excess of the loan balances.  9


Not
included in non-performing assets at December 31, 2009 are four loans with
a combined balance of $2.4 million to a single borrower, secured by 35
residential rental properties located in the greater Philadelphia area, and the
personal guarantees of the borrowers. These loans were current at year
end.  However, subsequent to year end the
borrower has experienced financial difficulties and informed the Bank that it
will not be able to continue to make the loan payments in full at the present
time. The Bank has placed these loans on non-accrual status and is negotiating
with the borrower in order to resolve the matter.  The
Bank was not aware of any other significant potential problem loans. Potential
problem loans are loans where information about possible credit problems of
borrowers has caused management to have serious doubts about the borrowers
ability to comply with present repayment terms.  At
December 31, 2009, the Bank had no foreign loans and no loan
concentrations exceeding 10% of total loans not disclosed in the table on page 4.
Loan concentrations are considered to exist when there are amounts loaned to
a multiple number of borrowers engaged in similar activities that would cause
them to be similarly impacted by economic or other conditions.  Classified Assets.OTS regulations provide for a classification
system for problem assets of insured institutions which covers all problem
assets.  Under this classification
system, problem assets of insured institutions are classified as substandard,
doubtful, or loss.  An asset is
considered substandard if it may be inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if
any.  Substandard assets include those
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all of
the weaknesses inherent in those classified substandard, with the added
characteristic that the weaknesses present make collection or liquidation in
full, on the basis of currently existing facts, conditions and values, highly
questionable and improbable.  Assets
classified as loss are those considered uncollectible and of such little
value that the establishment of a specific loss reserve is warranted.  Assets designated special mention by
management are assets that have potential weakness but that do not currently
warrant classification in one of the aforementioned categories.  For
regulatory purposes, the Banks allowance for loan losses is either general or
specific.  General allowances for OTS
purposes represent loss allowances which have been established to recognize the
inherent risk associated with lending activities, but which, unlike specific
allowances, have not been allocated to particular problem assets.  However, when an insured institution
classifies all or a portion of a problem asset as loss, it is required either
to establish a specific allowance for losses equal to 100% of that portion of
the asset so classified or to charge off such amount.  An institutions determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the OTS, which may determine that general or specific
allowances are insufficient.  A portion
of general loss allowances established to cover possible losses related to
assets classified as substandard or doubtful may be included in determining an
institutions regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital.  The
following table provides further information in regard to the Banks classified
assets as of December 31, 2009.  At December 31, 2009(In thousands)Special mention assets
  
  $
  20,005Substandard
  
  31,454Doubtful assets
  
  Loss
  
  Total classified assets
  
  $
  51,459  Real Estate Owned.Real estate acquired by the Bank as a result
of foreclosure, judgment or by deed in lieu of foreclosure is classified as
real estate owned (REO) until it is sold. 
When property is acquired it is recorded at the lower of fair value,
minus estimated cost to sell, or the recorded investment in the loan.  If the property subsequently decreases in
estimated value from the initial recorded amount, the Bank will provide a
valuation allowance, through a charge to earnings, if the decrease is judged by
management to be temporary. If the decrease is judged to be permanent, the Bank
will reduce the recorded amount, through a charge to earnings, to the new
estimated value.  Allowances for Loan Losses.The Bank provides valuation allowances for
estimated losses from uncollectible loans. Management determines the adequacy
of the allowance on a quarterly basis to ensure that a provision for loan
losses has been charged against earnings in an amount necessary to maintain the
allowance at a level that is appropriate based upon managements estimate of
probable losses. Several sources of data are used in making the evaluation as
to the appropriateness of the allowance.  In
establishing allowances, a specific allowance is established for loans which
because of past payment history, a review of recent financial information, or
other facts regarding the credit, pose a higher than normal amount of perceived
risk of collection. In addition, an allowance is assigned based upon
qualitative and quantitative risk factors which are inherent in segments of the
loan portfolio.  10


Although
the allowance has been determined based on loan segments, the total allowance
is available to absorb any and all losses from any segment of the loan
portfolio. At December 31, 2009, management believes that the allowance
for loan losses is at an acceptable level.  The following table sets
forth information with respect to the allocation of the Banks allowance for
loan losses by loan type at the dates and for the periods indicated:  For the Years Ended December 31,2009
  
  2008
  
  2007
  
  2006
  
  2005(Dollars in thousands)Balance at beginning of period
  
  $
  3,855
  
  $
  2,842
  
  $
  2,865
  
  $
  2,641
  
  $
  2,307Provision for loan losses
  
  2,930
  
  1,500
  
  
  
  150
  
  540Charge-offs:One-to-four family
  
  (149
  )
  (12
  )
  (27
  )
  
  
  Commercial and multi-family real estate loans
  
  (278
  )
  
  
  
  
  
  
  Construction
  
  (1,092
  )
  (347
  )
  
  
  
  
  Consumer and other loans
  
  (88
  )
  (55
  )
  (69
  )
  (55
  )
  (122
  )Commercial-business loans
  
  (9
  )
  (160
  )
  (1
  )
  (1
  )
  (286
  )Recoveries:Construction
  
  5
  
  
  
  
  
  
  
  Consumer and other loans
  
  13
  
  19
  
  13
  
  65
  
  39Commercial loans and leases
  
  28
  
  68
  
  61
  
  65
  
  163Balance at end of year
  
  $
  5,215
  
  $
  3,855
  
  $
  2,842
  
  $
  2,865
  
  $
  2,641Ratio of net charge-offs (net recoveries) during
  the period to average loans outstanding during the period
  
  0.29
  %
  0.09
  %
  0.02
  %
  (0.01
  )%
  0.04
  %Ratio of allowance for loan losses to non-performing
  loans at the end of the period
  
  63.0
  %
  73.0
  %
  53.0
  %
  135.8
  %
  166.3
  %Ratio of allowance for loan losses to loans
  receivable at the end of the period
  
