SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM l0-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         September 30, 2004
                                ------------------------------------
                                               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 000-24168
                                               ---------

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

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date: November 8, 2004

                     Class                                 Outstanding
         ----------------------------                  ----------------
         $.10 par value common stock                    2,944,009 shares


<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                    FORM 1O-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2004


                                      INDEX


                                                                           Page
                                                                          Number
                                                                          ------

PART I - CONSOLIDATED FINANCIAL INFORMATION

        Item 1. Consolidated Financial Statements                              3
        Item 2. Management's Discussion and Analysis of
                Financial Position and Results of Operations                  13
        Item 3. Quantitative and Qualitative Disclosures about Market Risk    21
        Item 4. Controls and Procedures                                       21

PART II- OTHER INFORMATION

        Item 1. Legal Proceedings                                             23
        Item 2. Unregistered Sales of Equity Securities and
                Use of Proceeds                                               23
        Item 3. Defaults Upon Senior Securities                               24
        Item 4. Submission of Matters to a Vote of Security Holders           24
        Item 5. Other Information                                             24
        Item 6. Exhibits                                                      24

SIGNATURES                                                                    25

EXHIBITS

        31. Certifications pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002                                        26

        32. Certification pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002                                        28



                                       2
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                       Unaudited        Audited
                                                                                     September 30,   December 31,
                                                                                         2004           2003
                                                                                         ----           ----
<S>                                                                                  <C>            <C>
                                   Assets
Cash and cash equivalents                                                              $  6,650       $  8,241
Certificates of deposit in other financial institutions                                      38            155
Investment securities available for sale - at fair value                                 17,630         14,433
Investment securities held to maturity
    (fair value of $7,277 and $10,815, respectively)                                      7,045         10,389
Mortgage-backed securities available for sale - at fair value                           109,462        106,774
Mortgage-backed securities held to maturity
    (fair value of $17,179 and  $24,774, respectively)                                   16,427         23,630
Loans receivable, net                                                                   435,174        404,649
Federal Home Loan Bank stock - at cost                                                    7,573          6,825
Accrued interest receivable                                                               2,469          2,671
Core deposit intangible, net of accumulated amortization
    of $2,577 and $2,456, respectively                                                      247            368
Goodwill, net of accumulated amortization of $2,328                                       4,324          4,324
Premises and equipment, net                                                               5,937          6,268
Other assets                                                                             16,481         18,025
                                                                                       --------       --------
                                Total assets                                           $629,457       $606,752
                                                                                       ========       ========

                    Liabilities and stockholders' equity
Liabilities
   Deposits                                                                            $457,892       $459,343
   Advances from the Federal Home Loan Bank                                             108,078         86,853
   Advances from borrowers for taxes and insurance                                        1,179          1,738
   Accrued interest payable                                                               1,961          1,908
   Other liabilities                                                                      2,172          1,430
                                                                                       --------       --------
                              Total liabilities                                         571,282        551,272
                                                                                       --------       --------

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; 2,701,901 and 2,596,037 shares
       outstanding at September 30, 2004 and December 31, 2003, net of
       treasury shares of 2,381,768 and 2,474,366, respectively.                            529            529
   Retained earnings                                                                     56,301         52,626
   Additional paid-in capital                                                            50,394         51,982
   Unearned ESOP shares                                                                  (2,063)        (2,196)
   Treasury stock - at cost                                                             (46,644)       (47,043)
   Accumulated other comprehensive loss                                                    (342)          (418)
                                                                                       --------       --------
                         Total stockholders' equity                                      58,175         55,480
                                                                                       --------       --------

Total liabilities and stockholders' equity                                             $629,457       $606,752
                                                                                       ========       ========
</TABLE>

                   See notes to consolidated financial statements

                                       3
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>


                                                                              For Three Months         For Nine Months
                                                                             Ended September 30,      Ended September 30,
                                                                             -------------------      -------------------
                                                                              2004       2003        2004          2003
                                                                              ----       ----        ----          ----

