SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM lO-Q
(Mark One)

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

              For the quarterly period ended         June 30, 1997
                                             -----------------------------------

                                       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
incorporation or organization)                               identification no.)
                                                                    

3 Penns Trail, Newtown, Pennsylvania                               18940
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code         215-579-4000
                                                   -----------------------------

                                       N/A
--------------------------------------------------------------------------------
               Former name, former address and former fiscal year,
                         if changed since last report.

            Indicate by check _ 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 e filed by shorter  period that
the registrant  was required to file such reports),  and (2) has been subject to
such filing by requirements for the past 90 days. Yes   X      No 
                                                       ---        ---   

                      APPLICABLE ONLY TO CORPORATE ISSUERS:


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock as of the latest practicable date August 11, 1997
                                                  ---------------

           Class                                      Outstanding
-----------------------------                       ----------------

  $.10 par value common stock                       4,083,100 shares 
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                    FORM 1O-Q

                       FOR THE QUARTER ENDED JUNE 30, 1997


                                      INDEX


 
                                                                        Page
                                                                       Number
                                                                       ------

PART I - CONSOLIDATED FINANCIAL INFORMATION

Item     1.  Unaudited Consolidated Financial Statements                  1
Item     2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                          7

PART II- OTHER INFORMATION

Item 1.      Legal Proceedings                                           15
Item 2.      Changes in Securities                                       15
Item 3.      Defaults upon Senior Securities                             15
Item 4.      Submission of Matters to a Vote of Security Holders         15
Item 5.      Other Materially Important Events                           15
Item 6.      Exhibits and Reports on Form 8-K                            15

SIGNATURES



<PAGE>



                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                     June 30,     December 31,
                      ASSETS                                                           1997           1996
                                                                                  ------------  --------------
<S>                                                                                <C>          <C>      
Cash and cash equivalents                                                           $ 25,725    $  54,132
Securities purchased under agreements to resell                                        5,000       25,129
Certificates of deposit in other financial institutions                                3,451        4,220
Investment securities available for sale - at market value                            18,642       12,652
Investment securities held to maturity (market value of $56,912 and $38,393           56,488       43,462
   respectively, for the periods shown)
Mortgage-backed  securities  available for sale - at market  value                    35,957       22,027
Mortgage-backed securities held to maturity (market value of $156,536 and
    $153,269 respectively, for the periods shown)                                    156,690      153,758
Loans receivable, net                                                                315,866      309,570
Accrued interest receivable                                                            4,815        4,247
Goodwill/Core deposit intangible                                                       8,743        9,232
Premises and equipment, net                                                            7,838        8,002
Other assets                                                                           1,531        1,422
                                                                                   ---------    ---------
                      Total Assets                                                 $ 640,746    $ 647,853
                                                                                   =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
   Deposits                                                                        $ 460,847    $ 469,088
   Advances from the Federal Home Loan Bank                                           98,359       98,359
   Advances from borrowers for taxes and insurance                                     2,564        2,364
   Accrued interest payable                                                            3,285        2,030
   Other liabilities                                                                   4,464        3,437
                                                                                   ---------    ---------
                      Total Liabilities                                              569,519      575,278
                                                                                   ---------    ---------

Commitments and contingencies                                                           --           --
Stockholders' Equity
   Preferred stock, no par value; 2,000,000 shares authorized
      and none issued                                                                   --           --
   Common stock, $0.10 par value; 10,000,000 shares authorized,
       5,290,000 issued;  3,776,815 and 3,962,544 shares outstanding
       at June 30, 1997 and December 31, 1996, net of treasury shares of
       1,206,900 and 1,008,614 respectively                                              529          529
   Additional paid-in capital                                                         51,761       51,645
   Net unrealized loss on investment securities available for sale                        (3)        (127)
   Unearned ESOP shares-at cost                                                       (3,063)      (3,188)
   Shares acquired by MSBP                                                            (1,109)      (1,322)
   Treasury stock - at cost                                                          (18,299)     (14,712)
   Retained earnings                                                                  41,411       39,750
                                                                                   ---------    ---------

                      Total Stockholders' Equity                                      71,227       72,575
                                                                                   ---------    ---------

                      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 640,746    $ 647,853
                                                                                   =========    =========
</TABLE>

See notes to consolidated financial statement

                                       1
<PAGE>



                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                  UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                         Six Months          Three Months
                                                                        Ended June 30,      Ended June 30,
                                                                        1997      1996      1997      1996
                                                                        ----      ----      ----      ----

Interest income
<S>                                                                   <C>       <C>       <C>       <C>    
   Loans                                                              $12,413   $10,902   $ 6,221   $ 5,622
   Mortgage-backed securities                                           6,379     5,366     3,271     2,597
   Investment securities                                                2,955     1,228     1,388       596
   Interest bearing deposits and other                                    534       577       226       268
                                                                      -------   -------   -------   -------
     TOTAL INTEREST INCOME                                             22,281    18,073    11,106     9,083
Interest expense
   Deposits                                                             9,320     6,397     4,663     3,219
   Borrowings                                                           2,930     2,923     1,473     1,519
                                                                      -------   -------   -------   -------
     TOTAL INTEREST EXPENSE                                            12,250     9,320     6,136     4,738
     NET INTEREST INCOME                                               10,031     8,753     4,970     4,345

