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, 2002
                               -----------------
                                     - or -

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

For the transition period from                  to
                               ----------------    ----------------
                         Commission file number: 0-24168
                                                 -------

                            TF FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

          Delaware                                        74-2705050
-------------------------------             ------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


  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:     None
                                                              --------
Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.10 per share
                     --------------------------------------
                                (Title of Class)

         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. YES X   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. [X]

Indicate by check mark whether the registrant is an accelerated filer as defined
in Exchange Act Rule 12b-2.  YES       NO   X
                                 ---       ---

         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 28, 2002 was $46.9 million.

         As of March 17,  2003 there were  outstanding  2,728,282  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, 2002. (Parts I, II and IV)
2.   Portions  of  the  Proxy   Statement   for  the  2003  Annual   Meeting  of
     Stockholders. (Part III)

<PAGE>

                                     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  for
5,290,000  shares of its common stock and acquired  Third  Federal  Savings 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  Savings  Bank,  TF  Investments  Corporation,  Teragon  Financial
Corporation, Penns Trail Development Corporation and Third Delaware Corporation.
At  December  31,  2002,  the Company had total  assets of $721  million,  total
liabilities of $658 million and stockholders' equity of $63 million.

                                        2

<PAGE>

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,  2002 the Bank  operated  thirteen  branch  offices  in Bucks  and
Philadelphia counties, Pennsylvania and in Mercer County, New Jersey. The Bank's
fourteenth  branch  office is  located  in the  Northern  Liberties  section  of
Philadelphia and opened during March 2003.

         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, 2002, one- to four-family residential mortgage loans
totaled  $228 million or 61% of the Bank's  total loan  portfolio.  At that same
date, the Bank had approximately $170 million or 24% of total assets invested in
mortgage-backed  securities  and $42 million or 6% of total assets in investment
securities.  To a lesser extent, the Bank also originates commercial real estate
and multi-family,  construction and consumer loans. The Bank has one subsidiary,
Third Delaware  Corporation,  which was  incorporated in 1998 for the purpose of
holding and managing  mortgage-backed  securities and investment  securities for
the Bank.

Market Area

         The Bank operates six offices in  Philadelphia  County and five offices
in Bucks County, Pennsylvania. These two counties cover the city of Philadelphia
and the northeast suburbs of Philadelphia.  The population of these two counties
totals over 2.1 million.  The Bank also operates  three branch offices in Mercer
County,  New  Jersey,  which has a  population  of  approximately  354,000.  The
population of Bucks and Mercer  Counties has  experienced  distinctly  different
economic and demographic trends over recent decades. Whereas Philadelphia County
has  experienced  a population  decline and has offered  limited  opportunities,
Bucks and Mercer Counties, with growing populations,  have offered the Bank much
greater opportunities.

Competition

         The Bank faces varying  degrees of  competition  from local thrifts and
credit unions at its various branch  locations.  Stronger  competition  has come
from local and much larger  regional banks based in and around the  Philadelphia
area.  Commercial  banks  hold  approximately  75%  of  the  deposit  market  in
Philadelphia  County,  65% in Bucks County and 66% in Mercer County.  The Bank's
share of the deposit market in  Philadelphia,  Bucks and Mercer Counties is very
small, at .20%, 1.57% and 1.23%, respectively.

Lending Activities

         General.  The Bank's loan portfolio  composition  consists primarily of
conventional 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, 2002, the Bank's mortgage loans  outstanding were $251 million,  of
which $228 million

                                        3
<PAGE>

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, 27%
were  ARM's  and 73% were  fixed-rate  loans.  Total  ARM  loans  in the  Bank's
portfolio at December 31, 2002,  amounted to $145 million or 39% of total loans.
At that same date,  commercial  real  estate and  multi-family  residential  and
construction loans totaled $85 million and $12 million, respectively.

         Consumer and other loans held by the Bank totaled $46 million or 12% of
total  loans  outstanding  at  December  31,  2002,  of which $25 million or 55%
consisted  of home  equity and second  mortgages.  At that same date  commercial
business  loans,  leases and other loans totaled $8 million,  $2 million and $10
million, respectively.

                                        4
<PAGE>

         The  following  tables set 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.

<TABLE>
<CAPTION>
                                                                         At December 31,
                                   ------------------------------------------------------------------------------------------------
                                        2002               2001              2000                   1999                1998
                                   ----------------   ----------------   -----------------   -------------------   ----------------
                                           Percent           Percent             Percent               Percent            Percent
                                   Amount  of Total   Amount  of Total   Amount   of Total     Amount   of Total    Amount of Total
                                   ------  --------   ------  --------   ------   --------     ------   --------    ------ --------
                                                                      (Dollars in thousands)
<S>                            <C>         <C>    <C>         <C>    <C>           <C>     <C>          <C>     <C>        <C>
Loans:
 Mortgage loans................
  One- to four-family..........  $227,953    61.33% $222,016    58.42% $211,065      57.89%  $168,057     58.00%  $152,819   62.93%
  Commercial real estate and
   multi-family................    85,493    23.00    93,572    24.62    77,486      21.25     65,346     22.55     55,208   22.73
  Construction.................    12,026     3.23     9,824     2.59    13,950       3.82     12,074      4.16      5,352    2.20
                                 --------   ------  --------   ------  --------     ------   --------    ------   --------  ------
       Total mortgage loans....   325,472    87.56   325,412    85.63   302,501      82.96    245,477     84.71    213,379   87.86
Consumer and other loans:
  Home equity and second
    mortgage...................    25,480     6.87    25,640     6.75    20,887       5.73     16,816      5.81     12,995    5.35
  Commercial business..........     8,005     2.15     9,285     2.44    14,630       4.01      9,339      3.22      6,666    2.74
  Leases.......................     2,246     0.60     3,544     0.93     3,493       0.96      3,195      1.10      2,305    0.95
  Other........................    10,490     2.82    16,154     4.25    23,113       6.34     14,945      5.16      7,521    3.10
                                 --------   ------  --------   ------  --------     ------   --------    ------   --------  ------
       Total consumer and other
         loans.................    46,221    12.44    54,623    14.37    62,123      17.04     44,295     15.29     29,487   12.14
                                 --------   ------  --------   ------  --------     ------   --------    ------   --------  ------
       Total loans.............   371,693   100.00%  380,035   100.00%  364,624     100.00%   289,772    100.00%   242,866  100.00%
                                 --------   ======  --------   ======  --------     ======   --------    ======   --------  ======
Less:
  Unearned discount,( premium),
    deferred loan fees, net....      (446)               428              1,104                   124                  116
  Allowance for loan losses....     2,047              1,972              1,714                 1,917                1,909
                                 --------           --------           --------              --------             --------
      Total loans, net.........  $370,092           $377,635           $361,806              $287,979             $240,841
                                 ========           ========           ========              ========             ========
</TABLE>
                                        5

<PAGE>

<TABLE>
<CAPTION>
                                                                         At December 31,
                                   ------------------------------------------------------------------------------------------------
                                        2002              2001            2000                  1999               1998
                                   ----------------  ---------------- -----------------  -----------------  ------------------
                                           Percent           Percent           Percent            Percent             Percent
                                   Amount  of Total  Amount  of Total Amount   of Total    Amount of Total   Amount   of Total
                                   ------  --------  ------  -------- ------   --------  -------- --------  -------   --------
                                                                      (Dollars in thousands)

<S>                            <C>         <C>    <C>         <C>    <C>          <C>     <C>      <C>      <C>       <C>