<S>                                                                        <C>       <C>         <C>           <C>
Interest income
   Loans                                                                      $6,095    $ 5,660     $18,045       $17,336
   Mortgage-backed securities                                                  1,490      1,621       4,478         5,318
   Investment securities                                                         279        505         839         1,531
   Interest bearing deposits and other                                             4         49          11           463
                                                                              ------    -------     -------       -------
       Total interest income                                                   7,868      7,835      23,373        24,648
                                                                              ------    -------     -------       -------
Interest expense
   Deposits                                                                    1,456      1,638       4,440         5,506
   Advances from the Federal Home Loan Bank                                      758      2,078       2,077         7,558
                                                                              ------    -------     -------       -------
       Total interest expense                                                  2,214      3,716       6,517        13,064
                                                                              ------    -------     -------       -------
       Net interest income                                                     5,654      4,119      16,856        11,584
Provision for loan losses                                                        150         90         450           270
                                                                              ------    -------     -------       -------
       Net interest income after provision for loan losses                     5,504      4,029      16,406        11,314
                                                                              ------    -------     -------       -------

Non-interest income
   Service fees, charges and other operating income                              463        435       1,584         1,320
   Bank-owned life insurance                                                     132        154         401           416
   Gain (loss) on sale of investment and mortgage-backed securities               --       (377)         --           208
     available for sale
   Gain on sale of real estate                                                    --        110          --           110
                                                                              ------    -------     -------       -------
       Total non-interest income                                                 595        322       1,985         2,054
                                                                              ------    -------     -------       -------

Non-interest expense
   Compensation and benefits                                                   2,160      1,996       6,681         6,056
   Occupancy and equipment                                                       613        675       1,852         1,905
   Federal deposit insurance premium                                              17         18          53            55
   Professional fees                                                             121        110         459           428
   Amortization of core deposit intangible                                        41         49         121           145
   Advertising                                                                   164        138         490           413
   Debt prepayment fee                                                            --     13,765          --        13,765
   Other operating                                                               627        727       1,873         2,049
                                                                              ------    -------     -------       -------
       Total non-interest expense                                              3,743     17,478      11,529        24,816
                                                                              ------    -------     -------       -------
       Income (loss) before income taxes                                       2,356    (13,127)      6,862       (11,448)
Income tax expense (benefit)                                                     642     (4,562)      1,883        (4,098)
                                                                              ------    -------     -------       -------
       Net income (loss)                                                      $1,714    $(8,565)    $ 4,979       $(7,350)
                                                                              ======    =======     =======       =======

Basic earnings (loss) per share                                               $ 0.64    $ (3.33)    $  1.86         (2.91)
Diluted earnings (loss) per share                                             $ 0.61    $ (3.33)    $  1.77         (2.91)
Dividends paid                                                                $ 0.17    $  0.15     $  0.49       $  0.45

</TABLE>

                      See notes to consolidated financial statements

                                       4
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                           For the nine months ended
                                                                                                  September 30,
                                                                                                  -------------
                                                                                              2004           2003
                                                                                              ----           ----
<S>                                                                                      <C>               <C>
Cash flows from operating activities
Net income (loss)                                                                          $   4,979         $(7,350)
Adjustments to reconcile net income to net cash provided by operating activities:
         Mortgage loan servicing rights                                                           --              11
         Deferred loan origination fees                                                          (10)           (174)
         Premiums and discounts on investment securities, net                                     54             150
         Premiums and discounts on mortgage-backed securities and loans, net                     565           1,642
         Amortization of core deposit intangible                                                 121             145
Provision for loan losses and provision for losses on real estate                                450             270
Adjustments to the net realizable value of real estate owned                                      30              12
Depreciation of premises and equipment                                                           725             809
Recognition of employee stock ownership plan expense                                             396             427
Gain on sale of investment and mortgage-backed securities available for sale                      --            (208)
Gain on sale of real estate                                                                       (1)           (123)
Increase in value of bank-owned life insurance                                                  (401)           (416)
(Increase) decrease in:
         Accrued interest receivable                                                             202           1,109
         Other assets                                                                          1,881          (5,012)
Increase (decrease) in:
         Accrued interest payable                                                                 53            (379)
         Other liabilities                                                                       704           1,807
                                                                                             -------          ------
         Net cash provided (used) by operating activities                                      9,748          (7,280)
                                                                                             -------          ------