Provision for loan losses                                                 180        90        75        60
                                                                      -------   -------   -------   -------
     NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                9,851     8,663     4,895     4,285

Non-interest income
   Gain on sale of real estate acquired through foreclosure                 0       114         0         0

   Gain  on sale of mortgage-backed securities                            188       223       115         0

   Gain  on sale of loans                                                  39         7        40         7
   Service fees, charges and other operating income                       651       650       333       296
                                                                      -------   -------   -------   -------

            TOTAL NON-INTEREST INCOME                                     878       994       488       303
Non-interest expense
   Employee compensation and benefits                                   3,299     2,806     1,626     1,383
   Occupancy and equipment                                                904       657       459       307
   Federal deposit insurance premium                                      153       390        76       194
   Data processing                                                        346       237       166       118
   Professional fees                                                      276       277       143       153
   Goodwill and other intangible amortization                             488         0       244         0
   Provision for losses on real estate acquired through foreclosure         0         3         0         3
   Advertising                                                            188       155        90        80
   Other operating                                                      1,072       878       514       419
                                                                      -------   -------   -------   -------
     TOTAL NON-INTEREST EXPENSE                                         6,726     5,403     3,318     2,657
          INCOME BEFORE INCOME TAXES                                    4,003     4,254     2,065     1,931
Income taxes                                                            1,574     1,758       800       829
                                                                      -------   -------   -------   -------
     NET INCOME                                                       $ 2,429   $ 2,496   $ 1,265   $ 1,102
                                                                      =======   =======   =======   =======

Per share data
     Earnings per share                                                   .60       .58       .31       .26
Weighted average number of shares outstanding                           4,025     4,301     3,981     4,304

</TABLE>

See notes to consolidated financial statement

                                       2
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                   Six Months
                                                                                  Ended June 30
                                                                              --------------------
                                                                                 1997        1996
                                                                              ---------   --------
   
<S>                                                                           <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                    $  2,429    $  2,496
Adjustments to reconcile net income to net cash provided by
operating activities:
     Amortization of:
         Mortgage loan servicing rights                                             47           0
         Deferred loan origination fees                                            (77)        (87)
         Premiums and discounts on investment securities. net                       25         (12)
         Premiums and discounts on mortgage-backed securities and
         loans. net                                                                 69          88
         Amortization of goodwill and core deposit intangible                      488           0
     Provision for loan losses and provision for losses on real estate             180          93
     Depreciation of premises and equipment                                        351         271
     Recognition of ESOP and MSBP expenses                                         454         440
     Gain (loss) on sale of mortgage-backed securities - available for sale       (188)       (223)

     Gain on sale of real estate acquired through foreclosure                        0        (114)
     (Gain)/loss on sale of mortgage loans                                         (39)          0
     Decrease (increase) in
         Accrued interest receivable                                              (568)        122
         Other assets                                                              (65)       (415)
     Increase (decrease) in
         Accrued interest payable                                                1,255         408
         Other liabilities                                                       1,154         986
                                                                                ------     ------- 
         NET CASH PROVIDED BY OPERATING ACTIVITIES                               5,515       4,053

CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations and principal payments on loans. net                         (11,009)    (22,347)
Purchases of loans                                                             (12,663)    (46,690)
Proceeds from loan sales                                                        16,970       1,008
Purchases and maturities of certificates of deposit in other
   financial institutions. net                                                     769         800
Purchases and maturities of securities purchased under
   agreements to resell, net                                                    20,129           0
Purchases of investment securities - available for sale                         (6,982)          0
Purchases of investment securities - held to maturity                          (68,081)     (3,724)
Purchases of mortgage-backed securities - available for sale                   (23,412)          0
Purchase of mortgage-backed securities - held to maturity                      (15,071)     (4,882)
Proceeds from maturities of investment securities held to maturity              54,680       7,464
Proceeds from maturities of investment securities available for sale             1,350       7,000
Principal repayments from maturities of mortgage-backed securities-
   held to maturity                                                             12,144      14,044

Principal repayments from maturities of mortgage-backed securities-
   available for sale                                                            1,189       1,851
Proceeds from the sale of mortgage-backed securities                             8,648       5,338
Purchases and redemptions of Federal Home Loan Bank Stock. net                       0      (1,500)
Proceeds from sales of real estate acquired through foreclosure                      0         439
Purchase of premises and equipment                                                (187)        (69)
                                                                                ------     ------- 
       NET CASH PROVIDED BY (USED IN)  INVESTING ACTIVITIES                     21,526)    (41,268)

</TABLE>
See notes to consolidated financial statement

                                       3
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              For the Six Months
                                                                                 Ended June 30
                                                                                1997       1996
                                                                            ---------   ---------

<S>                                                                         <C>         <C>     
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits/NOW accounts,
  passbook savings accounts and certificates of deposit                     $ (8,241)   $  4,803
Advances from Federal Home Loan Bank - net                                         0      30,000
Net (decrease) increase in advances from borrowers for taxes
     and insurance                                                               200         856
Purchase of treasury stock                                                    (3,587)         (0)
Common stock cash dividend                                                      (768)       (626)

     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                     (12,396)     35,033

     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    (28,407)      2,182

Cash and cash equivalents at beginning of period                              54,132      27,032

Cash and cash equivalents at end of period                                  $ 25,725    $ 24,850
                                                                            --------    -------- 