Mortgage-backed securities
  held-to-maturity:
  FHLMC........................ $ 21,870     40.10% $35,000    37.50%  $ 45,971    34.03% $ 52,625   32.91%   $ 47,239     26.10%
  FNMA.........................   11,781     21.60   15,739    16.90     20,756    15.36    24,983   15.63      12,726      7.03
  GNMA.........................   18,278     33.40   29,877    32.00     41,090    30.41    46,651   29.18      56,318     31.12
  Real estate investment
    mortgage conduit...........    2,519      4.60   12,550    13.40     27,043    20.02    35,271   22.06      64,180     35.47
  Other mortgage-backed
    securities.................      144      0.30      201     0.20        282     0.18       358    0.22         501      0.28
                                --------    ------  -------   ------   --------   ------  --------  ------    --------    ------
    Total mortgage-backed and
      related securities
      held-to-maturity......... $ 54,592    100.00% $93,367   100.00%  $135,142   100.00% $159,888  100.00%   $180,964    100.00%
                                ========    ======  =======   ======   ========   ======  ========  ======    ========    ======

Mortgage-backed securities
    available-for-sale:
    FHLMC...................... $    699      0.60% $ 1,108     1.10%  $  1,431    1.46%  $  7,233    5.46%   $ 13,214     17.55%
    FNMA.......................   11,878     10.30   22,459    22.50     25,679    26.23    27,963   21.10      32,178     42.74
    GNMA.......................       --        --    5,515     5.50      7,561     7.72     8,338    6.29      10,284     13.66
    Real estate investment
      mortgage conduit.........  102,666     89.10   70,681    70.90     63,243    64.59    88,981   67.15      19,609     26.05
                                --------    ------  -------   ------   --------   ------  --------  ------    --------    ------
      Total mortgage-backed
        and related securities
        available-for-sale..... $115,243    100.00% $99,763   100.00%  $ 97,914   100.00% $132,515  100.00%   $ 75,285    100.00%
                                ========    ======  =======   ======   ========   ======  ========  ======    ========    ======
</TABLE>

                                        6

<PAGE>

         Loan Maturity and Repricing Information. The following table sets forth
certain  information at December 31, 2002,  regarding the dollar amount of loans
maturing in the Bank's loan and mortgage- backed securities  portfolios 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, 2003,  are reported as due in one year or less.  The table does not
include prepayments or scheduled principal repayments.

<TABLE>
<CAPTION>
                                                   Due 1/1/03 -     Due 1/1/04 -  Due After
                                                    12/31/03         12/31/07     12/31/07
                                                    --------         --------     --------
                                                                  (In thousands)
<S>                                                <C>             <C>           <C>
Available for sale:
  Mortgage-backed securities..................       $    24         $ 4,693       $110,526

Held to Maturity:
  One-to-four family..........................         1,296          14,035        212,622
  Commercial real estate and multi-family.....         2,630          25,589         57,274
  Construction................................        12,026              --             --
  Consumer and other..........................         7,081          16,347         22,793
                                                     -------         -------       --------
  Total loans receivable......................        23,033          55,971        242,689
  Mortgage-backed securities..................            62           2,897         51,633
                                                     -------         -------       --------
  Totals......................................       $23,095         $58,868       $344,322
                                                     =======         =======       ========
</TABLE>


         The  following  table  sets  forth the  dollar  amount of all loans and
mortgage-backed securities due after December 31, 2003, which have predetermined
interest rates and which have floating or adjustable interest rates.


                                             Predetermined       Floating or
                                                 Rates         Adjustable Rate
                                                 -----         ---------------
                                                       (In thousands)
Available for sale:
  Mortgage-backed securities.................  $115,219           $     --
                                               --------           --------
  Totals.....................................  $115,219           $     --
                                               ========           ========

Held to Maturity:
  One-to-four family.........................  $165,283           $ 61,374
  Commercial real estate and multi-family....    26,602             56,261
  Construction...............................        --                 --
  Consumer and other.........................    30,349              8,791
                                               --------           --------
  Total loans receivable.....................   222,234            126,426
  Mortgage-backed securities.................    54,295                235
                                               --------           --------
  Totals.....................................  $276,529           $126,661
                                               ========           ========

         One- to  Four-Family  Mortgage  Loans.  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

                                        7

<PAGE>

value or selling price of the mortgaged property, other than loans to facilitate
the sale of real estate acquired through foreclosure, must be owner-occupied and
private mortgage insurance must be provided on the amount in excess of 80%.

         Loan  originations  are  generally   obtained  from  existing  or  past
customers,  members  of the local  community,  and  referrals  from  established
builders and realtors within the Bank's lending area.  Mortgage loans originated
and held by the Bank in its  portfolio  generally  include  due-on sale  clauses
which provide the Bank with the contractual  right to deem the loan  immediately
due and  payable  in the event  that the  borrower  transfers  ownership  of the
property without the Bank's consent.

         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 1 to 2% 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  and the Bank's  cost of
funds.  The origination  fees for fixed-rate loans range from 0% to 3% depending
on the  underlying  loan coupon.  Generally,  the Bank's  standard  underwriting
guideline  for  fixed-  rate  mortgage  loans  conform  to the  FHLMC  and  FNMA
guidelines and may be sold in the secondary market.  While it does not presently
do so, the Bank has in the past sold a portion  of its  conforming  fixed-  rate
mortgage  loans in the  secondary  market to FHLMC and FNMA while  retaining the
servicing rights on certain loans. The Bank,  however,  is primarily a portfolio
lender.  As of December 31,  2002,  the Bank's  portfolio of loans  serviced for
FHLMC or FNMA totaled approximately $4 million.

         Commercial  Real Estate and  Multi-Family  Loans.  The Bank  originates
loans secured by commercial real estate including non-owner occupied residential
multi-family  dwelling  units  (more  than  four  units)  primarily  secured  by
professional  office  buildings  and  apartment  complexes.  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 only to
borrowers known to the Bank and on properties in its market area. The commercial
real  estate  and  multi-family   loans  in  the  Bank's  portfolio  consist  of
fixed-rate,  ARM and balloon loans which were  originated  at prevailing  market
rates for terms of up to 25 years.  The Bank's  current  policy is to  originate
commercial  real  estate  and  multi-family  loans as ARM's  that are  generally
amortized  over a period of 20 years or as balloon  loans which  generally  have
terms of 5 to 10 years, with 20-25 year amortization.

         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 borrower's  creditworthiness  and the  feasibility  and cash flow
potential of the  project.  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 to a greater extent than residential real estate loans to adverse
conditions  in the real estate  market or the economy.  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.  At  December  31,  2002,  the five  largest  commercial  real estate and
multi-family  loans  totaled  $18.3 million with no single loan larger than $4.4
million.  At December 31, 2002,  all such loans were current and the  properties
securing such loans are in the Bank's market area.

                                        8

<PAGE>

         Construction  Loans.  At December 31, 2002, the Bank had $12 million of
construction  loans  or 3% 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 development.  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.

         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"),  commercial business loans, automobile
loans and student  loans.  These loans  totaled $46 million or 12% of the Bank's
total loan portfolio at December 31, 2002. Federal  regulations permit federally
chartered thrift institutions to make secured and unsecured consumer loans up to
35% of an  institution's  assets.  In  addition,  a federal  thrift has  lending
authority  above  the  35%  category  for  certain   consumer  loans,   property
improvement  loans, and loans secured by savings  accounts.  The Bank originates
consumer  loans in order to provide a wide range of  financial  services  to its
customers and because the shorter terms and normally  higher  interest  rates on
such loans help maintain a profitable  spread between its average loan yield and
its cost of funds.

         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  considered.  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 unit which
secures the loan.

         The Bank intends to continue to emphasize the  origination  of consumer
loans.  Consumer  loans  tend to be  originated  at higher  interest  rates than
conventional residential mortgage loans and for shorter terms which benefits the
Bank's interest rate risk management.  Consumer loans,  however,  tend to have a
higher risk of default than  residential  mortgage  loans. At December 31, 2002,
$245,000 or 0.7% of the Bank's consumer loans were delinquent more than 90 days.

         Federal thrift  institutions are permitted to make secured or unsecured
loans for commercial,  corporate,  business or agricultural purposes,  including
the issuance of letters of credit  secured by real estate,  business  equipment,
inventories,  accounts receivable and cash equivalents.  The aggregate amount of
such loans outstanding may not exceed 10% of such institution's assets.