Cash flows  from investing activities
Loan originations                                                                           (108,130)       (131,604)
Purchases of loans                                                                            (3,922)        (23,035)
Loan principal payments                                                                       80,997         121,646
Proceeds from sale of investment securities available for sale                                    --          70,753
Proceeds from sale of mortgage-backed securities available for sale                               --          24,440
Purchases of mortgage-backed securities available for sale                                   (27,701)        (65,873)
Purchase of investment securities available for sale                                          (3,040)        (95,737)
Proceeds from maturities of investment securities held to maturity                             3,295           4,105
Proceeds from maturities of investment securities available for sale                              --          40,000
Principal repayments from mortgage-backed securities held to maturity                          7,204          26,533
Principal repayments from mortgage-backed securities available for sale                       24,489          51,451
Purchase of bank-owned insurance                                                                  --          (1,500)
(Purchases) and maturities of certificates of deposit in other financial
   institutions,net                                                                              117              (9)
(Purchases) and redemptions of Federal Home Loan Bank stock, net                                (748)            164
Proceeds from sales of real estate                                                                32             473
Purchase of real estate held for investment                                                        3              (5)
Purchase of premises and equipment                                                              (394)           (597)
                                                                                             -------          ------
         Net cash provided by (used in) investing activities                                 (27,798)         21,205
                                                                                             -------          ------

</TABLE>
                    See notes to consolidated financial statements

                                       5


<PAGE>

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

<TABLE>
<CAPTION>

                                                                                           For the nine months ended
                                                                                                 September 30,
                                                                                                 -------------
                                                                                               2004          2003
                                                                                               ----          ----

<S>                                                                                           <C>        <C>
Cash flows from financing activities
Net increase (decrease) in deposits                                                              (1,451)      12,190
Net increase (decrease) in advances from Federal Home Loan Bank                                  21,225     (120,259)
Net increase (decrease) in advances from borrowers for taxes and insurance                         (559)        (208)
Exercise of stock options                                                                         2,802        1,009
Purchase of treasury stock, net                                                                  (4,254)          --
Common stock cash dividend                                                                       (1,304)      (1,131)
                                                                                               --------    ---------
         Net cash provided by (used in) financing activities                                     16,459     (108,399)
                                                                                               --------    ---------

         Net decrease in cash and cash equivalents                                               (1,591)     (94,474)

Cash and cash equivalents at beginning of period                                                  8,241      100,580
                                                                                               --------    ---------
Cash and cash equivalents at end of period                                                     $  6,650    $   6,106
                                                                                               ========    =========

Supplemental disclosure of cash flow information
Cash paid for
         Interest on deposits and advances from FHLB                                           $  6,464    $  13,443
         Income taxes                                                                          $      0    $     250
Non-cash transactions
         Transfers from loans to real estate acquired through foreclosure                      $      0    $   1,857

                        See notes to consolidated financial statements
</TABLE>





                                       6

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION
         The  consolidated   financial  statements  as  of  September  30,  2004
         (unaudited) and December 31, 2003 and for the nine-month  periods ended
         September  30, 2004 and 2003  (unaudited)  include  the  accounts of TF
         Financial Corporation (the "Company") and its wholly owned subsidiaries
         Third Federal Savings Bank (the "Bank"), TF Investments Corporation and
         Penns  Trail  Development   Corporation.   The  Company's  business  is
         conducted  principally  through the 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  all of  the  disclosures  or  footnotes  required  by
         accounting  principles  generally  accepted  in the  United  States  of
         America. In the opinion of management,  all adjustments,  consisting of
         normal  recurring  accruals,  necessary  for fair  presentation  of the
         consolidated  financial  statements have been included.  The results of
         operations for the period ended  September 30, 2004 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
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 2003.

NOTE 3 - CONTINGENCIES
         The Company,  from time to time, is a party to routine  litigation that
         arises in the normal course of business.  In the opinion of management,
         the  resolution of this  litigation,  if any, would not have a material
         adverse  effect on the  Company's  consolidated  financial  position or
         results of operations.

NOTE 4 - OTHER COMPREHENSIVE INCOME
         The  Company's  other  comprehensive  income  (loss)  consists  of  net
         unrealized gains (losses) on investment  securities and mortgage-backed
         securities  available for sale. Total  comprehensive  income (loss) for
         the  three-month   periods  ended  September  30,  2004  and  2003  was
         $2,746,000  and  $(9,578,000),  net of  applicable  income tax  expense
         (benefit)  of  $1,173,000   and   $(5,084,000),   respectively.   Total
         comprehensive  income (loss) for the nine-month periods ended September
         30, 2004 and 2003 was  $5,055,000 and  $(8,971,000),  net of applicable
         income  tax  expense   (benefit)  of   $1,921,000   and   $(4,933,000),
         respectively.