Supplemental disclosure of cash flow information
     Cash paid for
         Interest on deposits and advances                                  $ 10,995    $  8,192
         Income taxes                                                       $    801    $  1,330
     Non-cash transactions
         Transfers from loans to real estate acquired through foreclosure   $     78    $     32

</TABLE>

See notes to consolidated financial statement

                                       4
<PAGE>
                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements as of December 31, 1996 and as of and
for the three and six month  periods  ended June 30,  1997 and 1996  include the
accounts of TF Financial  Corporation (the  "Corporation")  and its wholly owned
subsidiaries  Third Federal  Savings Bank (the "Savings  Bank"),  TF Investments
Corporation  and Penns  Trail  Development  Corporation  and  Teragon  Financial
Corporation.  The Corporation's  business is conducted  principally  through the
Savings Bank. All significant  intercompany  accounts and transactions have been
eliminated in consolidation.

NOTE 2 - BASIS OF PRESENTATION

     The accompanying  unaudited consolidated financial statements were prepared
in accordance with  instructions  for Form 10-Q and,  therefore,  do not include
information or footnotes  necessary for a complete  presentation of consolidated
financial  condition,  results of operations,  and cash flows in conformity with
generally accepted accounting principles.  However, all adjustments,  consisting
of normal recurring accruals, which, in the opinion of management, are necessary
for  fair  presentation  of the  consolidated  financial  statements  have  been
included.  The results of operations for the periods ended June 30, 1997 are not
necessarily  indicative  of the  results  which may be  expected  for the entire
fiscal year or any other period. For further information,  refer to consolidated
financial  statements and footnotes thereto included in the Corporations  Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.

NOTE 3 - IMPAIRED LOANS

     On  January  1,  1995  the  Corporation   adopted  Statement  of  Financial
Accounting Standards (SFAS) No. 114, "Accounting for Creditors for Impairment of
a Loan," as amended by SFAS No. 118,  "Accounting by Creditors for Impairment of
a Loan - Income  Recognition  and  Disclosures."  SFAS No. 114  requires  that a
creditor  measure  impairment based on the present value of expected future cash
flows  discounted  at the  loan's  effective  interest  rate,  except  that as a
practical  expedient,  a  creditor  may  measure  impairment  based  on a loan's
observable  market  price,  or the fair value of the  collateral  if the loan is
collateral  dependent.  Regardless of the  measurement  method,  a creditor must
measure  impairment  based on the fair value of the collateral when the creditor
determines that  foreclosure is probable:  SFAS No. 118 allows  creditors to use
existing methods for recognizing interest income on impaired loans.

     The Savings Bank has identified a loan as impaired when it is probable that
interest and principal will not be collected  according to the contractual terms
of the loan  agreement.  The accrual of interest is  discontinued on such loans,
and cash  payments  received  are  applied  to reduce  principal  to the  extent
necessary to eliminate any doubt as to the ultimate  collectibility of principal
either in whole or in part.  Loan  impairment  is  measured  by  estimating  the
expected  future cash flows and  discounting  them at the  respective  effective
interest rate, or by valuing the underlying collateral.  An allowance for credit
losses has been established for all loans  identified as impaired.  The recorded
investment in impaired loans and the valuation for credit losses are as follows:

                     (in thousands)                               June 30 1997
                                                                  ------------
         Principal amount of impaired loans                       $        625
         Accrued interest                                                    -
         Deferred loan costs                                                 -
              Subtotal                                            $        625
                                                                           ---
         Less valuation allowance                                          132
                                                                           ---
              Total                                               $        493
                                                                           ===

     The average recorded  investment in impaired loans during the quarter ended
June 30, 1997 was $628,000.  Total cash  collected on impaired  loans during the
quarter  ended June 30,  1997 was $7,000 of which  $4,000  was  credited  to the
principal  balance  outstanding  on such  loans and  $3,000  was  recognized  as
interest income.  Interest that would have been accrued on impaired loans during
the quarter  was  

                                       5
<PAGE>

$13,000.  Interest  income  recognized  during the quarter was $3,000.

NOTE 4 -  CONTINGENCIES

     The Corporation, from time to time, is a party to routine litigation, which
arise in the  normal  course of  business.  In the  opinion of  management,  the
resolution of these  lawsuits  would not have a material  adverse  effect on the
Corporation's consolidated financial condition or results of operations.

     A petition for  resettlement  has been filed by the Savings Bank protesting
assessment of certain prior years'  Pennsylvania Mutual Thrift Institutions Tax.
Management  believes that the  resolution of this  liability,  if any, would not
have a  material  adverse  effect on the  Corporation's  financial  position  or
results of operations.

                                       6
<PAGE>
                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------

GENERAL

The  Corporation's  total  assets at June 30, 1997 and December 31, 1996 totaled
$640.7 million and $647.9 million,  respectively,  a decrease of $7.2 million or
1.1% for the six month  period.  This  decrease was  primarily as a result of an
$8.2 million or 1.8% decrease in deposits which was funded by reductions in cash
and cash  equivalents.  Savings deposits declined over the period as a result of
general market  conditions.  Loans receivable  increased by $6.3 million or 2.0%
from $309.6  million at December  31, 1996 to $315.9  million at June 30,  1997.
During this same period,  investment securities increased $19.0 million or 33.9%
and mortgage backed securities increased by $16.9 million or 9.6%. The increases
in these asset  categories  was funded by the $48.5 million or 61.2% decrease in
other  interest  earning  assets  (cash  and  cash  equivalents  and  securities
purchased under agreements to resell).