         The  Bank  offers  second   mortgage   loans  on  one-  to  four-family
residences.  At December 31, 2002, second mortgage and home equity loans totaled
$25 million, or 7% of the Bank's total loan portfolio. Second mortgage loans are
offered as  fixed-rate  loans for a term not to exceed 15 years.  Such loans are
only made on owner-occupied one- to four-family  residences and are subject to a
75% 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.

         The Bank  makes  commercial  business  loans  on a  secured  basis  and
generally requires additional collateral consisting of real estate. The terms of
such loans generally do not exceed five years.  The majority of these loans have
floating interest rates which adjust with changes in market driven indices.  The
Bank's  commercial  business  loans  primarily  consist of short-term  loans for
equipment, working capital,

                                        9

<PAGE>

business  expansion and inventory  financing.  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,  2002,  the Bank  had  approximately  $8  million  outstanding  in
commercial business loans, which represented  approximately 2% of its total loan
portfolio.

         Prior to 2002 the Bank purchased  commercial leases;  however, the Bank
no longer  engages in this activity.  These lessees are generally  small medical
practitioners  located  throughout the United States.  The average lease is less
than  $100,000  and the  servicing  for such  leases  had been  retained  by the
lessor/seller.  During  2002 the Bank took  control  of the  servicing  due to a
default  by the  seller/servicer.  At  December  31,  2002 the  purchased  lease
portfolio totaled $2 million or 0.6% of total assets.

         Loan Approval  Authority and Underwriting.  The Board of Directors 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. A Lending Vice  President may
approve  a secured  loan up to  $100,000  and an  unsecured  loan up to  $25,000
individually.  Each In-House Loan Committee member may approve a secured loan up
to  $250,000  and an  unsecured  loan  up to  $50,000,  except  the  President's
authority is two times these amounts.  Any two In-House Loan  Committee  members
may combine their  secured  lending  authority.  A majority of the In-House Loan
Committee members may approve a secured loan up to $1.5 million and an unsecured
loan up to $200,000. Generally, all loans over $1.5 million, or loans that cause
the proposed  total  exposure to exceed $1.5  million,  require  approval by the
Board Loan Committee.

         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 ordered,  income and certain other  information is
verified and, if necessary,  additional financial  information is requested.  An
appraisal of the real estate  intended to secure the  proposed  loan is required
which currently 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.
The  independent  appraiser or loan officer  determines  the stage of completion
based upon its physical inspection of the construction.  It is the Bank's policy
to obtain title  insurance or a title opinion on all real estate first  mortgage
loans.  Borrowers  must also  obtain  hazard or flood  insurance  (for  loans on
property located in a flood zone) prior to closing the loan. For loans in excess
of 80% of the loan to value ratio,  borrowers are generally  required to advance
funds on a monthly basis together with each payment of principal and interest to
an escrow account from which the Bank makes disbursements for items such as real
estate taxes and hazard insurance premiums.

         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 $7.6 million as of December 31, 2002.

         At  December  31,  2002,  the Bank's  five  largest  aggregate  lending
relationships  had balances  ranging from $3.6 to $5.3 million.  At December 31,
2002, all of these loans were current.

                                       10

<PAGE>

Mortgage-Backed Securities

         To  supplement  lending  activities,  the Bank  invests in  residential
mortgage-backed securities. Although the majority of such securities are held to
maturity,  they can serve as collateral for borrowings and, through  repayments,
as a source of liquidity.

         The  mortgage-backed  securities  portfolio  as of December  31,  2002,
consisted of pass-through  certificates issued by the Federal Home Loan Mortgage
Corporation  ("FHLMC") ($23 million),  Government National Mortgage  Association
("GNMA"),  ($18 million) Federal  National  Mortgage  Association  ("FNMA") ($24
million), real estate mortgage investment conduits formed by these same agencies
("REMICs") ($105 million), and other mortgage-backed securities ($144,000).

         At December 31, 2002, the amortized cost of mortgage-backed  securities
totaled  $167  million,  or 23% of total  assets,  and the market  value of such
securities totaled approximately $173 million.

         The Bank's  mortgage-backed  securities  are so-called  "pass-throughs"
which  represent  a  participation  interest  in  a  pool  of  single-family  or
multi-family mortgages,  the principal and interest payments on which are passed
from  the  mortgage  originators,   through  intermediaries   (generally  quasi-
governmental  agencies) that pool and repackage the  participation  interests in
the form of securities,  to investors such as the Bank. Such  quasi-governmental
agencies,  which  guarantee  the payment of principal and interest to investors,
primarily 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" that, when purchased,  offered a high  probability of predictable  cash
flows.

                                       11

<PAGE>

         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,
                                                --------------------------------
                                                  2002        2001        2000
                                                --------    --------    --------
                                                         (In thousands)
Held to maturity:
  GNMA-fixed rate ..........................    $ 18,278    $29,877    $ 41,090
  FHLMC ARMs ...............................          91        131         168
  FHLMC-fixed rate .........................      21,779     34,869      45,803
  FNMA-fixed rate ..........................      11,781     15,739      20,756
  REMICs ...................................       2,519     12,550      27,043
  Other mortgage-backed securities .........         144        201         282
                                                --------    -------    --------
    Total mortgage-backed securities
      held to maturity .....................    $ 54,592    $93,367    $135,142
                                                ========    =======    ========
Mortgage-backed securities
Available-for-sale:
  FHLMC ....................................    $    699    $ 1,108    $  1,431
  FNMA .....................................      11,878     22,459      25,679
  GNMA .....................................          --      5,515       7,561
  REMICs ...................................     102,666     70,681      63,243
                                                --------    -------    --------
    Total mortgage-backed securities
      available-for-sale ...................    $115,243    $99,763    $ 97,914
                                                ========    =======    ========

         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, 2002. The table does not include estimated
prepayments.  Adjustable-rate  mortgage-backed  securities are shown as maturing
based on contractual maturities.

<TABLE>
<CAPTION>
                                                                 Contractual
                                      Contractual Held            Available
                                        To Maturity               -For-Sale
                                       Maturities Due    WAC    Maturities Due   WAC
                                       --------------    ---    --------------   ---
                                                  (Dollars in thousands)
<S>                                    <C>             <C>       <C>           <C>
Less than 1 year.....................    $    62         7.18%     $     24      6.38%
1 to 3 years.........................        110         9.01           538      6.83
3 to 5 years.........................      2,787         7.34         4,155      6.09
5 to 10 years........................      4,423         7.09        45,985      5.74
10 to 20 years.......................      2,894         6.96        46,169      5.41
Over 20 years........................     44,316         6.62        18,372      6.05
                                         -------         ----      --------      ----
Total mortgage-backed securities.....    $54,592         6.72%     $115,243      5.68%
                                         =======         ====      ========      ====
</TABLE>

                                       12

<PAGE>

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 sold 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,  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, 2002 the
Bank used  third-party  servicers to service $149.3  million in mortgage  loans,
including  one  servicer  that  serviced  $104.7  million.  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.

         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  collection.  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, 2002, the Bank had one
significant  lending  relationship  involving two loans that were impaired loans
within the meaning of SFAS No. 114 and SFAS No. 118.  Subsequent to December 31,
2002 these loans were  foreclosed upon and the property became real estate owned
by the  Bank.  These  loans  totaled  $1.7  million  and are  collateralized  by
commercial  real  estate.  The Bank  expects to recover  some or all of its loan
balances through the liquidation of the collateral,  which has been appraised at
an amount in excess of $1.7 million. The Bank does not expect a material loss on
the liquidation of the collateral,  although the timing and ultimate recovery of
any proceeds are unknown at this time.