                                       7
<PAGE>

         TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                        Three months ended September 30, 2004
                                                         -------------------------------------
                                                                        Weighted
                                                        (000's)         Average
                                                        Income           Shares          Per share
                                                      (numerator)    (denominator)         Amount
                                                      -----------    -------------         ------
<S>                                                      <C>           <C>                 <C>
     Basic earnings per share
       Income available to common stockholders           $ 1,714       2,692,211           $ 0.64

     Effect of dilutive securities
       Stock options                                           -         108,516            (0.03)
                                                         -------       ---------           ------
     Diluted earnings per share
        Income available to common
          stockholders plus effect of
          dilutive securities                            $ 1,714       2,800,727           $ 0.61
                                                         =======       =========           ======
</TABLE>

<TABLE>
<CAPTION>

                                                         Nine months ended September 30, 2004
                                                         ------------------------------------
                                                                        Weighted
                                                        (000's)         Average
                                                        Income           Shares          Per share
                                                      (numerator)    (denominator)         Amount
                                                      -----------    -------------         ------
<S>                                                    <C>          <C>                 <C>
     Basic earnings per share
       Income available to common stockholders           $ 4,979       2,673,448           $ 1.86

     Effect of dilutive securities
        Stock options                                          -         144,734            (0.09)
                                                         -------       ---------           ------
     Diluted earnings per share
        Income available to common
          stockholders  plus
          effect of dilutive securities                  $ 4,979       2,818,182           $ 1.77
                                                         =======       =========           ======
</TABLE>

          There were  options to  purchase  31,816  shares of common  stock at a
          price of $34.14  per share  which  were  outstanding  during  the nine
          months  ended  September  30,  2004  that  were  not  included  in the
          computation  of  diluted  earnings  per  share  because  the  options'
          exercise  prices were  greater  than the average  market  price of the
          common shares.




                                       8

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - EARNINGS PER SHARE (continued)

<TABLE>
<CAPTION>

                                                        Three months ended September 30, 2003
                                                        -------------------------------------
                                                                        Weighted
                                                        (000's)         Average
                                                        Income           Shares          Per share
                                                      (numerator)    (denominator)         Amount
                                                      -----------    -------------         ------
<S>                                                    <C>          <C>                 <C>
     Basic earnings (loss) per share
       Income (loss) available to
          common stockholders                           $ (8,565)      2,571,947          $ (3.33)

     Effect of dilutive securities
       Stock options                                          --         216,749               --
                                                        --------       ---------          -------
     Diluted earnings (loss) per share
       Income (loss) available to common
          stockholders plus
          effect of dilutive securities                 $ (8,565)      2,788,696          $ (3.33)
                                                        ========       =========          =======
</TABLE>


<TABLE>
<CAPTION>

                                                         Nine months ended September 30, 2003
                                                         ------------------------------------
                                                                        Weighted
                                                        (000's)         Average
                                                        Income           Shares          Per share
                                                      (numerator)    (denominator)         Amount
                                                      -----------    -------------         ------
<S>                                                    <C>          <C>                 <C>
     Basic earnings (loss) per share
       Income (loss) available to
          common stockholders                           $ (7,350)      2,525,970          $ (2.91)

     Effect of dilutive securities
       Stock options                                           -         210,595               --
                                                        --------       ---------          -------

     Diluted earnings (loss) per share
       Income (loss) available to
          common stockholders  plus
          effect of dilutive securities                   (7,350)      2,736,565          $ (2.91)
                                                        ========       =========          =======

</TABLE>

          There were  options to  purchase  34,900  shares of common  stock at a
          range of $25.33 to $28.00 per share which were outstanding  during the
          nine months  ended  September  30, 2003 that were not  included in the
          computation  of  diluted  earnings  per  share  because  the  options'
          exercise  prices were  greater  than the average  market  price of the
          common shares.