Other interest earning assets totaled $30.7 million at June 30, 1997 as compared
with $79.3 million at December 31, 1996. The decrease in other interest  earning
assets is a result of the  reinvestment  of $138 million  received in September,
1996 as a result of the  acquisition  of deposits  and three  retail  offices of
Cenlar Federal Savings Bank ("Cenlar").

Investment securities at June 30, 1997, totaled $75.1 million,  which represents
an increase of $19.0  million or 33.9% as compared  to December  31,  1996.  The
increase is primarily due to the  reinvestment  of cash received from the Cenlar
acquisition.

Mortgage-backed  securities  totaled $192.6 million at June 30, 1997 as compared
to $175.8  million at December 31, 1996.  This increase of $16.9 million or 9.6%
is also attributed  mainly to the  reinvestment of cash received from the Cenlar
acquisition.

Other  assets,  inclusive  of prepaid  expenses,  at June 30 1997,  totaled $1.5
million,  which  represents  an  increase  of  $109,000  or 7.7% as  compared to
December  31,  1996.  This  increase is  comprised  primarily  of an increase in
accounts receivable due the Savings Bank.

Total  consolidated  stockholders'  equity  of the  Corporation  decreased  $1.3
million to $71.2  million or 11.1% of total assets at June 30, 1997,  from $72.6
million or 11.2 % of total  assets at December 31,  1996,  primarily  due to the
payment of $767,000  in  dividends  to  shareholders  and $3.6  million in stock
repurchases  partially  offset by  earnings  of $2.4  million  for the six month
period.  Stockholders'  equity also decreased as a result of a change in the net
unrealized loss on investment  securities available for sale of $124,000 at June
30, 1997 and  amortization of stock incentive plans of $338,000.  On October 23,
1996  the  Corporation  announced  its  intent  to  repurchase  up to 5% of  its
outstanding  common stock in the open market.  The  repurchase  was completed on
April 9, 1997, with a total of 214,869 shares,  approximately  5% of outstanding
common shares, repurchased at a total cost of $3.6 million.




Average Balance Sheet

The following tables set forth information relating to the Corporation's average
balance  sheet and  reflects  the average  yield on assets and  average  cost of
liabilities  for the  periods  indicated.  The yields and costs are  computed by
dividing income or expense by the monthly  average  balance of  interest-earning
assets or interest-bearing liabilities, respectively for the periods indicated.

                                       7

<PAGE>

<TABLE>
<CAPTION>


                                                                               For Three Months Ended June 30
                                                    --------------------------------------------------------------------------------
                                                                  1997 (4)                                     1996(4)
                                                    --------------------------------------     -------------------------------------


(Dollars in thousands)                               Average                       Average      Average                     Average
                                                     Balance      Interest      Yield/Cost      Balance       Interest   Yield/Cost
                                                     -------      --------      ----------      -------       --------   ----------
<S>                                                 <C>            <C>               <C>       <C>             <C>            <C>  
Assets:
Interest earning assets:
  Loans receivable, net.......................      $316,050       $ 6,221           7.87%     $299,397        $ 5,622        7.51%
  Mortgage-backed securities..................       196,144         3,271           6.67%      153,381          2,597        6.77%
  Investment securities.......................        81,281         1,388           6.83%       38,143            596        6.25%
  Other interest-earning assets(1)............        22,563           226           4.01%       24,742            268        4.33%
                                                     -------           ---                       ------            ---
    Total interest-earning assets.............      $616,038       $11,106           7.21%     $515,663         $9,083        7.05%
                                                     =======       =======                     ========
Non interest-earning assets...................        23,029                                     10,827
                                                     -------                                    -------
    Total assets..............................      $639,067                                   $526,490
                                                     =======                                    =======

Liabilities and Stockholders' Equity:
  Interest-bearing liabilities:
    Savings deposits..........................      $459,122        $4,663           4.06%     $338,511         $3,219        3.80%
    Borrowed money............................        98,359         1,473           5.99%      103,359          1,519        5.88%
                                                    --------         -----                      -------          -----
      Total interest-bearing liabilities......      $557,481        $6,136           4.40%     $441,870         $4,738        4.29%
                                                     =======        ======                     ========
Non interest-bearing liabilities..............        11,025                                      9,744
                                                     -------
      Total liabilities.......................      $568,506                                   $451,614
                                                    ========
Stockholders' equity..........................        70,561                                     74,876
      Total liabilities and stockholders' equity    $639,067                                   $526,490
                                                     =======                                   ========
Net interest income...........................                      $4,970                                      $4,345
                                                                    ======                                       =====
Interest rate spread (2)......................                                       2.81%                                    2.76%
Net yield on interest-earning assets (3)......                                       3.23%                                    3.37%
Ratio of average interest-earning assets to average
  interest-bearing liabilities................                                        111%                                     117%

</TABLE>

----------------------------------------
(1)  Includes interest-bearing deposits in other banks.
(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.
(4)  Ratios have been annualized where applicable.