  0.98
  %
  0.71
  %
  0.55
  %
  0.59
  %
  0.54
  %Ratio of allowance for loan losses and foreclosed
  real estate to total non-performing assets at the end of the period
  
  54.5
  %
  73.0
  %
  53.0
  %
  135.8
  %
  115.4
  %  The following table sets forth the allocation of the
Banks allowance for loan losses by loan category and the percent of loans in
each category to total loans receivable, gross, at the dates indicated.  At December 31,2009
  
  2008
  
  2007
  
  2006
  
  2005Amount
  
  Percent of
  Loans to
  Total Loans
  
  Amount
  
  Percent of
  Loans to
  Total Loans
  
  Amount
  
  Percent of
  Loans to
  Total Loans
  
  Amount
  
  Percent of
  Loans to
  Total Loans
  
  Amount
  
  Percent of
  Loans to
  Total Loans(Dollars in thousands)At
  end of period allocated to:One-to-four
  family
  
  $
  962
  
  18.4
  %
  $
  1,461
  
  37.9
  %
  $
  504
  
  17.8
  %
  $
  332
  
  54.9
  %
  $
  154
  
  58.8
  %Commercial
  real estate and multi-family
  
  1,275
  
  24.5
  %
  845
  
  21.9
  %
  667
  
  23.5
  %
  665
  
  19.3
  %
  1,010
  
  18.2
  %Construction
  
  1,736
  
  33.3
  %
  953
  
  24.7
  %
  1,018
  
  35.8
  %
  621
  
  7.2
  %
  738
  
  5.0
  %Consumer
  and other loans
  
  317
  
  17.7
  %
  259
  
  6.7
  %
  246
  
  8.6
  %
  248
  
  10.3
  %
  115
  
  8.2
  %Commercial
  -business loans
  
  925
  
  6.1
  %
  337
  
  8.8
  %
  407
  
  14.3
  %
  999
  
  8.3
  %
  624
  
  9.8
  %Total
  allowance
  
  $
  5,215
  
  100.0
  %
  $
  3,855
  
  100.0
  %
  $
  2,842
  
  100.0
  %
  $
  2,865
  
  100.0
  %
  $
  2,641
  
  100.0
  %  Investment
Securities  The purchase of investment securities is designed
primarily to provide and maintain liquidity, to generate a favorable return on
investments without incurring undue interest rate and credit risk, and to
complement the Banks lending activities. 
In establishing its investment strategies, the Bank considers its
business and growth plans, the economic environment, the types of securities to
be held and other factors.  Federally
chartered savings institutions have the authority to invest in various types of
assets, including U.S. Treasury obligations, securities of various federal
agencies, certain certificates of deposit of insured banks and savings
institutions, certain bankers acceptances, repurchase agreements, loans on
federal funds, and, subject to certain limits, commercial paper and mutual
funds.  11


The following table sets forth certain information
regarding the amortized cost and fair values of the Banks investment
securities at the dates indicated.  At December 31,2009
  
  2008
  
  2007Amortized
  Cost
  
  Fair
  Value
  
  Amortized
  Cost
  
  Fair
  Value
  
  Amortized
  Cost
  
  Fair
  Value(In thousands)Interest-earning deposits
  
  $
  9,971
  
  $
  9,971
  
  $
  56
  
  $
  56
  
  $
  123
  
  $
  123Investment securities held-to-maturity:State and political subdivisions
  
  $
  
  
  $
  
  
  $
  
  
  $
  
  
  $
  244
  
  $
  246Total
  
  $
  
  
  $
  
  
  $
  
  
  $
  
  
  $
  244
  
  $
  246Securities available-for-sale:U.S. government and agency obligations
  
  $
  3,000
  
  $
  2,945
  
  $
  2,944
  
  $
  3,173
  
  $
  2,996
  
  $
  2,982State and political subdivisions
  
  33,180
  
  34,241
  
  24,532
  
  24,996
  
  24,628
  
  24,833Corporate debt securities
  
  3,340
  
  3,517
  
  3,340
  
  3,285
  
  4,340
  
  4,377Equities
  
  150
  
  150
  
  150
  
  165
  
  150
  
  171Total
  
  $
  39,670
  
  $
  40,853
  
  $
  30,966
  
  $
  31,619
  
  $
  32,114
  
  $
  32,363  Investment
Portfolio Maturities  The following table sets forth certain information
regarding the amortized cost, weighted average yields and maturities of the
Banks investment securities portfolio, exclusive of equities and
interest-earning deposits, at December 31, 2009.  Yields on tax exempt obligations have been
computed on a tax equivalent basis.  One Year or Less
  
  One to Five Years
  
  Five to Ten Years
  
  More than Ten Years
  
  Total Investment Securities(1)Amortized
  Cost
  
  Average
  Yield
  
  Amortized
  Cost
  
  Average
  Yield
  
  Amortized
  Cost
  
  Average
  Yield
  
  Amortized
  Cost
  
  Average
  Yield
  
  Amortized
  Cost
  
  Average
  Yield
  
  Fair
  Value(Dollars in thousands)U.S.
  government and agency obligations
  
  $
  
  
  
  
  $
  3,000
  
  2.13
  %
  $
  
  
  
  
  $
  
  
  
  
  $
  3,000
  
  2.13
  %
  $
  2,945State
  and political subdivisions
  
  592
  
  
  
  4,095
  
  3.38
  %
  18,514
  
  3.73
  %
  9,979
  
  3.99
  %
  33,180
  
  3.75
  %
  34,241Corporate
  debt securities
  
  
  
  
  
  3,340
  
  5.50
  %
  
  
  
  
  
  
  
  
  3,340
  
  5.50
  %
  3,517Total
  
  $
  592
  
  
  %
  $
  10,435
  
  3.70
  %
  $
  18,514
  
  3.73
  %
  $
  9,979
  
  3.99
  %
  $
  39,520
  
  3.76
  %
  $
  40,703  
 (1)
  