                                       9


<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6- STOCK BASED COMPENSATION
         The  Company  has  several  fixed stock  option  plans.  The  Company's
         employee stock option plans are accounted for using the intrinsic value
         method  under APB  Opinion  No. 25, as  permitted  by SFAS No.  123. No
         stock-based  compensation  expense is reflected  in net income,  as all
         options  granted  under the plans had an  exercise  price  equal to the
         market value of the underlying common stock on the date of the grant.

         Had  compensation  cost for the plans been determined based on the fair
         value of options at the grant dates  consistent with the method of SFAS
         No. 123,  "Accounting for Stock-Based  Compensation," the Company's net
         income and  earnings per share would have been reduced to the pro forma
         amounts indicated below (in thousands, except per share data):


                    Three months ended September 30,      2004        2003
                    --------------------------------      ----        ----

           Net income (loss)
             As reported                                 $1,714    $(8,565)
             Deduct:   stock-based  compensation
               expense  determined  using the fair
               value method, net of related tax effects      25         17
                                                         ------    -------
           Pro forma                                     $1,689    $(8,582)
                                                         ======    =======

           Basic earnings (loss) per share
             As reported                                  $0.64     $(3.33)
             Pro forma                                    $0.63     $(3.34)

           Diluted earnings (loss) per share
             As reported                                  $0.61     $(3.33)
             Pro forma                                    $0.61     $(3.34)


          Stock-based  compensation expense included in net income is related to
          stock  grants  in lieu of  salary  and the  Company's  employee  stock
          ownership  plan.  Such  expense  totaled  $95,000 and $140,000 for the
          three-month periods ended September 30, 2004 and 2003, respectively.





                                       10


<PAGE>


                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6- STOCK BASED COMPENSATION (continued)



               Nine months ended September 30,            2004           2003
               -------------------------------            ----           ----

      Net income (loss)
        As reported                                      $4,979       $(7,350)
        Deduct: stock-based compensation expense
            determined using the fair value method,
            net of related tax effects                       76            39
                                                         ------       -------
        Pro forma                                        $4,903       $(7,389)
                                                         ======       =======

      Basic earnings (loss) per share
        As reported                                       $1.86        $(2.91)
        Pro forma                                         $1.84        $(2.93)

      Diluted earnings (loss) per share
        As reported                                       $1.77        $(2.91)
        Pro forma                                         $1.76        $(2.93)



     Stock-based compensation expense included in net income is related to stock
     grants in lieu of salary and the Company's  employee stock  ownership plan.
     Such expense totaled $322,000 and $368,000 for the nine-month periods ended
     September 30, 2004 and 2003, respectively.




                                       11

<PAGE>


                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7- EMPLOYEE BENEFIT PLANS
<TABLE>
<CAPTION>

         Net periodic  defined benefit  pension  expense  included the following
components:
<S>                                                          <C>               <C>

                   Three months ended September 30,              2004               2003
                   --------------------------------              ----               ----

          Service cost                                         $ 57,569          $ 47,686
          Interest cost                                          47,413            46,256
          Expected return on plan assets                        (52,367)          (54,317)
          Amortization of transition (asset)/obligation           1,002             1,337
          Amortization of prior service costs                    15,634            15,634
          Amortization of unrecognized net actual loss            6,014             3,273
                                                               --------          --------
          Net periodic benefit cost                            $ 75,265          $ 59,869
                                                               ========          ========


                   Nine months ended September 30,               2004                2003
                   -------------------------------               ----                ----

          Service cost                                         $172,706          $143,057
          Interest cost                                         142,240           138,770
          Expected return on plan assets                       (157,103)         (162,953)
          Amortization of transition (asset)/obligation           3,005             4,011
          Amortization of prior service costs                    46,902            46,902
          Amortization of unrecognized net actual loss           18,042             9,821
                                                               --------          --------
          Net periodic benefit cost                            $225,792          $179,608
                                                               ========          ========
</TABLE>

         As of September 30, 2004, $30,000 of contributions has been made to the
         pension  plan.   Management   does  not   anticipate   any   additional
         contributions  to the pension  plan in 2004.  The impact of the Pension
         Funding  Equity Act which was enacted in April 2004 is currently  being
         evaluated.

NOTE 8- RECLASSIFICATIONS

         Certain  prior year  amounts have been  reclassified  to conform to the
current period presentation.