                                       8
<PAGE>

Average Balance Sheet  (continued)
<TABLE>
<CAPTION>
                                                                                For Six Months Ended June 30
                                                      ------------------------------------------------------------------------------
                                                                     1997 (4)                                   1996(4)
                                                      ------------------------------------     -------------------------------------

(Dollars in thousands)                                  Average                  Average        Average                   Average
                                                        Balance      Interest   Yield/Cost      Balance        Interest  Yield/Cost
                                                        -------      --------   ----------      -------        --------  ----------
<S>                                                    <C>            <C>            <C>        <C>             <C>           <C>  
Assets:
Interest earning assets:
  Loans receivable, net..............................  $313,220       $12,413        7.93%      $290,154        $10,902       7.51%
  Mortgage-backed securities.........................   190,656         6,379        6.69%       156,205          5,366       6.87%
  Investment securities..............................    91,152         2,955        6.48%        39,997          1,228       6.14%
  Other interest-earning assets(1)...................    23,347           534        4.57%        25,344            577       4.55%
                                                         ------           ---                     ------            ---
    Total interest-earning assets....................  $618,375       $22,281        7.21%      $511,700        $18,073       7.06%
                                                       ========                                 ========
Non interest-earning assets..........................    22,783                                    9,310
                                                         ------                                    -----
    Total assets.....................................  $641,158                                 $521,010
                                                       ========                                 ========

Liabilities and Stockholders' Equity:
  Interest-bearing liabilities:
    Savings deposits.................................  $460,847        $9,320        4.04%      $336,833         $6,397       3.80%
    Borrowed money...................................    99,192         2,930        5.91%       100,859          2,923       5.80%
                                                         ------         -----                    -------          -----
      Total interest-bearing liabilities.............  $560,039       $12,250        4.37%      $437,692         $9,320       4.26%
                                                       ========                                 ========
Non interest-bearing liabilities.....................    10,176                                    8,861
      Total liabilities..............................  $570,215                                 $446,553
                                                       ========
Stockholders' equity.................................    70,943                                   74,457
                                                         ------                                  -------
      Total liabilities and stockholders' equity.....  $641,158                                 $521,010
                                                       ========                                  =======
Net interest income..................................                 $10,031                                    $8,753
                                                                      =======                                     =====
Interest rate spread (2).............................                                2.84%                                    2.80%
Net yield on interest-earning assets (3).............                                3.24%                                    3.42%
Ratio of average interest-earning assets to average
  interest-bearing liabilities.......................                                 110%                                     117%

</TABLE>

----------------------------------------
(1)  Includes interest-bearing deposits in other banks.
(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.
(4)  Ratios have been annualized where applicable.

                                       9


<PAGE>
RESULTS OF OPERATIONS

Net Income.  The  Corporation  recorded net income of $1.3 million for the three
months  ended June 30, 1997 as  compared  to net income of $1.1  million for the
three months  ended June 30, 1996.  Earnings for the three months ended June 30,
1997 represent an increase of $.2 million or 14.8% compared to earnings reported
for the same  period  in 1996.  The  increase  in  earnings  for this  period is
attributable  to an  increase  in core  earnings.  Net  interest  income  before
provisions  for loan losses was $5.0 million for the three month  periods  ended
June 30, 1997 as compared to $4.3 million for the same period in 1996. For these
same  periods,  total  interest  expense  was $6.1  million  and  $4.7  million,
respectively.  Non-interest income was $488,000 and $303,000,  respectively, for
these same periods.  Operating expenses (non-interest expense) were $3.3 million
and $2.7  million for the three month  periods  ended June 30, 1997 and June 30,
1996, respectively.

Net Income of $2.4  million  for the six months  ended  June 30,  1997  showed a
$67,000  decrease  over net income of $2.5 million for the six months ended June
30,  1996.  The  decrease in  earnings  for this  period is  attributable  to an
increase in non-interest  expense  partially offset by gains on the sale of real
estate and investment securities. Net interest income before provisions for loan
losses  was  $10.0  million  for the six month  period  ended  June 30,  1997 as
compared to $8.8  million for the same period in 1996.  For these same  periods,
total  interest  expense  was  $12.3  million  and $9.3  million,  respectively.
Non-interest  income was  $878,000  and  $994,000,  respectively  for these same
periods.  The decrease in non-interest income was attributed to the reduction in
gains on the sale of the real estate and investment  securities in the six month
period ended June 30, 1997 than in the corresponding period ended June 30, 1996.
Operating expenses (non-interest expense) were $6.7 million and $5.4 million for
the six month periods ended June 30, 1997 and June 30, 1996, respectively.