                                       13

<PAGE>

<TABLE>
<CAPTION>
Non-performing assets                                         At December 31,
                                             -------------------------------------------------
                                                2002      2001      2000      1999      1998
                                                ----      ----      ----      ----      ----
                                                            (Dollars in thousands)
<S>                                         <C>       <C>       <C>       <C>       <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
  One- to four-family .....................   $1,013    $1,821    $  869    $  880    $  896
  Commercial real estate and multi-family .    1,677     1,725       180        24        97
Consumer and other ........................    1,132       230       421       413       609
                                              ------    ------    ------    ------    ------
   Total non-accrual loans ................    3,822     3,776     1,470     1,317     1,602
                                              ------    ------    ------    ------    ------
Real estate owned, net ....................       84        30       176       546       308
                                              ------    ------    ------    ------    ------
Total non-performing assets ...............   $3,906    $3,806    $1,646    $1,863    $1,910
                                              ======    ======    ======    ======    ======
Total non-accrual loans to loans ..........     1.03%     0.99%     0.41%     0.45%     0.65%
                                              ======    ======    ======    ======    ======
Total non-accrual loans to total assets ...     0.53%     0.53%     0.20%     0.18%     0.24%
                                              ======    ======    ======    ======    ======
Total non-performing assets to total assets     0.54%     0.54%     0.23%     0.26%     0.29%
                                              ======    ======    ======    ======    ======
</TABLE>

         At  December  31,  2002,  the Bank  had no  foreign  loans  and no loan
concentrations  exceeding  10% of total loans not  disclosed in above the table.
"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.  Loans recorded in the
category  of other  real  estate  owned are valued at the lower of book value of
loans outstanding or fair market value less cost of disposal.

         At December 31, 2002,  the Bank was not aware of any potential  problem
loans that are not otherwise included in the foregoing table. "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.

         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 is  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  their  continuance  as  assets  without  the
establishment  of a specific loss reserve is not  warranted.  Assets  designated
"special  mention" by  management  are assets  included  on the Bank's  internal
watchlist  because  of  potential  weakness  but that do not  currently  warrant
classification in one of the aforementioned categories.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  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. 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

                                       14

<PAGE>

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 order the  establishment  of additional
general or  specific  loss  allowances.  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, 2002.

                                                 At December 31, 2002
                                                 --------------------
                                                     (In thousands)

               Special mention assets...............     $1,359
               Substandard (1)......................      3,996
               Doubtful assets......................        468
               Loss ................................         --
                                                         ------
                  Total classified assets...........     $5,823
                                                         ======

-----------------------------
(1)  Substandard assets include approximately $560,000 of performing assets that
     are less than 90 days  delinquent,  that are  classified  for reasons other
     than delinquency.


         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 cost.  If the
property  subsequently  decreases in estimated  value from the initial  recorded
amount,  the Bank will  provide an  additional  valuation  allowance,  through a
charge to earnings, if the decrease is judged by management to be temporary,  or
the Bank will write the property down, through a charge to earnings,  to the new
estimated value if the decrease is judged by management to be permanent.

         The Bank records loans as in substance foreclosures if the borrower has
little or no equity in the property based upon its documented current fair value
and if the borrower has effectively  abandoned  control of the collateral or has
continued  to retain  control  of the  collateral  but  because  of the  current
financial  status of the borrower it is doubtful  the  borrower  will be able to
repay  the  loan  in the  foreseeable  future.  In  substance  foreclosures  are
accounted for as loans until such time that title to the  collateral is acquired
by the Bank. There may be significant  other expenses  incurred such as attorney
and other extraordinary servicing costs involved with in substance foreclosures.

         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 on  management's  estimate  of
probable losses. Several sources of data are used in making the evaluation as to
the appropriateness of the allowance.

          The Bank's watch list contains all 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. Once a
loan is deemed to pose other than a normal level of risk of collection, it moves
to the classified asset list as either special mention,  substandard,  doubtful,
or loss as required by regulatory

                                       15

<PAGE>

guidelines.  Classified  assets  also  include  all loans  over 90 days past due
according to the  contractual  repayment  terms.  These loans are  automatically
considered at least substandard.  All loans not on the classified asset list are
assigned  a  reserve  factor  that is based  on the  Corporation's  actual  loss
experience  over the last three  years,  with a small  factor  assigned to loans
current as to their contractual payments, and an increased factor if the loan is
30 of 60 days past due.  Classified  loans  with  balances  under  $100,000  are
typically pooled according to their underlying collateral,  and a reserve factor
assigned based on historical loss experience.  Classified loans are evaluated on
an individual  basis if the loan balance exceeds  $100,000.  In such a case, the
value of the underlying  collateral,  which is ordinarily real estate because of
the nature of the Corporation's predominant past lending activities, the cost of
collection  and  disposition,  and other factors are considered and an estimated
reserve level is established.  In establishing  estimated reserves,  current and
projected economic conditions as they may affect the borrower and the collateral
are considered. If prospects appear poor with respect to collateral disposition,
for example,  because of economic factors,  a lower disposition value and thus a
higher  reserve  level  would  be  established.  Similarly,  the  credit  may be
guaranteed by a governmental  agency, or the collateral value may greatly exceed
the loan  balance  such that no reserve is  indicated  for these  loans that are
nevertheless  considered  classified assets because of their  delinquency.  If a
loan or a  portion  of a loan is  judged  to be  unrecoverable,  that  amount is
charged off. The calculated reserve determined using the methodologies described
above is compared to the actual level of reserves;  the difference  reflects the
imprecision  of the  multitude of  assumptions  that are made  combined with the
variability  that can occur with a relatively  small amount of troubled  assets,
and the reserve is maintained  at  reasonable  levels by adjusting the provision
that is charged to earnings.

                                       16

<PAGE>

         The following table sets forth  information  with respect to the Bank's
allowance for loan losses at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                 For the Years Ended December 31,
                                    ---------------------------------------------------------
                                      2002        2001        2000        1999          1998
                                    -------     -------     -------     -------       -------
                                                     (Dollars in thousands)

<S>                                 <C>         <C>         <C>         <C>           <C>
Balance at beginning of period ....   $ 1,972     $ 1,714     $ 1,917     $ 1,909       $ 2,029
Provision for loan losses .........       988         500         410         300            60
Charge-offs:
  One- to four-family .............       (13)         --          --          --            --
  Commercial and multi-family
    real estate loans .............        --          --          --          --            --
  Consumer and other loans ........      (928)       (430)       (634)       (296)         (180)
Recoveries:
  One- to four-family .............         3          --          --          --            --
  Commercial and multi-family
    real estate loans .............        --          --          --          --            --
  Consumer and other loans ........        25         188          21           4            --
                                      -------     -------     -------     -------       -------
Balance at end of year ............   $ 2,047     $ 1,972     $ 1,714     $ 1,917       $ 1,909
                                      =======     =======     =======     =======       =======

Ratio of net charge-offs during
  the period to average loans
  outstanding during the period ...      0.25%       0.07%       0.20%       0.10%         0.08%
Ratio of allowance for loan
  losses to non-performing
  loans at the end of the period...     53.56%      52.22%      116.0%      145.6%        119.2%
Ratio of allowance for loan
  losses to loans receivable
  at the end of the period ........      0.55%       0.52%       0.47%       0.66%         0.78%
Ratio of allowance for loan
  losses and foreclosed real
  estate to total non-performing
  assets at the end of the period..     52.41%      52.60%      114.8%      132.2%        116.1%

</TABLE>
                                       17

<PAGE>

         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.  The portion of the loan
loss  allowance  allocated to each loan  category  does not  represent the total
available for future  losses which may occur within the loan category  since the
total loan loss allowance is a valuation  reserve  applicable to the entire loan
portfolio.