                                       12
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL POSITION AND RESULTS OF OPERATIONS



GENERAL

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 Quarterly Report on Form 10-Q
and  the  exhibits  thereto),  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, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the Board of  Governors of the
Federal  Reserve  System,   inflation,   interest  rate,   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  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  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.

Financial Position

The  Company's  total  assets at  September  30, 2004 and December 31, 2003 were
$629.5 million and $606.8 million,  respectively,  an increase of $22.7 million,
or 3.7%, during the nine-month  period.  Cash and cash equivalents  decreased by
$1.6  million.  Investment  securities  available  for  sale  increased  by $3.2
million,  the net effect of the  purchases  of $3.0  million and a $0.2  million
increase in the market value of these securities.  Investment securities held to
maturity  decreased by $3.3 million due to the  maturities  of such  securities.
Mortgage-backed securities available for sale increased by $2.7 million as $27.7
million in security purchases was off-set by $24.5 million of principal payments
and premium  amortization  of $0.5 million.  Mortgage-backed  securities held to
maturity  decreased by $7.2 million as a result of principal  repayments.  Loans
receivable  increased by $30.5 million for the nine-month  period.  Consumer and
single-family  residential  mortgage loans of $66.7 million and commercial loans
of $41.4 million  comprised  loan  originations  during the first nine months of
2004. Additionally, $3.7 million of newly originated,  single-family residential
mortgage loans were purchased  during the nine-month  period.  Offsetting  these
increases to loans receivable were $81.0 million of principal repayments.


                                       13

<PAGE>

Total  liabilities  increased by $20.0 million.  Deposit growth during the first
nine  months of 2004 was $1.5  million.  Non-interest  bearing  demand  deposits
increased by $5.7 million  while  savings,  money market,  and  interest-bearing
checking accounts decreased by a combined $6.6 million.  Certificates of deposit
decreased by $0.6 million. Advances from the Federal Home Loan Bank increased by
$21.2 million due to a $25.0 million  increase in long-term  fixed rate advances
and $5.6 million of short-term advances, less scheduled amortization payments of
$9.4 million.

Total  consolidated  stockholders'  equity of the Company  was $58.2  million or
9.24% of total assets at September 30, 2004.  During the first three quarters of
2004 the  Company  repurchased  149,608  shares of its  common  stock and issued
242,206 shares  pursuant to the exercise of stock  options.  As of September 30,
2004,  there were 101,123 shares  available for repurchase  under the previously
announced share repurchase plan.


Asset Quality

During the first nine months of 2004,  the  Company's  provision for loan losses
was $450,000  compared to $270,000 during the same period in 2003. The resulting
increase in the allowance for loan losses is consistent  with the  corresponding
increase in balance of loans  receivable.  As of September 30, 2004, the Company
owned one parcel of  foreclosed  real estate.  This parcel has been  recorded as
real  estate  owned  at the  lower  of the  recorded  investment  in the loan or
estimated  fair value in the amount of $0.8  million  and is  included  in other
assets in the statement of financial position at September 30, 2004.  Management
of the Company believes that there has not been any significant deterioration in
its asset quality during such period.

      The following table sets forth  information  regarding the Company's asset
quality (dollars in thousands):

<TABLE>
<CAPTION>

                                                       September 30,    December 31,    September 30,
                                                       -------------    ------------    -------------
                                                           2004             2003            2003
                                                           ----             ----            ----
<S>                                                     <C>            <C>             <C>
Non-performing loans                                       $1,813         $2,282          $2,905
Ratio of non-performing loans to gross loans                 0.41%          0.56%           0.72%
Ratio of non-performing loans to total assets                0.29%          0.38%           0.48%
Foreclosed property                                        $  807         $  868          $1,763
Foreclosed property to total assets                          0.13%          0.14%           0.29%
Ratio of total non-performing assets to total assets         0.42%          0.52%           0.77%

</TABLE>


Management maintains an allowance for loan losses at levels that are believed to
be adequate; however, there can be no assurances that further additions will not
be necessary or that losses  inherent in the existing loan  portfolios  will not
exceed  the  allowance.  The  following  table sets  forth the  activity  in the
allowance for loan losses during the periods indicated (in thousands):

                                                          2004           2003
                                                          ----           ----
Beginning balance, January 1,                           $2,111         $2,047
Provision                                                  450            270
Less: charge-off's (recoveries), net                       376            345
                                                        ------         ------
Ending balance, September 30,                           $2,185         $1,972
                                                        ======         ======


                                       14
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

Net Income. The Company recorded net income of $1,714,000,  or $0.61 per diluted
share,  for the three months ended  September 30, 2004 as compared to a net loss
of $8,565,000,  or $3.33 per diluted share, for the three months ended September
30, 2003.