  Excludes
  equity securities with amortized cost and fair value of $150,000.  Sources of Funds  General.Deposits, borrowings, loan
repayments and cash flows generated from operations are the primary sources of
the Banks funds for use in lending, investing and other general purposes.  Deposits.The Bank offers a variety of
deposit accounts having a range of interest rates and terms. The Banks
deposits consist of regular savings, non-interest bearing checking, NOW
checking, money market, and certificate accounts. Of the deposit accounts,
$40.3 million or 7% consist of IRA, Keogh or SEP retirement accounts at December 31,
2009.  The
flow of deposits is influenced significantly by general economic conditions,
changes in money market and prevailing interest rates and competition. The Banks
deposits are primarily obtained from areas surrounding its offices, and the
Bank relies primarily on customer service and long-standing relationships with
customers to attract and retain these deposits. The Bank has historically
maintained a high level of core deposits consisting of regular savings, money
market, non-interest-bearing checking, and NOW checking, which has contributed
to a low cost-of-funds. At December 31, 2009, core deposits amounted to 59%
of total deposits.  The
following table sets forth the distribution of the Banks deposit accounts at
the dates indicated and the weighted average nominal interest rates on each
category of deposits presented. The Bank does not have significant amount of
deposits from outside its  12


market
area. Management does not believe that the use of year end balances instead of
average balances resulted in any material difference in the information
presented.  At December 31,2009
  
  2008
  
  2007Amount
  
  Percent
  of Total
  Deposits
  
  Weighted
  Average
  Nominal
  Rate
  
  Amount
  
  Percent
  of Total
  Deposits
  
  Weighted
  Average
  Nominal
  Rate
  
  Amount
  
  Percent
  of Total
  Deposits
  
  Weighted
  Average
  Nominal
  Rate(Dollars in thousands)Transaction
  Accounts:Interest-bearing
  checking accounts
  
  $
  52,988
  
  9.59
  %
  0.42
  %
  $
  46,907
  
  9.58
  %
  0.45
  %
  $
  46,543
  
  9.85
  %
  0.48
  %Money
  market accounts
  
  141,286
  
  25.56
  %
  1.07
  %
  88,609
  
  18.09
  %
  2.15
  %
  79,267
  
  16.78
  %
  3.69
  %Non-interest-bearing
  checking accounts
  
  37,288
  
  6.75
  %
  
  
  36,871
  
  7.53
  %
  
  
  35,904
  
  7.60
  %
  Total
  transaction accounts
  
  231,562
  
  41.90
  %
  
  
  172,387
  
  35.20
  %
  
  
  161,714
  
  34.23
  %Passbook
  accounts
  
  96,061
  
  17.38
  %
  0.45
  %
  111,591
  
  22.77
  %
  1.12
  %
  130,423
  
  27.61
  %
  1.79
  %Certificates
  of deposit
  
  225,093
  
  40.72
  %
  2.75
  %
  205,872
  
  42.03
  %
  3.58
  %
  180,257
  
  38.16
  %
  4.50
  %Total
  deposits
  
  $
  552,716
  
  100.00
  %
  1.51
  %
  $
  489,850
  
  100.00
  %
  2.19
  %
  $
  472,394
  
  100.00
  %
  2.88
  %  At
December 31, 2009, the Bank had outstanding certificates of deposit in
amounts of $100,000 or more maturing as follows:  Maturing Period
  
  Amount(In thousands)Three months or less
  
  $
  14,993Over three through six months
  
  7,806Over six through 12 months
  
  10,535Over 12 months
  
  23,510Total
  
  $
  56,844  Borrowings  Deposits are the primary source of funds of the Banks
lending and investment activities and for its general business purposes. The
Bank may obtain advances from the Federal Home Loan Bank, (FHLB) of
Pittsburgh to supplement its supply of lendable funds. Advances from the FHLB
of Pittsburgh are typically secured by a pledge of the Banks stock in the FHLB
of Pittsburgh and a portion of the Banks first mortgage loans and certain other
assets. The Bank may also access the Federal Reserve Bank, (FRB) discount
window. The following tables set forth the maximum month-end balance, period
ending balance, and weighted average balance of outstanding FHLB and FRB
advances at the dates and for the periods indicated, together with the
applicable weighted average interest rates.  At December 31,2009
  