Total Interest Income.  Total interest income increased by $2.0 million or 22.3%
to $11.1 million for the three months ended June 30, 1997, from $9.1 million for
the three months  ended June 30, 1996 due  primarily to increases in the average
balance  of  loans   receivable,   mortgage-backed   securities  and  investment
securities,  offset  somewhat  by  decreases  in the  average  balances of other
interest-earning  assets. The average balance of loans receivable increased 5.6%
to $316.0  million from $299.4  million for the three months ended June 30, 1997
and 1996,  respectively.  Interest  attributable to loans  receivable  increased
$599,000 or 10.7% to $6.2 million from $5.6 million for these same periods. This
increase is primarily attributed to the increase in the average balance of loans
receivable as well as an increase in the average yield on loans  receivable from
7.51% for the period end June 30,  1996,  to 7.87% for the period ended June 30,
1997.  Interest  on  mortgage-backed   securities   increased  $674,000  (26.0%)
primarily as a result of increases in the average  balances of these  securities
offset  partially  by  decreases  in the average  yield.  The  average  yield on
mortgage-backed  securities  decreased to 6.67% for the three month period ended
June 30, 1997 compared to 6.77% for the similar period in 1996 while the average
balance of mortgage-backed  securities  increased by $42.8 million or 27.9% when
comparing  these two periods.  Interest on  investment  securities  increased by
$792,000 or 132.9% for the three month period ended June 30, 1997 as compared to
the similar period in 1996.  Interest on other interest  earning assets declined
by $42,000  for the three  month  period  ended June 30,  1997  compared  to the
similar period ended June 30, 1996 primarily as a result of the average  balance
declining  by $2.2  million to $22.6  million,  coupled  with a decrease  in the
average  yield to  4.01%  at June 30,  1997  from  4.33% at June 30,  1996.  The
increases  in  the  average  balances  of  loans   receivable,   mortgage-backed
securities and investment  securities are a result of the  reinvestment  of $138
million in deposits received from the Cenlar acquisition.

For the six months ended June 30, 1997, total interest income increased to $22.3
million from $18.1 million for the six months ended June 30, 1996. This increase
of $4.2 million,  or 23.3%,  is due primarily to the increase in income on loans
receivable,  mortgage-backed  securities  and  investment  securities,  somewhat
offset by the decrease in income on other interest  earning assets.  Interest on
loans receivable  increased by $1.5 million,  or 13.9%, to $12.4 million at June
30, 1997, from $10.9 million at June 30, 1996. During the same time periods, the
average  balance of loans  receivable  increased by $23.1 to $313.2 million from
$290.2 million. Interest on mortgage-backed securities increased $1.0 million
(18.9%) from June 30, 1996 to June 30, 1997,  primarily as a result of increases
in  the  average   balances   of  these   securities.   The  average   yield  on
mortgage-backed  securities  decreased  to 6.69% for the six month  period ended
June 30,

                                       10
<PAGE>

1997 compared to 6.87% for the similar period in 1996 while the average  balance
of  mortgage-backed  securities  increased by $34.5 million when comparing these
two periods. Interest on investment securities increased by $1.7 million for the
six month period  ended June 30, 1997 as compared to the similar  period in 1996
as a result of  increases in the average  balances  and average  yields of these
securities.  The average yield on investment  securities  increased to 6.48% for
the six month  period  ended June 30,  1997  compared  to 6.14% for the  similar
period in 1996 while the average balance of investment  securities  increased by
$51.2  million  when  comparing  these two periods.  Interest on other  interest
earning assets  declined by $43,000 for the six month period ended June 30, 1997
compared to the similar  period ended June 30, 1996 primarily as a result of the
average  balance  declining  by $2.0 million to $23.3  million,  coupled with an
increase in the  average  yield to 4.57% at June 30, 1997 from 4.55% at June 30,
1996. The increases in the average balances of loans receivable, mortgage-backed
securities and investment  securities are a result of the  reinvestment  of $138
million in deposits received from the Cenlar acquisition.

Total Interest Expense. Total interest expense increased to $6.1 million for the
three month period ended June 30, 1997 from $4.4 million at June 30, 1996.  This
increase in total  interest  expense is a result of the increases in the average
balance and average  rate of savings  deposits.  The average  balance of savings
deposits  increased  from $338.5  million at June 30, 1996 to $459.1  million at
June 30, 1997. The average rate paid on savings deposits increased from 3.80% in
the June 30, 1996 period to 4.06% in the June 30, 1997 period. This increase was
mainly  attributable to the acquisition of deposits from the Cenlar acquisition.
The average balance of total interest  bearing  liabilities  increased to $557.5
million  during the three months ended June 30, 1997 from $441.9  million during
the three  months  ended June 30,  1996 as a result of the  increase  in savings
deposits  partially  offset by  decreases  in the  average  balance  and rate of
Federal Home Loan Bank advances.

Total interest expense of $12.3 million increased $2.9 million for the six month
period  ended June 30, 1997  compared to $9.3  million for the six months  ended
June 30,  1996.  This  increase  in total  interest  expense  is a result of the
increases  in the  average  balance and average  rate of savings  deposits.  The
average  balance  of total  interest  bearing  liabilities  increased  to $560.0
million during the six months ended June 30, 1997 from $437.7 million during the
six months ended June 30, 1996 as a result of the increase in savings deposits.

Net Interest  Income.  Net interest income for the three month period ended June
30, 1997  increased  by $625,000 or 14.4% to $5.0  million from $4.3 million for
the same period in 1996.  This  increase  is  primarily  due to the  increase in
interest earning assets offset by the increase to interest bearing  liabilities.
The average  balances of interest earning assets increased to $616.0 million for
the three months ended June 30, 1997 from $515.7  million for the similar period
in 1996.  During these same periods,  the average  balances on  interest-bearing
liabilities  increased  to  $557.5  million  from  $441.9  million.  The cost of
interest  bearing  liabilities  increased from 4.29% to 4.40% while the yield on
interest  earning  assets  increased  from  7.05% to 7.21% for the  three  month
periods ended June 30, 1996 and 1997 respectively.