<TABLE>
<CAPTION>
                                                                  At December 31,
                          ----------------------------------------------------------------------------------------------
                               2002              2001                2000               1999                   1998
                          ----------------- ------------------  ------------------  --------------    ------------------
                                  Percent of        Percent of          Percent of         Percent of        Percent of
                                   Loans to          Loans to            Loans to           Loans to          Loans to
                                    Total             Total               Total              Total             Total
                          Amount    Loans   Amount    Loans     Amount    Loans     Amount   Loans    Amount   Loans
                          ------    -----   ------    -----     ------    -----     ------   -----    ------   -----
                                                               (Dollars in thousands)
<S>                    <C>        <C>    <C>       <C>       <C>         <C>     <C>        <C>    <C>        <C>
At end of period
 allocated to:
One- to four-family.....  $  119     5.8%   $  216    10.9%     $   97      5.7%    $  242     12.6%  $  168     8.8%
Commercial real estate
 and multi-family.......   1,021    49.9     1,100    55.8         835     48.7        676     35.3      905    47.4
Construction............      90     4.4        74     3.8         105      6.1        172      9.0      111     5.8
Consumer and other
  loans.................     817    39.9       582    29.5         677     39.5        826     43.1      725    38.0
                          ------   -----    ------   -----      ------    -----     ------    -----   ------   -----
Total allowance.........  $2,047   100.0%   $1,972   100.0%     $1,714    100.0%    $1,917    100.0%  $1,909   100.0%
                          ======   =====    ======   =====      ======    =====     ======    =====   ======   =====
</TABLE>

                                       18

<PAGE>

Investment Activities

         The investment policy of the Bank, which is established by the Board of
Directors  and  implemented  by  the  Asset  Liability  Committee,  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.

         The  following  table  sets forth  certain  information  regarding  the
amortized cost and fair values of the Bank's investments at the dates indicated.

<TABLE>
<CAPTION>
                                                                  At December 31,
                                           ---------------------------------------------------------------
                                                    2002                2001                    2000
                                           -------------------   -------------------   -------------------
                                           Amortized    Fair     Amortized   Fair      Amortized    Fair
                                             Cost       Value      Cost      Value       Cost       Value
                                           --------   --------   --------   --------   --------   --------
                                                                   (In thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>
Interest-earning deposits ..............   $100,580   $100,580   $ 58,157   $ 58,157   $  1,965   $  1,964
                                           ========   ========   ========   ========   ========   ========

Investment securities held-to- maturity:
  U.S. government and agency
    obligations .......................    $   4000   $  4,125   $     --   $     --   $ 52,499   $ 51,016
  State and political
    subdivisions .......................      3,700      3,880      5,743      5,787      5,958      5,979
  Corporate debt securities ............      6,863      7,182      4,123      4,043      5,004      4,924
                                           --------   --------   --------   --------   --------   --------
    Total ..............................   $ 14,563   $ 15,187   $  9,866   $  9,830   $ 63,461   $ 61,919
                                           ========   ========   ========   ========   ========   ========

Securities available-for-sale:
  U.S. government and agency
    obligations ........................   $ 15,964   $ 16,084   $ 11,018   $ 10,929   $ 12,003   $ 11,967
  State and political
    subdivisions .......................        453        464         --         --         --         --
  Corporate Debt Securities ............     10,034     10,197     11,070     11,245      6,034      6,004
  Mutual funds .........................        500        498        500        497        500        494
    Other ..............................         --         --         --         --        500        400
                                           --------   --------   --------   --------   --------   --------
    Total ..............................   $ 26,951   $ 27,243   $ 22,588   $ 22,671   $ 19,037   $ 18,865
                                           ========   ========   ========   ========   ========   ========
</TABLE>

                                       19

<PAGE>

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 interest-earning  deposits, at December 31,
2002.  Yields on tax exempt  obligations  have been computed on a tax equivalent
basis.

<TABLE>
<CAPTION>
                                                                                               More than           Total
                                  One Year or Less  One to Five Years  Five to Ten Years       Ten Years   Investment Securities(2)
                                  ----------------  -----------------  -----------------  ---------------- -------------------------
                                  Amortized Average Amortized  Average Amortized Average  Amortize Average Amortized Average    Fair
                                    Cost     Yield    Cost      Yield    Cost     Yield     Cost    Yield    Cost     Yield    Value
                                    ----     -----    ----      -----    ----     -----     ----    -----    ----     -----    -----
                                                                      (Dollars in thousands)
<S>                              <C>       <C>    <C>         <C>     <C>        <C>     <C>       <C>    <C>        <C>   <C>
U.S. government................    $ 9,964   1.24%  $    --       --%   $   --       --%   $   --      --%  $ 9,964    1.24% $ 9,969
U.S. government agency                  --     --    10,000     4.31        --       --        --      --    10,000    4.31   10,240
Municipal obligations..........         --     --       330     4.40     2,155     8.14     1,668    8.14     4,153    6.55    4,344
Corporate obligations..........      8,007   5.71     8,890     4.60        --       --        --      --    16,897    5.13   17,379
Other securities(1)............        500   2.18        --       --        --       --        --      --       500    2.18      498
                                   -------   ----   -------     ----    ------     ----    ------    ----   -------    ----  -------
  Total........................    $18,471   3.20%  $19,220     4.45%   $2,155     8.14%   $1,668    8.14%  $41,514    3.82% $42,431
                                   =======   ====   =======     ====    ======     ====    ======    ====   =======    ====  =======
</TABLE>

----------------
(1)  Other   securities   consists   of   an   investment   in   adjustable-rate
     mortgage-backed  securities  mutual funds.  Such  investments do not have a
     stated  maturity and are  considered in the one year or less category based
     on quarterly repricing of the investment.
(2)  Includes  $27,243  million of U.S.  government and agency  obligations  and
     other investments which are carried as  available-for-sale  at December 31,
     2002. Investment securities available-for-sale are carried at fair value.

                                       20

<PAGE>

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,  $31 million or 7% consist of IRA, Keogh or
SEP retirement accounts at December 31, 2002.

         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
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, 2002, core deposits amounted to 67% 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 out-of-state  sources.  Management does not believe that
the use of year  end  balances  instead  of  average  balances  resulted  in any
material difference in the information presented.

<TABLE>
<CAPTION>
                                                                              At December 31,
                                         -------------------------------------------------------------------------------------------
                                                     2002                            2001                         2000
                                         ---------------------------- ---------------------------------  ---------------------------
                                                             Weighted                          Weighted                    Weighted
                                                   Percent    Average              Percent     Average            Percent  Average
                                                   of Total   Nominal              of Total     Nominal            of Total Nominal
                                         Amount    Deposits    Rate      Amount    Deposits      Rate     Amount  Deposits   Rate
                                         ------    --------    ----      ------    --------      ----     ------  --------   ----
                                                                                (Dollars in thousands)
<S>                                   <C>          <C>       <C>     <C>         <C>           <C>    <C>        <C>        <C>
Transaction Accounts
Interest-bearing checking accounts..    $ 48,496      10.96%   0.60%   $ 46,990     11.13%       0.75%  $ 35,127     8.76%    1.02%
Money market accounts...............      43,677       9.87    1.00      42,557     10.08        2.54     44,325    11.05     3.13
Non-interest-bearing checking
  accounts..........................      20,810       4.70    0.00      18,200      4.31        0.00     12,096     3.02     0.00
                                        --------     ------    ----    --------    ------        ----   --------   ------     ----
   Total transaction accounts.......     112,983      25.53             107,747     25.52                 91,548    22.83

 Passbook accounts..................     182,813      41.31    1.51     169,576     40.18        2.52    155,699    38.85     3.48

Certificates of deposit.............     146,762      33.16    2.84     144,729     34.30        4.29    153,604    38.32     5.32
                                        --------     ------    ----    --------    ------        ----   --------   ------     ----
    Total deposits..................    $442,558     100.00%   1.73%   $422,052    100.00%       2.82%  $400,851   100.00%    3.66%
                                        ========     ======    ====    ========    ======        ====   ========   ======     ====

</TABLE>
                                       21

<PAGE>

         At December 31, 2002, the Bank had outstanding  certificates of deposit
in amounts of $100,000 or more maturing as follows:


                                                                     Amount
                                                                     ------
Maturing Period                                                  (In thousands)
---------------
Three months or less.................................               $ 3,004
Over three through six months........................                 3,108
Over six through 12 months...........................                 3,772
Over 12 months.......................................                 9,799
                                                                    -------
    Total............................................               $19,683
                                                                    =======

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 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, if the need arises, may also
access the Federal Reserve Bank discount window.  The following tables set forth
the maximum  month-end  balance,  period ending  balance,  and weighted  average
balance of outstanding FHLB advances at the dates and for the periods indicated,
together with the applicable weighted average interest rates.