  2008
  
  2007(Dollars in thousands)FHLB advances
  
  $
  80,241
  
  $
  158,148
  
  $
  153,221FRB advances
  
  $
  
  
  $
  10,000
  
  $
  Total advances
  
  $
  80,241
  
  $
  168,148
  
  $
  153,221Weighted average interest rate
  
  4.21
  %
  3.52
  %
  4.19
  %  Years Ended December 31,2009
  
  2008
  
  2006(Dollars in thousands)Maximum balance of FHLB/FRB advances
  
  $
  177,249
  
  $
  170,988
  
  $
  153,221Weighted average balance of FHLB/FRB advances
  
  $
  120,631
  
  $
  159,268
  
  $
  112,277Weighted average interest rate of FHLB/FRB
  advances
  
  3.67
  %
  3.90
  %
  4.17
  %  13


Subsidiary Activity  The Bank is permitted to invest
up to 2% of its assets in the capital stock of, or secured or unsecured loans
to, subsidiary corporations, with an additional investment of 1% of assets when
such additional investment is utilized primarily for community development
purposes. Under such limitations, as of December 31, 2009, the Bank was
authorized to invest up to approximately $17.1 million in the stock of, or
loans to, service corporations (based upon the 2% limitation). In addition, the
Bank can designate a subsidiary as an operating subsidiary, in which there is
no percentage of assets investment limitation, if it engages only in activities
in which it would be permissible for the Bank to engage. At December 31,
2009, the Bank had two wholly-owned operating subsidiaries, Third Delaware
Corporation and Teragon Financial Corporation. Third Delaware Corporation was
formed in 1998 for the purpose of investing in marketable securities. At December 31,
2009, the Bank had $144.0 million invested in Third Delaware Corporation.
During 2004, Teragon Financial Corporation (Teragon) invested $7,500 in a
limited partnership entitled Third Fed Abstract, L. P., whose purpose is to
operate a title insurance agency, primarily to capture certain title insurance
premiums generated by the Banks lending activities. At December 31, 2009
the Bank had an investment of $74,000 in Teragon. During 2006, Teragon was
granted approval by the state of Pennsylvania to conduct business as an
insurance agency, and during 2009, Teragon received $23,000 of insurance commissions.  Personnel  As of December 31, 2009, the Company had 162
full-time and 29 part-time employees. None of the Companys employees are
represented by a collective bargaining group. The Company believes that its
relationship with its employees is good.  REGULATION  Set forth below is a brief description of all material
laws and regulations which relate to the regulation of the Bank and the
Company. The description does not purport to be complete and is qualified in
its entirety by reference to applicable laws and regulations.  Recent
Legislation  The economy is
experiencing significantly reduced business activity as a result of, among
other factors, disruptions in the financial system during the past year.
Declines in the housing market during the past year, due to falling home prices
and increased foreclosures and unemployment, have resulted in substantial
declines in mortgage-related asset values, which have had a dramatic negative
impact on government-sponsored entities and major commercial and investment
banks.  Reflecting concern about
the stability of the finance markets in general and the strength of
counterparties, many lenders and institutional investors have reduced, and in
some cases, ceased, to provide funding and liquidity to borrowers, including
other financial institutions. In response to the financial crisis affecting the
banking system and financial markets and going concern threats to investment
banks and other financial institutions, on October 3, 2008, the Emergency
Economic Stabilization Act of 2008 (the EESA) was signed into law.  Pursuant to the EESA, specifically the
Troubled Asset Relief Program (TARP) thereunder, the U.S. Treasury will have
the authority to, among other things, purchase up to $700 billion of mortgages,
mortgage-backed securities and certain other financial instruments from
financial institutions for the purpose of stabilizing and providing liquidity
to the U.S. financial markets.  On October 14, 2008,
the Secretary of the Department of the Treasury announced the Department of the
Treasury will purchase equity stakes in a wide variety of banks and thrifts
through TARPs Capital Purchase Program (CPP). Under this program, from the
$700 billion authorized by the EESA, the Treasury made $250 billion of capital
available to U.S. financial institutions in the form of preferred stock. In
conjunction with the purchase of preferred stock, the Treasury received, from
participating financial institutions, warrants to purchase common stock with an
aggregate market price equal to 15% of the preferred stock investment.
Participating financial institutions were required to adopt the Treasurys
standards for executive compensation and corporate governance for the period
during which the Treasury holds equity in such institution issued under the
CPP.  The Company did not participate in
the CPP  On February 17, 2009, the American Recovery and
Reinvestment Act of 2009 (ARRA) was signed into law by President Obama.  The ARRA includes a wide variety of programs
intended to stimulate the economy and provide for extensive infrastructure,
energy, health, and education needs. In addition, the ARRA imposes certain new
executive compensation and corporate expenditure limits on all current and
future TARP recipients until the institution has repaid the U.S. Treasury,
which is now permitted under the ARRA without penalty and without the need to
raise new capital, subject to the U.S. Treasurys consultation with the
recipients appropriate regulatory agency.  14


Company Regulation  General.The Company is a unitary
savings and loan holding company subject to regulatory oversight by the OTS. As
such, the Company is required to register and file reports with the OTS and is
subject to regulation and examination by the OTS. In addition, the OTS has
enforcement authority over the Company and its non-savings association
subsidiaries, which also permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to the subsidiary savings association.
This regulation and oversight is intended primarily for the protection of the
depositors of the Bank and not for the benefit of stockholders of the Company.
The Company is also required to file certain reports with, and otherwise comply
with, the rules and regulations of the OTS and the SEC.  Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of
2002 (the Act) implemented legislative reforms intended to address corporate
and accounting fraud and improve public company reporting. The SEC has
promulgated new regulations pursuant to the Act and may continue to propose
additional implementing or clarifying regulations as necessary in furtherance
of the Act. The passage of the Act by Congress and the implementation of new
regulations by the SEC subject publicly-traded companies to additional and more
cumbersome reporting regulations and disclosure. Compliance with the Act and
corresponding regulations may increase the Companys expenses.  Financial Modernization.The Gramm-Leach-Bliley Act (GLB)
permits qualifying bank holding companies to become financial holding companies
and thereby affiliate with securities firms and insurance companies and engage
in other activities that are financial in nature. GLB defines financial in
nature to include securities underwriting, dealing and market making;
sponsoring mutual funds and investment companies; insurance underwriting and
agency; merchant banking activities; and activities that the Federal Reserve
Board has determined to be closely related to banking. A qualifying national
bank also may engage, subject to limitations on investment, in activities that
are financial in nature, other than insurance underwriting, insurance company
portfolio investment, real estate development, and real estate investment,
through a financial subsidiary of the bank.  GLB
also prohibits new unitary thrift holding companies from engaging in
nonfinancial activities or from affiliating with a nonfinancial entity. As a
grandfathered unitary thrift holding company, the Company has retained its
authority to engage in nonfinancial activities.  Qualified Thrift Lender Test.As a unitary savings and
loan holding company, the Company generally is not subject to activity
restrictions, provided the Bank satisfies the QTL test. See Bank Regulation  Qualified Thrift Lender Test.  If the Company acquires control of another
savings association as a separate subsidiary, it would become a multiple
savings and loan holding company, and the activities of the Company and any of
its subsidiaries (other than the Bank) would become subject to restrictions
applicable to bank holding companies unless such other associations each also
qualify as a QTL and were acquired in a supervisory acquisition.  Bank
Regulation  General.As a federally chartered,
FDIC-insured savings association, the Bank is subject to extensive regulation
by the OTS and the FDIC. Lending activities and other investments must comply
with various federal statutory and regulatory requirements. The Bank is also
subject to certain reserve requirements promulgated by the Federal Reserve
Board.  The
OTS, in conjunction with the FDIC, regularly examines the Bank and prepares
reports for the consideration of the Banks Board of Directors on any
deficiencies that they find in the Banks operations. The Banks relationship
with its depositors and borrowers is also regulated to a great extent by
federal law, especially in such matters as the ownership of savings accounts
and the form and content of the Banks mortgage documents.  The
Bank must file reports with the OTS and the FDIC concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of
other savings institutions. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the FDIC and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulations, whether by the OTS, the FDIC or the Congress could
have a material adverse impact on the Company, the Bank and their operations.
The Company is also required to file certain reports with, and otherwise comply
with, the rules and regulations of the OTS and the SEC.  Loan Limitations.Regulations limit the amount of non-residential mortgage loans a savings
institution may hold as a percentage of assets or capital.  Separate from the qualified thrift lender test,
regulations limit a savings institution to a maximum of 10% of its assets in
large commercial loans (defined as loans in excess of $2 million), with another
10% of assets permissible in small business loans.  Commercial loans secured by real estate can
be made in an amount up to four times an institutions capital.  15