Net interest  income for the six month  period ended June 30, 1997  increased by
$1.3 million or 14.6% to $10.0  million from $8.8 million for the same period in
1996. This increase is primarily due to the increase in interest  earning assets
partially  offset by the increase to interest earning  liabilities.  The average
balances of interest  earning  assets  increased  to $618.4  million for the six
months ended June 30, 1997 from $511.7  million for the similar  period in 1996.
During these same periods,  the average balances on interest bearing liabilities
increased to $560.0 million from $437.7  million.  The cost of interest  bearing
liabilities  increased  from 4.26% to 4.37% while the yield on interest  earning
assets  increased  from 7.06% to 7.21% for the six month  periods ended June 30,
1996 and 1997 respectively.

Allowance for Loan Losses.  The allowance for loan losses  increased at June 30,
1997 to $2.0 million from $1.7 million at June 30, 1996.  Such totals  correlate
to  non-performing  loans of $2.0  million at June 30, 1997 and $1.8  million at
June 30,  1996.  The  increase  in the  allowance  for loan  losses of  $417,000
resulted  from the addition of $420,000 to the provision for loan losses and the
deduction of $3,000 of net charge offs for losses on loans.  The  provision  for
losses on loans is the  method by which the  allowance  for  losses is  adjusted
during the period.  The  provision for losses on loans was $75,000 for the three
months ended June 30, 1997. At June 30, 1997,  the allowance for loan losses was
102.6% of non-performing  loans as compared to 79.4% of non-performing  loans at
June 30, 1996.  While  management  maintains its allowance for

                                       11
<PAGE>

losses at a level which it  considers  to be  adequate to provide for  potential
losses, there can be no assurance that further additions will not be made to the
allowance and that such losses will not exceed the estimated amounts.

Non-interest  Income.  Total  non-interest  income increased to $488,000 for the
three months ended June 30, 1997 from $303,000 for the same period in 1996. This
increase can be attributed to the increase in income from the sale of investment
securities and loans.

Total  non-interest  income decreased to $878,000 for the six month period ended
June 30, 1997 from $994,000 for the similar period in 1996. This decrease can be
attributed  to the decrease in the net gain on the sale of real estate  acquired
through foreclosure of $114,000.

Non-interest  Expense.  Total non-interest expense increased by $661,000 to $3.3
million for the three months ended June 30, 1997 as compared to $2.7 million for
the  similar  period in 1996.  This  increase  is  primarily  attributed  to the
$243,000 increase in employee  compensation and benefits, a $152,000 increase in
occupancy  and  equipment,  a $48,000  increase in data  processing  expense,  a
$244,000  increase in  amortization  of goodwill  and other  intangibles,  and a
$95,000  increase in other  operating  costs.  These increased costs were offset
partially  by decreases of $118,000 in Federal  deposit  insurance  premiums and
$10,000 in professional  fees. The increases in  compensation  and benefit costs
were  primarily as a result of  increased  staffing  necessary to support  three
additional  retail offices which were acquired  through the Cenlar  acquisition.
Benefit costs were also increased due to the increases in costs  associated with
benefit  plans  utilizing  Corporation  stock  (portions of the costs of benefit
plans  utilizing  Corporation  stock  change  as the  market  value of the stock
changes). Data processing, occupancy and equipment, and other operating expenses
were also increased due to this acquisition.  The cost of the acquisition of the
three  retail  offices  is  being  amortized  over a 15  year  period  and  this
amortization  resulted in  additional  expenses of $244,000 for the period ended
June 30, 1997.

Total  non-interest  expense has  increased  to $6.7  million for the six months
ended June 30, 1997 as compared to $5.4 million for the similar  period in 1996.
This increase of $1.3 million is primarily  attributable to a $493,000  increase
in employee  compensation and benefits,  the $247,000  increase in occupancy and
equipment,  a $109,000 increase in data processing costs, a $488,000 increase in
goodwill and other  intangible  amortization,  and a $194,000  increase in other
operating costs.  These increases were partially offset by the $237,000 decrease
in Federal  deposit  insurance  premiums.  The increases  were mainly due to the
increased costs associated with the Cenlar acquisition.  Benefit costs were also
increased due to the increases in costs  associated with benefit plans utilizing
Corporation stock (portions of the costs of benefit plans utilizing  Corporation
stock change as the market value of the stock changes).


Income Tax Expense.  Income taxes decreased by $29,000 to $800,000 for the three
month period ended June 30, 1997,  from $829,000 for the three months ended June
30, 1996.  The primary  reason for this decrease was the change in the effective
state tax rate as a result of tax savings strategies.

For the six month  period ended June 30,  1997,  income taxes  decreased to $1.6
million from $1.8 million for the six months ended June 30, 1996.  This decrease
of $184,000 is primarily  attributed  to the decrease in net income before taxes
to $4.0 million from $4.3 million for the six month  periods ended June 30, 1997
and 1996,  respectively  coupled with a decrease in the effective state tax rate
as a result of tax savings strategies.

                                       12
<PAGE>

Liquidity and Capital Resources

Under current Office of Thrift Supervision (OTS)  regulations,  the Savings Bank
must have core capital equal to 3% of total assets and risk-based  capital equal
to 8% of risk-weighted assets, of which 1.5% must be tangible capital, excluding
goodwill and certain other intangible assets.