                                                      At December 31,
                                              ---------------------------------
                                                2002        2001         2000
                                              --------    --------     --------
                                                    (Dollars in thousands)

FHLB advances and other borrowings........    $207,359    $223,359     $259,821
                                              ========    ========     ========

Weighted average interest rate............        5.46%       5.46%        5.78%
                                                  ====        ====         ====


                                                      At December 31,
                                              ---------------------------------
                                                2002        2001         2000
                                              --------    --------     --------
                                                    (Dollars in thousands)
Maximum balance of  FHLB advances and
  other borrowings outstanding............    $222,359    $259,821     $259,889
                                              ========    ========     ========
Weighted average balance of FHLB
  advances and other borrowings
  outstanding.............................    $218,578    $229,473     $243,656
                                              ========    ========     ========
Weighted average interest rate of FHLB
  advances and other borrowings...........        5.46%       5.53%        5.68%
                                                  ====        ====         ====

                                       22

<PAGE>

         The Bank uses  convertible  FHLB  advances for a portion of its funding
needs.  These  borrowings  are  fixed  rate,  fixed  term  advances  that can be
converted to  LIBOR-based  floating  rate advances at the option of the FHLB, on
each quarterly  interest  payment date,  after an initial period.  The following
table sets forth information related to these convertible advances.

                                             At December 31, 2002
                                             --------------------
                                            (Dollars in thousands)
Date first convertible  Contractual Maturity                      Contractual
(month/year)            Date (month/year)            Amount      Interest Rate
------------            -----------------            ------      -------------
January 2002                April 2003               $5,000           4.74%
February 2002             February 2009              15,000           4.74
February 2002             February 2004              25,000           5.10
February 2002             February 2004              20,000           4.94
April 2002                  April 2008               10,000           5.41
June 2002                   June 2008                15,000           5.63
June 2002                   June 2008                10,000           5.61
February 2003             February 2006              20,000           5.15
March 2003                  March 2008               25,000           5.70
March 2003                  March 2008               10,000           5.61
February 2004             February 2009              10,000           5.05
                                                  ---------           ----
                                                  $ 165,000           5.29%
                                                  =========           ====

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, 2002, the Bank was  authorized to invest up to  approximately
$14.4 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,  2002,  the Bank had one  subsidiary,  Third  Delaware
Corporation.  Third Delaware Corporation is a wholly- owned operating subsidiary
of the Bank and was formed in 1998 for the purpose of  investing  in  marketable
securities.  At December 31, 2002,  the Bank had $114 million  invested in Third
Delaware Corporation.

Personnel

         As of December 31, 2002,  the Bank had 158  full-time  and 20 part-time
employees.  None  of  the  Bank's  employees  are  represented  by a  collective
bargaining  group. The Bank believes that its relationship with its employees is
good.

Executive Officers of the Registrant

   Executive Officers of the Bank and the Company:

         John R.  Stranford  has been with the Bank  since  1968.  He  presently
serves as Chairman of the Board of the Bank, President, Chief Executive Officer,
Chief Operating Officer and Director of the

                                       23

<PAGE>



Bank and Company.  Mr.  Stranford has served as Chief  Operating  Officer of the
Bank since 1984 , President of the Bank since January 1994,  and Chairman of the
Board of the Bank  since  April  2001.  Prior to that time he served in  various
capacities as an officer of the Bank.

         Dennis R. Stewart has been Senior Vice  President  and Chief  Financial
Officer of the Bank and the Company since May 1999.  Prior to that,  Mr. Stewart
served as Executive Vice President and Chief Financial  Officer of First Coastal
Bank in Virginia Beach, Virginia, where he had been employed since 1990.

         Elizabeth  Davidson Maier is Senior Vice President and Secretary of the
Bank and the Company and has been with the Bank since 1964.  Ms.  Maier has been
an  officer of the Bank  since  1974.  Prior to that,  Ms.  Maier  held  various
positions at the Bank.

         Kent C. Lufkin has been with the Bank since 2000.  He currently  serves
as Senior Vice  President  and Retail  Banking  Officer.  Mr.  Lufkin's's  prior
experience includes 4 years as Chief Executive Officer at Roebling Bank.

         Earl A. Pace,  Jr.  was Senior  Vice  President  and Chief  Information
Officer of the Bank at December 31, 2002.  Mr. Pace had been with the Bank since
1997. Previously,  he was President and CEO of Pace Data Systems, an information
technology  consulting  firm. Mr. Pace resigned from the Bank effective  January
31, 2003.

         Floyd P. Haggar has been with the Bank since 1998. Mr. Haggar currently
serves as Senior Vice President and Chief Lending Officer of the Bank. His prior
experience  includes four years as Senior Vice President and Senior Loan Officer
at Carnegie Bank.

         The remaining  information relating to Directors and Executive Officers
of the Registrant is incorporated  herein by reference to the Registrant's Proxy
Statement for the 2003 Annual Meeting of Stockholders.

                                   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.

         On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002  (the  "Act").  The  Securities  and  Exchange  Commission  (the  "SEC")
promulgated certain regulations pursuant to the Act and will continue to propose
additional implementing or clarifying regulations as necessary in furtherance of
the Act.  The  passage  of the Act and the  regulations  implemented  by the SEC
subject  publicly-traded  companies to additional and more cumbersome  reporting
regulations and disclosure.

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,  should such subsidiaries
be formed,  which also permits the OTS to restrict or prohibit  activities  that
are determined to be a serious risk to the subsidiary

                                       24

<PAGE>

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.

         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.

         QTL 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. 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 or any  other  SAIF-insured  savings  association)  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,  SAIF-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 SAIF 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

                                       25

<PAGE>

Company is also  required to file certain  reports with,  and  otherwise  comply
with, the rules and regulations of the OTS and the SEC.

         Insurance of Deposit Accounts.  The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured  member (as defined by law
and regulation).  The FDIC has the authority,  should it initiate proceedings to
terminate an institution's  deposit  insurance,  to suspend the insurance of any
such institution without tangible capital. However, if a savings association has
positive capital when it includes qualifying  intangible assets, the FDIC cannot
suspend deposit  insurance unless capital declines  materially,  the institution
fails to enter into and remain in  compliance  with an approved  capital plan or
the institution is operating in an unsafe or unsound manner.

         Regardless of an institution's capital level, insurance of deposits may
be  terminated  by the FDIC upon a finding that the  institution  has engaged in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition  imposed  by the  FDIC or the  institution's  primary  regulator.  The
management of the Bank is unaware of any practice,  condition or violation  that
might lead to termination of its deposit insurance.

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
This  risk  classification  is  based  on an  institution's  capital  group  and
supervisory subgroup assignment.

         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,  2002,  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.

                                       26

<PAGE>

         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
FDICIA also amended the method for measuring  compliance with the QTL test to be
on a monthly  basis in nine out of every 12 months,  as opposed to on a daily or
weekly average of QTIs. As of December 31, 2002, the Bank was in compliance with
its QTL requirement with 81% 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 stock in the
FHLB of  Pittsburgh  in an amount equal to at least 1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year. At December 31, 2002,  the Bank had $11.4 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, 2002, the Bank's total transaction accounts required a reserve level of $3.8
million 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," but Federal Reserve policy  generally  requires savings
associations  to exhaust  all OTS  sources  before  borrowing  from the  Federal
Reserve System. The Bank had no such borrowings at December 31, 2002.

Item 2. Properties
------------------

         The  Company is located and  conducts  its  business at 3 Penns  Trail,
Newtown,  Pennsylvania.  At December 31, 2002,  the Bank  operated from its main
office and thirteen branch offices  located in Philadelphia  and Bucks Counties,
Pennsylvania and Mercer County,  New Jersey. The Bank also owns two lots, one of
which has a building,  behind its  Doylestown  branch  office.  The  building is
leased to a third- party and the other 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 $769,000.