An
institution can also have commercial leases, in addition to the above items, up
to 10% of its assets. Commercial paper, corporate bonds, and consumer loans
cannot collectively exceed 35% of an institutions assets.  For this purpose, however, residential
mortgage loans (including securities backed by such loans) and credit card
loans are not considered consumer loans, and are both unlimited in amount.  Federal Deposit Insurance.The Banks deposits are
insured to applicable limits by the FDIC. 
The maximum deposit insurance amount has been increased from $100,000 to
$250,000 until December 31, 2013. 
On October 13, 2008, the FDIC established a Temporary Liquidity
Guarantee Program under which the FDIC fully guarantees all
non-interest-bearing transaction accounts until December 31, 2009 (the Transaction
Account Guarantee Program) and all senior unsecured debt of insured depository
institutions or their qualified holding companies issued between October 14,
2008 and June 30, 2009, with the FDICs guarantee expiring by June 30,
2012 (the Debt Guarantee Program). 
Senior unsecured debt would include federal funds purchased and
certificates of deposit standing to the credit of the bank.  After November 12, 2008, institutions
that did not opt out of the Programs by December 5, 2008 were assessed at
the rate of ten basis points for transaction account balances in excess of
$250,000 and at a rate between 50 and 100 basis points of the amount of debt
issued.  In May, 2009, the Debt Guarantee
Program issue end date and the guarantee expiration date were both extended, to
October 31, 2009 and December 31, 2012, respectively.  Participating holding companies that have not
issued FDIC-guaranteed debt prior to April 1, 2009 must apply to remain in
the Debt Guarantee Program. 
Participating institutions will be subject to surcharges for debt issued
after that date.  Effective October 1,
2009, the Transaction Account Guarantee Program was extended until June 30,
2010, with an increased assessment after December 31, 2009.  The Bank did not opt out of Transaction
Account Guarantee Program or its extension but did opt out of the Debt
Guarantee Program.  The
FDIC has adopted a risk-based premium system that provides for quarterly
assessments based on an insured institutions ranking in one of four risk
categories based on their examination ratings and capital ratios.
Well-capitalized institutions with the CAMELS ratings of 1 or 2 are grouped in
Risk Category I and, until 2009, were assessed for deposit insurance at an
annual rate of between five and seven basis points with the assessment rate for
an individual institution determined according to a formula based on a weighted
average of the institutions individual CAMELS component ratings plus either
five financial ratios or the average ratings of its long-term debt. The Bank is
included in Risk Category I. Institutions in Risk Categories II, III and
IV were assessed at annual rates of 10, 28 and 43 basis points,
respectively.  Insured depository
institutions that were in existence on December 31, 1996 and paid
assessments prior to that date (or their successors) were entitled to a
one-time credit against future assessments based on their past contributions to
the predecessor to the Deposit Insurance Fund. 
The Bank used its special assessment credit to offset the cost of its
deposit insurance premium until September 30, 2009 when the credit was
exhausted.  Pursuant
to the Federal Deposit Insurance Reform Act of 2005 (the Reform Act), the
FDIC is authorized to set the reserve ratio for the Deposit Insurance Fund
annually at between 1.15% and 1.5% of estimated insured deposits.  Due to recent bank failures, the FDIC
determined that the reserve ratio was 1.01% as of June 30, 2008.  In accordance with the Reform Act, as amended
by the Helping Families Save Their Home Act of 2009, the FDIC has established
and implemented a plan to restore the reserve ratio to 1.15% within eight
years.  For the quarter beginning January 1,
2009, the FDIC raised the base annual assessment rate for institutions in Risk
Category I to between 12 and 14 basis points while the base annual assessment
rates for institutions in Risk Categories II, III and IV were increased to
17, 35 and 50 basis points, respectively. 
For the quarter beginning April 1, 2009 the FDIC set the base
annual assessment rate for institutions in Risk Category I to between 12 and 16
basis points and the base annual assessment rates for institutions in Risk
Categories II, III and IV at 22, 32 and 45 basis points,
respectively.  An institutions
assessment rate could be lowered by as much as five basis points based on the
ratio of its long-term unsecured debt to deposits or, for smaller institutions
based on the ratio of certain amounts of Tier 1 capital to adjusted
assets.  The assessment rate may be
adjusted for Risk Category I institutions that have a high level of brokered
deposits and have experienced higher levels of asset growth (other than through
acquisitions) and could be increased by as much as ten basis points for
institutions in Risk Categories II, III and IV whose ratio of brokered
deposits to deposits exceeds 10%. 
Reciprocal deposit arrangements like CDARS® were treated as brokered
deposits for Risk Category II, III and IV institutions but not for
institutions in Risk Category I.  An
institutions base assessment rate would also be increased if an institutions
ratio of secured liabilities (including FHLB advances and repurchase
agreements) to deposits exceeds 25%.  The
maximum adjustment for secured liabilities for institutions in Risk Categories
I, II, III and IV would be 8, 11, 16 and 22.5 basis points,
respectively, provided that the adjustment may not increase an institutions
base assessment rate by more than 50%. The Banks assessment rate is 13 basis
points.  16