On June 30, 1997, the Savings Bank was in compliance  with its three  regulatory
capital requirements as follows:

                                  Amount  Percent
                                  ------  -------
                               (dollars in thousands)

Tangible capital                 $57,501      9.0%
Tangible capital requirement       9,532      1.5
                                 -------     ----
Excess over requirement          $47,969      7.5%
                                 =======     ====

Core capital                     $57,501      9.0%
Core capital requirement          19,064      3.0
                                 -------     ----
Excess over requirement          $38,437      6.0%
                                 =======     ====

Risk based capital               $59,484     20.8%
Risk based capital requirement    22,830      8.0
                                 -------     ----
Excess over requirement          $36,654     12.8%
                                 =======     ====


Management  believes  that under  current  regulations,  the  Savings  Bank will
continue to meet its minimum capital  requirements  in the  foreseeable  future.
Events beyond the control of the Savings Bank, such as increased  interest rates
or a downturn in the economy in areas in which the Savings Bank operates,  could
adversely  affect  future  earnings and as a result,  the ability of the Savings
Bank to meet its future minimum capital requirements.

The Savings  Bank's  liquidity  is a measure of its  ability to fund loans,  pay
withdrawals of deposits, and other cash outflows in an efficient, cost effective
manner.  The Savings  Bank's  primary source of funds are deposits and scheduled
amortization  and prepayment of loan and mortgage backed  principal.  During the
past  several  years,  the Savings  Bank has used such funds  primarily  to fund
maturing  time  deposits,  pay savings  withdrawals,  fund lending  commitments,
purchase new investments,  and increase liquidity. The Savings Bank is currently
able to fund its operations  internally but has, when deemed  prudent,  borrowed
funds from the Federal Home Loan Bank of Pittsburgh.  As of June 30, 1997,  such
borrowed funds total $98.4  million.  Loan payments,  maturing  investments  and
mortgage-backed  security prepayments are greatly influenced by general interest
rates, economic conditions and competition.

The Savings  Bank is required  under  federal  regulations  to maintain  certain
specified  levels of "liquid  investments",  which include certain United States
government  obligations  and other  approved  investments.  Current  regulations
require the Savings  Bank to maintain  liquid  assets of not less than 5% of its
net withdrawable  accounts plus short term borrowings.  Short term liquid assets
must consist of not less than 1% of such accounts and  borrowings,  which amount
is also  included  within the 5%  requirement.  These levels may be changed from
time to time by the  regulators  to reflect  current  economic  conditions.  The
Savings Bank has  generally  maintained  liquidity  far in excess of  regulatory
requirements.  The Savings  Bank's  regulatory  liquidity was 14.5% and 12.3% at
June 30, 1997 and 1996, respectively,  and its short term liquidity was 6.5% and
8.3%, at such dates, respectively.

The amount of  certificate  accounts  which are  scheduled to mature  during the
twelve months  ending June 30 1998,  is  approximately  $134.9  million.  To the
extent that these deposits do not remain at the Savings Bank upon maturity,  the
Savings Bank  believes  that it can replace  these funds with  deposits,  excess
liquidity,  FHLB advances or outside borrowings.  It has been the Savings Bank's
experience  that a substantial  portion of such maturing  deposits remain at the
Savings Bank.

                                       13
<PAGE>

At June 30, 1997,  the Savings  Bank had  outstanding  commitments  to originate
loans of $8.1 million.  Also  outstanding  at June 30, 1997 were  commitments to
purchase $334,000 of loans. Funds required to fill these commitments are derived
primarily from current excess  liquidity,  deposit  inflows or loan and security
repayments.  At June 30, 1997, the Savings Bank had  outstanding  commitments to
sell loans of $11.7 million.

                                       14
<PAGE>



                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                     PART II

ITEM 1.                    LEGAL PROCEEDINGS

                           Neither  the  Corporation  nor the  Savings  Bank was
                           engaged in any legal  proceeding of a material nature
                           at June 30, 1997.  From time to time, the Corporation
                           is a  party  to  legal  proceedings  in the  ordinary
                           course of business  wherein it enforces  its security
                           interest in loans.

ITEM 2.                    CHANGES IN SECURITIES

                           Not applicable.

ITEM 3.                    DEFAULTS ON SENIOR SECURITIES

                           Not applicable.

ITEM 4.                    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                           Not applicable.

ITEM 5.                    OTHER MATERIALLY IMPORTANT EVENTS

                           Not applicable

ITEM 6.                    EXHIBITS AND REPORTS ON FORM 8-K

                           (a)      Exhibits

                           None

                           (b)      Reports on Form 8-K

                           On April 19, 1997,  the  Corporation  filed a Current
                           Report on Form 8-K dated April 9, 1997, to report the
                           completion of the repurchase of 214,869 shares of the
                           Corporation's common stock

                                       15
<PAGE>

                                   SIGNATURES


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


                            TF FINANCIAL CORPORATION



Date:      August 12, 1997     By: /s/ John R. Stranford
     -------------------------    ----------------------
                                  John R. Stranford
                                  President and CEO
                                  (Principal Executive Officer)



Date:      August 12, 1997      By: /s/ William C. Niemczura
     -------------------------     -------------------------
                                   William C. Niemczura
                                   Senior Vice President and
                                   Chief Financial Officer
                                   (Principal Financial & Accounting Officer)

                                       16