                                       27

<PAGE>

         The following table sets forth certain information regarding the Bank's
operating properties:

<TABLE>
<CAPTION>
                                     Leased or                                     Leased or
    Location                           Owned                 Location                Owned
---------------------------        -------------       ------------------------- ------------
<S>                           <C>                  <C>
ADMINISTRATIVE OFFICE                                  OPERATIONS OFFICE
  Newtown Office                                       Operations Center
  3 Penns Trail                                        62 Walker Lane
  Newtown, PA 18940                  Owned             Newtown, PA  18940(1)        Owned

BRANCH OFFICES
  Frankford Office                                     Newtown Office
  4625 Frankford Avenue                                950 Newtown Yardley Road
  Philadelphia, PA 19124             Owned             Newtown, PA 18940            Leased

  Ewing Office                                         Mayfair Office
  2075 Pennington Road                                 Roosevelt Blvd. at Unruh
  Ewing, NJ 08618                     Owned            Philadelphia, PA 19149       Owned

  Hamilton Office                                      Doylestown Office
  1850 Route 33                                        60 North Main Street
  Hamilton Square, NJ 08690          Owned             Doylestown, PA 18901         Owned

  Fishtown Office                                      Feasterville Office
  York & Memphis Streets                               Buck Hotel Complex
  Philadelphia, PA 19125             Owned             Feasterville, PA 19053       Leased

  Cross Keys Office                                    Quakerbridge Office
  834 North Easton Highway                             590 Lawrence Square Blvd.
  Doylestown, PA 18901               Owned             Lawrenceville, NJ 08648      Leased

  Bridesburg Office                                    Woodhaven Office
  Orthodox & Almond Streets                            Knights Road Center
  Philadelphia, PA 19137             Owned             4014 Woodhaven Road
                                                       Philadelphia, PA 19154       Leased

  New Britain Office                                   Northern Liberties Office
  600 Town Center                                      905 North 2nd Street
  New Britain, PA 18901              Leased            Philadelphia, PA 19123       Leased
</TABLE>

---------------
(1)  This office  serves as the computer  operations  center,  check  processing
     area, training center, mail processing and storage center for the Bank.

                                       28

<PAGE>

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, which 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.

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

        None.

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
-----------------------------------------------------------------------------

         Information  relating to the market for Registrant's  common equity and
related  stockholder  matters appears under the section  captioned "Stock Market
Information"  in the  Registrant's  2002 Annual  Report to  Stockholders  and is
incorporated herein by reference.

Item 6. Selected Financial Data
-------------------------------

         The  above-captioned  information  appears under the section  captioned
"Selected  Financial and Other Data" in the  Registrant's  2002 Annual Report to
Stockholders and is incorporated herein by reference.

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  2002  Annual  Report to  Stockholders  is  incorporated  herein by
reference.

Item 7A. Liquidity
------------------

The  following  table  illustrates,  in one  place,  the  Company's  contractual
obligations  and commitments to make future payments as of December 31, 2002 (in
000's):

<TABLE>
<CAPTION>
                                   Total     Less than 1 year     1-3 years     4-5 years    After 5 years
                                   -----     ----------------     ---------     ---------    -------------
Contractual obligations:                              Payments due by period
------------------------                              ----------------------
<S>                             <C>              <C>              <C>           <C>           <C>
FHLB advances                     $207,359         $27,000          $57,000       $25,000       $98,359
Time deposits                      146,762          96,669           43,426         6,354           313
Operating leases                       523             190              218            77            38
                                  --------        --------         --------       -------       -------
Total contractual obligations     $354,644        $123,859         $100,644       $31,431       $98,710
                                  ========        ========         ========       =======       =======

Commitments:                                Amount of commitment expirations by period
------------                      ---------------------------------------------------------------------
Extensions of credit               $35,983         $23,766             $422          $ 13       $11,782
Letters of credit                    1,548           1,379              169            --            --
Loans sold with recourse               163              --               --            --           163
                                   -------         -------             ----          ----       -------
Total commitments                  $37,694         $25,145             $591          $ 13       $11,945
                                   =======         =======             ====          ====       =======
</TABLE>

                                       29
<PAGE>

Item 7B. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

Asset and Liability Management

         Managing  Interest  Rate  Risk.  Interest  rate risk is  defined as the
sensitivity of the Bank's current and future  earnings as well as its capital to
changes in the level of market interest  rates.  The Bank's exposure to interest
rate risk results  from,  among other  things,  the  difference in maturities in
interest-  earning  assets and  interest-bearing  liabilities.  Since the Bank's
assets  currently  have a longer  maturity  than  its  liabilities,  the  Bank's
earnings could be negatively  impacted  during a period of rising interest rates
and conversely,  positively  impacted during a period of falling interest rates.
The relationship  between the interest rate sensitivity of the Bank's assets and
liabilities is continually  monitored by  management.  In this regard,  the Bank
emphasizes  the  origination  of  shorter  term or  adjustable  rate  assets for
portfolio.

         The  Bank  utilizes  its   investment  and   mortgage-backed   security
portfolios to generate additional interest income and in managing its liquidity.
These  securities  are readily  marketable and provide the Bank with a cash flow
stream to fund asset growth or liability maturities.

         A  significant  portion of the Bank's  assets has been  funded with CDs
including jumbo CDs. Unlike other deposit  products such as checking and savings
accounts,  CDs carry a high degree of interest rate sensitivity and,  therefore,
their  renewal  will vary based on the  competitiveness  of the Bank's  interest
rates. At December 31, 2002, approximately 33% of the Bank's deposits were CDs.

         The Bank  utilizes  borrowings  from the FHLB in managing  its interest
rate risk and as a tool to augment  deposits in funding asset  growth.  The Bank
may utilize  these  funding  sources to better  match its longer term  repricing
assets (i.e., between one and five years).

         The  nature of the  Bank's  current  operations  is such that it is not
subject to foreign  currency  exchange or  commodity  price risk.  Additionally,
neither the Company nor the Bank owns any trading assets.  At December 31, 2002,
the Bank did not have any hedging  transactions  in place such as interest  rate
swaps, caps, or floors.

         As part of its  interest  rate  risk  management,  the  Bank  uses  the
Interest Rate Risk  Exposure  Report,  which is generated  quarterly by the OTS.
This report  forecasts  changes in the Bank's  market value of portfolio  equity
("MVPE") under alternative  interest rate  environments.  The MVPE is defined as
the net present value of the Bank's existing assets, liabilities and off-balance
sheet  instruments.  The calculated  estimates of change in MVPE at December 31,
2002 are as follows:

                                     MVPE
          -----------------------------------------------------------
          Change in Interest Rates(1)         Amount         % Change
          ---------------------------         ------         --------
                                         (In Thousands)

          +300 Basis Points                  $54,724           -12%
          +200 Basis Points                  $60,496            -3%
          +100 Basis Points                  $64,250            +3%
            Flat Rates                       $62,379             0%
          -100 Basis Points                  $55,360           -11%

-----------------------
(1)  The -200 and -300 bp scenarios  are not shown due to the low interest  rate
     environment.

                                       30

<PAGE>

         Management believes that the assumptions  utilized by OTS in evaluating
the  vulnerability  of the  Company's  capital to changes in interest  rates are
reasonable;  however,  the interest  rate  sensitivity  of the Bank's assets and
liabilities as well as the estimated effect of changes in interest rates on MVPE
could vary substantially if different  assumptions are used or actual experience
differs from the experience on which the assumptions were based.

         In the event the Bank should  measure an excessive  decline in its MVPE
as the result of an immediate  and sustained  change in interest  rate, it has a
number of options  which it could  utilize to remedy  that  situation.  The Bank
could  restructure  its  investment   portfolio  through  sale  or  purchase  of
securities  with more favorable  repricing  attributes.  It could also emphasize
loan products with appropriate  maturities or repricing attributes,  or it could
attract deposits or obtain borrowings with desired maturities.