Regulatory Capital Requirements.OTS capital
regulations require savings institutions to meet three capital standards: (1) tangible
capital equal to 1.5% of total adjusted assets, (2) a leverage ratio (core
capital) equal to at least 4% of total adjusted assets and (3) a
risk-based capital requirement equal to 8.0% of total risk-weighted assets. In
addition, the OTS prompt corrective action regulation provides that a savings
institution that has a leverage capital ratio of less than 4% (3% for
institutions receiving the highest examination rating) will be deemed to be undercapitalized
and may be subject to certain restrictions.  At
December 31, 2009, the Bank was in compliance with all of its regulatory
capital requirements.  Dividend and Other Capital Distribution Limitations.The Bank may
not declare or pay a cash dividend on its capital stock if the effect thereof
would be to reduce the regulatory capital of the Bank below the amount required
for the liquidation account established at the time of the Banks
mutual-to-stock conversion.  Savings
associations that would remain at least adequately capitalized following the
capital distribution, and that meet other specified requirements, are not
required to file a notice or application for capital distributions (such as
cash dividends) declared below specified amounts. Savings associations which
are eligible for expedited treatment under current OTS regulations are not
required to file an application with the OTS if (i) the savings
association would remain at least adequately capitalized following the capital
distribution and (ii) the amount of capital distribution does not exceed
an amount equal to the savings associations net income for that year to date,
plus the savings associations retained net income for the previous two
calendar years. Thus, only undistributed net income for the prior two years may
be distributed in addition to the current years undistributed net income
without the filing of an application with the OTS. Savings associations which
do not qualify for expedited treatment or which desire to make a capital
distribution in excess of the specified amount, must file an application with,
and obtain the approval of, the OTS prior to making the capital distribution. A
savings association such as the Bank that is a subsidiary of a savings and loan
holding company, and under certain other circumstances, must file a notice with
OTS prior to making the capital distribution.  Qualified Thrift Lender Test.The Home Owners Loan Act (HOLA),
as amended, requires savings institutions to meet a QTL test. If the Bank
maintains an appropriate level of Qualified Thrift Investments (primarily
residential mortgages and related investments, including certain
mortgage-backed securities) (QTIs) and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Pittsburgh. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the institution in conducting its
business and liquid assets equal to 10% of total assets). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC
as qualifying QTIs. The method for measuring compliance with the QTL test
requires an institution to be in compliance nine out of every 12 months. As of December 31,
2009, the Bank was in compliance with its QTL requirement with 70.62% of its
assets invested in QTIs.  Federal Home Loan Bank System.The Bank is a
member of the FHLB of Pittsburgh, one of 12 regional FHLBs that administer the
home financing credit function of savings associations. Each FHLB serves as a
reserve or central bank for its members within its assigned region. It is
funded primarily from proceeds derived from the sale of consolidated
obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.  As
a member, the Bank is required to purchase and maintain an investment in the
capital stock of the FHLB of Pittsburgh in an amount equal to 4.55% of its
advances outstanding from the FHLB plus 0.55% of its unused borrowing capacity.
At December 31, 2009, the Bank had $10.0 million in FHLB stock, which was
in compliance with this requirement.  Federal Reserve System.The Federal Reserve Board
requires all depository institutions to maintain non-interest bearing reserves
at specified levels against their transaction accounts (primarily checking, NOW
and Super NOW checking accounts) and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve
Board may be used to satisfy the liquidity requirements that are imposed by the
OTS. At December 31, 2009, the Banks total transaction accounts required
a reserve level of $50,000 which was offset by the Banks vault cash on hand
and cash on deposit at the Federal Reserve Bank of Philadelphia.  Savings
associations have authority to borrow from the Federal Reserve Bank discount
window.  Item 1A.Risk Factors  Not applicable.  17


Item 1B.Unresolved Staff
Comments  None.  Item 2.Properties  The
Company is located and conducts its business at 3 Penns Trail, Newtown,
Pennsylvania. At December 31, 2009, the Bank operated from its
administrative offices and fourteen branch offices located in Philadelphia and
Bucks Counties, Pennsylvania and Mercer County, New Jersey. The Bank also owns
two parcels of land and a building behind its Doylestown branch office. The
parcel with the building is available to be leased to a third-party and the
other parcel is used as a parking lot for employees of the Bank and tenants.
The net book value of the two lots was $100,000. In addition, a subsidiary of
the Company, Penns Trail Development Corporation, owns investment property with
a book value of $726,000.  The
following table sets forth certain information regarding the Banks operating
properties:  Location
  
  Leased
  or
  OwnedADMINISTRATIVE
  OFFICE
  
  OwnedNewtown Office3 Penns TrailNewtown, PA 18940DEPOSIT OPERATIONS
  
  Leased828C Newtown-Yardley RoadSuite 301BNewtown, PA 18940BRANCH
  AND LOAN OFFICES
  