Item 8. Financial Statements and Supplementary Data
---------------------------------------------------

         The Consolidated  Financial Statements of TF Financial  Corporation and
its subsidiaries included in the Registrant's 2002 Annual Report to Stockholders
are incorporated herein by reference.

Item 9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
         Financial Disclosure
         --------------------

         None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

         The information  contained under the sections  captioned  "Proposal 1 -
Election of Directors -- General  Information and Nominees" and "-- Biographical
Information" and "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   2002  Annual  Meeting  of
Stockholders (the "Proxy Statement") is incorporated herein by reference.

         Additional  information concerning executive officers is included under
"Item 1. Business -- Executive Officers of the Registrant."

Item 11. Executive Compensation
-------------------------------

         The  information  relating to executive  compensation  is  incorporated
herein by reference to the  information  contained  under the section  captioned
"Director  and  Executive  Officer   Compensation"  in  the  Registrant's  Proxy
Statement.

                                       31

<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

         (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 section captioned  "Proposal 1 -- 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, 2002 with respect to
         compensation  plans under which equity securities of the Registrant are
         authorized for issuance.

<TABLE>
<CAPTION>
                                      EQUITY COMPENSATION PLAN INFORMATION
                                                 (a)                     (b)                         (c)
                                                                                             Number of securities
                                        Number of securities       Weighted-average        remaining available for
                                          to be issued upon       exercise price of         future issuance under
                                             exercise of             outstanding             equity compensation
                                        outstanding options,      options, warrants      plans (excluding securities
                                        warrants and rights          and rights            reflected in column (a))
                                        -------------------          ----------            ------------------------
<S>                                        <C>                      <C>                        <C>
Equity compensation plans
  approved by shareholders(1).......           633,973                  $14.08                     135,027
Equity compensation plans
  not approved by shareholders(2)...            25,000                   14.75                          --
                                               -------                  ------                     -------
     TOTAL..........................           658,973                  $14.11                     135,027
                                               =======                  ======                     =======
</TABLE>

---------------
(1)  Plans approved by stockholders include: TF Financial Corporation 1994 Stock
     Option Plan, TF Financial Corporation 1997 Stock Option Plan.
(2)  Plans not approved by stockholders  include: TF Financial  Corporation 1996
     Directors Stock Option Plan For information regarding the material features
     of  these  plans,  see  Note A8 to the  Consolidated  Financial  Statements
     included as part of Exhibit 13 to this report.

                                       32

<PAGE>

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

         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" in the
Registrant's Proxy Statement.

Item 14. Controls and Procedures
--------------------------------

         (a) Evaluation of disclosure  controls and  procedures.  Based on their
             --------------------------------------------------
evaluation  as of a date within 90 days of the filing date of this Annual Report
on Form  10-K,  the  Registrant's  principal  executive  officer  and  principal
financial officer have concluded that the Registrant's  disclosure  controls and
procedures  (as defined in Rules  13a-14(c) and 15d-14(c)  under the  Securities
Exchange  Act of 1934  (the  "Exchange  Act"))  are  effective  to  ensure  that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.

         (b) Changes in internal controls.  There were no significant changes in
             ----------------------------
the Registrant's  internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.

                                     PART IV

Item 15. Exhibits, Financial Statements and Reports on Form 8-K
---------------------------------------------------------------

(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 2002 Annual Report
to Stockholders are incorporated herein by reference.


          Independent Auditors' Report
          Consolidated  Statements of Financial Position as of December 31, 2002
          and 2001
          Consolidated  Statements of Earnings For the Years Ended  December 31,
          2002, 2001 and 2000
          Consolidated   Statement  of  Changes  in  Stockholders'   Equity  and
          Comprehensive  Income for the Years Ended December 31, 2002,  2001 and
          2000
          Consolidated Statements of Cash Flows for the Years Ended December 31,
          2002, 2001 and 2000
          Notes to Consolidated Financial Statements

         The   remaining   information   appearing  in  the  Annual   Report  to
Stockholders  is not  deemed  to be  filed  as part of this  report,  except  as
expressly provided herein.

         (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.

                                       33

<PAGE>

         (3)      Exhibits

         (a)      The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
     <S>        <C>
          3.1     Certificate of Incorporation of TF Financial Corporation*
          3.2     Bylaws of TF Financial Corporation*
          4.0     Stock Certificate of TF Financial Corporation*
          4.1     The Company's Rights Agreement dated November 22, 1995**
         10.1     Third Federal Savings and Loan Association Management Stock Bonus Plan*
         10.2     TF Financial Corporation 1994 Stock Option Plan*
         10.3     Third Federal Savings Bank Directors Consultation and Retirement Plan***
         10.4     TF Financial Corporation Incentive Compensation Plan***
         10.5     Severance Agreement with John R. Stranford***
         10.6     Severance Agreement with Kent C. Lufkin****
         10.7     Severance Agreement with Floyd P. Haggar****
         10.8     Severance Agreement with Earl A. Pace, Jr.*****
         10.9     Severance Agreement with Dennis R. Stewart******
         10.10    TF Financial Corporation 1997 Stock Option Plan*******
         10.11    Severance Agreement with Robert N. Dusek********
         10.12    TF Financial Corporation 1996 Directors Stock Option Plan
         13.0     2002 Annual Report to Stockholders
         21.0     Subsidiary Information
         23.0     Consent of Independent Auditor
         99.0     Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

-------------------
*          Incorporated  herein  by  reference  from  the  Exhibits to Form S-1,
           Registration Statement, File No. 33-76960.
**         Incorporated  herein by reference to the  Registrants  Form 8-A filed
           with the Securities and Exchange Commission on November 22, 1995.
***        Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1995.
****       Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2000.
*****      Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1998.
******     Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1999.
*******    Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1997.
********   Incorporated herein by reference to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2001.

           (b)    Reports on Form 8-K.

                  During the last  quarter of the year ended  December 31, 2002,
           the Registrant filed no Current Reports on Form 8-K.


                                       34

<PAGE>

                                   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 CORPORATION



Dated:  March 26, 2003                 By:    /s/ John R. Stranford
                                              ----------------------------------
                                              John R. Stranford
                                              President, Chief Executive Officer
                                                  and Director
                                              (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 March 26, 2003.


<TABLE>
<CAPTION>
<S>                                            <C>

By:   /s/ John R. Stranford                       By:  /s/ Dennis R. Stewart
      ------------------------------------             -----------------------------------
      John R. Stranford                                Dennis R. Stewart
      President, Chief Executive Officer               Senior Vice President, Chief
       and Director                                    Financial Officer and Treasurer
      (Principal Executive Officer)                    (Principal Financial and Accounting
                                                         Officer)


By:   /s/ Carl F. Gregory                         By:  /s/ Robert N. Dusek
      ------------------------------------             -----------------------------------
      Carl F. Gregory                                  Robert N. Dusek
      Director                                         Chairman of the Board



By:   /s/ Thomas J. Gola                          By:  /s/ George A. Olsen
      ------------------------------------             -----------------------------------
      Thomas J. Gola                                   George A. Olsen
      Director                                         Director

</TABLE>


<PAGE>

                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, John R. Stranford, President and Chief Executive Officer, certify that:


1.   I have reviewed this annual report on Form 10-K of TF Financial Corporation
     (Registrant);

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of  Registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:    March 26, 2003               /s/John R. Stranford
                                      ------------------------------------------
                                      John R. Stranford
                                      President and Chief Executive Officer
                                      (Principal Executive Officer)

<PAGE>

                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, Dennis R. Stewart, Vice President and Chief  Financial  Officer, certify
that:

1.   I have reviewed this annual report on Form 10-K of TF Financial Corporation
     (Registrant);

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of  Registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:    March 26, 2003              /s/Dennis R. Stewart
                                     -------------------------------------------
                                     Dennis R. Stewart
                                     Vice President and Chief Financial Officer
                                     (Principal Financial & Accounting Officer)