  LeasedFrankford Office4625 Frankford AvenuePhiladelphia, PA 19124Ewing Office
  
  Owned2075 Pennington RoadEwing, NJ 08618Hamilton Office
  
  Owned1850 Route 33Hamilton Square, NJ 08690Fishtown Office
  
  OwnedYork & Memphis StreetsPhiladelphia, PA 19125Cross Keys Office
  
  Owned834 North Easton HighwayDoylestown, PA 18901Bridesburg Office
  
  OwnedOrthodox & Almond StreetsPhiladelphia, PA 19137New Britain Office
  
  Leased600 Town CenterNew Britain, PA 18901Newtown Office
  
  Leased950 Newtown Yardley RoadNewtown, PA 18940Mayfair Office
  
  OwnedRoosevelt Blvd. at UnruhPhiladelphia, PA 19149Doylestown Office
  
  Owned60 North Main StreetDoylestown, PA 18901Feasterville Office
  
  LeasedBuck Hotel ComplexFeasterville, PA 19053Woodhaven Office
  
  Leased4014 Woodhaven RoadPhiladelphia, PA 19154Girard Office
  
  Leased136 West Girard AvenuePhiladelphia, PA 19123Northern Liberties Office
  
  Leased905 North 2nd StreetPhiladelphia, PA 19123PROCESSING
  OPERATIONS
  
  OwnedOperations Center62 Walker LaneNewtown, PA 18940(1)  Item 3.Legal
Proceedings  Neither
the Company nor its subsidiaries are involved in any pending legal proceedings,
other than routine legal matters occurring in the ordinary course of business
that in the aggregate involve amounts which are believed by management to be
immaterial to the consolidated financial condition or results of operations of
the Company.  18


Item 4.[Reserved]  PART II  Item 5.Market
for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities  Information
relating to the market for Registrants common equity and related stockholder
matters appears under the section captioned Corporate Corporate Profile and
Related Information Stock Market Information, Dividend Policy and Stock
Price and Dividend History in the Registrants 2009 Annual Report to
Stockholders and is incorporated herein by reference.  The following table provides information on repurchases
by the Company of its common stock in each month for the three months ended December 31,
2009:  Month
  
  Total Number of
  Shares Purchased
  
  Average Price
  Paid per Share
  
  Total Number of
  Shares Purchased as
  Part of Publicly
  Announced Plan or
  Program
  
  Maximum Number of
  Shares that may yet
  be Purchased Under
  the Plans or
  ProgramsOctober 1, 2009 - October 31, 2009
  
  
  
  
  
  
  
  101,597November 1, 2009 - November 30, 2009
  
  
  
  
  
  
  
  101,597December 1, 2009 - December 31, 2009
  
  
  
  
  
  
  
  101,597  Item 6.Selected
Financial Data  Not
applicable.  Item 7.Managements
Discussion and Analysis of Financial Condition and Results of Operations  The
information under the section captioned Managements Discussion and Analysis
of Financial Condition and Results of Operations in the Registrants 2009
Annual Report to Stockholders is incorporated herein by reference.  Item 7A.Quantitative and
Qualitative Disclosures about Market Risk  The
information under the section captioned Managements Discussion and Analysis
of Financial Condition and Results of Operations in the Registrants 2009
Annual Report to Stockholders is incorporated herein by reference.  Item 8.Financial
Statements and Supplementary Data  The
Consolidated Financial Statements of TF Financial Corporation and its
subsidiaries included in the Registrants 2009 Annual Report to Stockholders
are incorporated herein by reference.  Item 9.Changes in
and Disagreements with Accountants on Accounting and Financial Disclosure  None.  Item 9A(T).  Controls and Procedures  (a)Disclosure
Controls and Procedures  Based
on their evaluation of the Companys disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934
(the Exchange Act)), the Companys principal executive officer and principal
financial officer have concluded that as of the end of the period covered by
this Annual Report on Form 10-K such disclosure controls and procedures
are effective.  (b)Internal
Control Over Financial Reporting  Managements
report on internal control over financial reporting is included in the
Registrants 2009 Annual Report to Stockholders and is incorporated herein by
reference. Neither this Annual Report on Form 10-K nor the Annual Report
to  19


Stockholders
includes an attestation report of the Companys registered public accounting
firm regarding internal control over financial reporting. Managements report
was not subject to attestation by the Companys registered public accounting
firm pursuant to the temporary rules of the Securities and Exchange
Commission that permit the Company to provide only managements report in this
Annual Report on Form 10-K.  (c)  Changes in
Internal Control Over Financial Reporting.  During
the last quarter of the year under report, there was no change in the Companys
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over
financial reporting.  Item 9B.Other Information  None.  PART III  Item 10.Directors,
Executive Officers and Corporate Governance  The
information contained under the sections captioned Proposal I - Election of
Directors  General Information and the Nominee and  Biographical
Information, Meetings and Committees of the Board of Directors, Director
Nomination Process,Additional Information About Directors and Executive Officers
Section 16(a) Beneficial Ownership Reporting Compliance in the
Registrants definitive proxy statement for the Registrants 2010 Annual
Meeting of Stockholders (the Proxy Statement) is incorporated herein by
reference.  The
Company has adopted a Code of Ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer or persons
performing such functions. The Code of Ethics can be obtained without charge by
sending a written request to the Corporate Secretary, TF Financial Corporation,
3 Penns Trail, Newtown, Pennsylvania 18940.  Item 11.Executive
Compensation  The
information relating to executive compensation is incorporated herein by
reference to the information contained under the sections captioned Executive
Compensation and Director Compensation in the Registrants Proxy Statement.  Item 12.Security
Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters  (a)Security
Ownership of Certain Beneficial Owners  Information
required by this item is incorporated herein by reference to the Section captioned
Voting Securities and Principal Holders Thereof in the Registrants Proxy
Statement.  (b)Security
Ownership of Management  Information
required by this item is incorporated herein by reference to the sections
captioned Security Ownership of Certain Beneficial Owners and Management and
Proposal I  Election of Directors in the Registrants Proxy Statement.  (c)Management of
the Company knows of no arrangements, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change in control of the registrant.  (d)Securities
Authorized for Issuance Under Equity Compensation Plans  Set
forth below is information as of December 31, 2009 with respect to
compensation plans under which equity securities of the Registrant are
authorized for issuance.  20


EQUITY COMPENSATION PLAN INFORMATION  (a)
  Number of securities
  to be issued upon
  exercise of
  outstanding options,
  warrants and rights
  
  (b)
  Weighted-average
  exercise price of
  outstanding
  options, warrants
  and rights
  
  (c)
  Number of securities
  remaining available for
  future issuance under
  equity compensation plans
  (excluding securities
  reflected in column (a))Equity compensation plans approved by
  shareholders(1)
  
  271,646
  
  
  
  1,334Equity compensation plans not approved by
  shareholders
  
  
  
  
  
  TOTAL
  
  271,646
  
  
  
  1,334  
 (1)Plans
approved by stockholders include: TF Financial Corporation 1997 Stock Option
Plan, and TF Financial Corporation 2005 Stock-Based Incentive Plan.  For
information regarding the material features of these plans, see Notes A10, A11,
J3 and J4 to the Consolidated Financial Statements included as part of Exhibit 13
to this report.  Item 13.Certain
Relationships and Related Transactions, and Director Independence  The
information relating to certain relationships and related transactions is
incorporated herein by reference to the information contained under the section
captioned Additional Information About Directors and Executive Officers 
Certain Relationships and Related Transactions and Director Independence in
the Registrants Proxy Statement.  Item 14.Principal
Accountant Fees and Services  The
information relating to this item is incorporated herein by reference to the
information contained under the section captioned Additional Information about
Directors and Executive Officers - Principal Accounting Firm Fees in the
Registrants Proxy Statement.  PART IV  Item 15.Exhibits and
Financial Statement Schedules  (a)The
following documents are filed as a part of this report:  (1)  The following financial statements and
the report of the independent auditor of the Company included in the Companys
2009 Annual Report to Stockholders are incorporated herein by reference.  Managements Report on
Internal Control Report of Independent
Registered Public Accounting Firm Consolidated Statements
of Financial Condition as of December 31, 2009 and 2008 Consolidated Statements
of Income For the Years Ended December 31, 2009 and 2008 Consolidated Statements
of Changes in Stockholders Equity and Comprehensive Income for the Years Ended
December 31, 2009 and 2008 Consolidated Statements
of Cash Flows for the Years Ended December 31, 2009 and 2008 Notes to Consolidated Financial Statements  (2)   All schedules are omitted because they
are not required or applicable, or the required information is shown in the
consolidated financial statements or the notes thereto.  21


(3)   Exhibits  (a)           The following exhibits are filed as part of this report.  3.1
  Certificate of
  Incorporation of TF Financial Corporation (1)3.2
  Bylaws of TF Financial
  Corporation (1)4.0
  Stock Certificate of TF
  Financial Corporation (1)10.1
  Third Federal Savings and
  Loan Association Management Stock Bonus Plan (1)10.2
  Third Federal Savings Bank
  Directors Consultation and Retirement Plan (2)10.3
  Severance Agreement with
  Kent C. Lufkin (3)10.4
  Severance Agreement with
  Floyd P. Haggar (3)10.5
  Severance Agreement with
  Dennis R. Stewart (4)10.6
  TF Financial Corporation
  1997 Stock Option Plan (5)10.7
  Severance Agreement with
  Robert N. Dusek (6)10.8
  TF Financial Corporation
  1996 Directors Stock Option Plan (7)10.9
  Retirement and
  Non-Competition Agreement with John R. Stranford (8)10.10
  Employment Agreement with
  John R. Stranford (8)10.11
  TF Financial Corporation
  Incentive Compensation Plan (9)10.12
  TF Financial Corporation
  2005 Stock-Based Incentive Plan (10)10.13
  Severance Agreement with
  Elizabeth Kaspern (11)10.14
  TF Financial Corporation
  Stock Repurchase Plan (12)10.15
  TF Financial Corporation
  Amended and Restated Bylaws (13)13.0
  2009 Annual Report to
  Stockholders21.0
  Subsidiary Information23.0
  Consent of Independent
  Registered Public Accounting Firm31.1
  Certification pursuant to
  Section 302 of the Sarbanes-Oxley Act of 200231.2
  Certification pursuant to
  Section 302 of the Sarbanes-Oxley Act of 200232.0
  Certification pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002  
 (1)
  Incorporated
  herein by reference to the Exhibits to Form S-1, Registration Statement,
  File No. 33-76960.(2)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 1995.(3)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 2000.(4)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 1999.(5)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 1997.(6)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 2001.(7)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 2002.(8)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 2003.(9)
  Incorporated
  herein by reference to the Registrants Form 8-K filed with the
  Securities and Exchange Commission on October 20, 2004.(10)
  Incorporated
  herein by reference to the Registrants Form S-8 filed with the
  Securities and Exchange Commission on May 20, 2005.(11)
  Incorporated
  herein by reference to the Registrants Annual Report on Form 10-K for
  the fiscal year ended December 31, 2006.(12)
  Incorporated herein by
  reference to the Registrants Form 8-K filed with the Securities and
  Exchange Commission on October 25, 2007.(13)
  Incorporated herein by
  reference to the Registrants Form 8-K filed with the Securities and
  Exchange Commission on October 26, 2007.  22


SIGNATURES  Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.  TF FINANCIAL CORPORATIONDated: March 30, 2010
  By:
  /s/ Kent C. LufkinKent C. LufkinPresident, Chief Executive Officer(Duly Authorized Representative)  Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of Dated: March 30, 2009.   By:
  /s/ Kent C. Lufkin
  
  By:
  /s/ Dennis R. StewartKent C. Lufkin
  
  
  Dennis R. StewartPresident, Chief Executive Officer
  (Principal Executive Officer)
  
  
  Executive Vice President, Chief Financial Officer
  and Treasurer(Principal Financial and Accounting Officer)By:
  /s/ Carl F. Gregory
  
  By:
  /s/ Robert N. DusekCarl F. Gregory
  
  
  Robert N. DusekDirector
  
  
  Chairman of the BoardBy:
  /s/ Dennis L. McCartney
  
  By:
  /s/ Albert M. Tantala, Sr.Dennis L. McCartney
  
  
  Albert M. Tantala, Sr.Director
  
  
  DirectorBy:
  /s/ John R. StranfordJohn R. StranfordDirector  23