Average Balance Sheet

The following  table sets forth  information  relating to the Company's  average
balance  sheet and  reflects  the average  yield on assets and  average  cost of
liabilities for the periods  indicated.  Yield and cost are computed by dividing
income or expense by the average  daily  balance of  interest-earning  assets or
interest-bearing liabilities, respectively, for the periods indicated.

<TABLE>
<CAPTION>
                                                                       Three months ended September 30,
                                                                       --------------------------------
                                                                 2004                                    2003
                                                    --------------------------------        -------------------------------
                                                    Average                   Average       Average                   Average
                                                    Balance     Interest      Yld/Cost      Balance     Interest      Yld/Cost
                                                    -------     --------      --------      -------     --------      --------
                                                                              (dollars in thousands)
<S>                                              <C>            <C>            <C>       <C>            <C>            <C>
Assets:
  Interest-earning assets:
    Loans receivable (1).......................      $426,686       $6,095         5.68%     $381,005       $5,660         5.89%
    Mortgage-backed securities.................       129,715        1,490         4.57%      155,260        1,621         4.14%
    Investment securities(2)...................        31,117          340         4.35%       85,847          552         2.55%
    Other interest-earning assets(3)...........           685            4         2.32%       21,685           49         0.90%
                                                     --------       ------                   --------       ------
      Total interest-earning assets............       588,203        7,929         5.36%      643,797        7,882         4.86%
Non interest-earning assets....................        36,358       ------                     33,670       ------
                                                     --------                                --------
      Total assets.............................      $624,561                                $677,467
                                                     ========                                ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities
    Deposits...................................      $465,782        1,456         1.24%     $452,145        1,638         1.44%
    Advances from the FHLB.....................        96,090          758         3.14%      158,357        2,078         5.21%
                                                     --------       ------                   --------       ------
      Total interest-bearing liabilities.......       561,872        2,214         1.56%      610,502        3,716         2.42%
Non interest-bearing liabilities...............         5,327       ------                      3,661       ------
                                                     --------                                --------
      Total liabilities........................       567,199                                 614,163
Stockholders' equity...........................        57,362                                  63,304
                                                     --------                                --------
      Total liabilities and stockholders' equity     $624,561                                $677,467
                                                     ========                                ========
Net interest income............................                     $5,715                                  $4,166
                                                                    ======                                  ======
Interest rate spread (4).......................                                    3.80%                                   2.44%
Net yield on interest-earning assets (5).......                                    3.87%                                   2.57%
Ratio of average interest-earning assets to
   average interest-bearing liabilities...........                                  105%                                    105%
</TABLE>


(1)  Nonaccrual loans have been included in the appropriate average loan balance
     category,  but  interest  on  nonaccrual  loans has not been  included  for
     purposes of determining interest income.

(2)  Tax  equivalent  adjustments  to interest on investment  securities for the
     quarter  ended  September  30,  2004  and 2003  were  $61,000  and  $47,000
     respectively.  Tax  equivalent  interest  income is based  upon a  marginal
     effective tax rate of 34%.

(3)  Includes interest-bearing deposits in other banks.

(4)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.

(5)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                       15
<PAGE>

Rate/Volume Analysis

The following table presents, for the periods indicated,  the change in interest
income and interest  expense (in thousands)  attributed to (i) changes in volume
(changes in the weighted average balance of the total interest earning asset and
interest bearing  liability  portfolios  multiplied by the prior year rate), and
(ii) changes in rate (changes in rate multiplied by prior year volume).  Changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately based on the absolute value of changes due to volume and changes
due to rate.
<TABLE>
<CAPTION>

                                                                      Three months ended
                                                                         September 30,
                                                                         2004 vs. 2003
                                                        -----------------------------------------------
                                                                      Increase (decrease)
                                                                            due to
                                                        -----------------------------------------------
                                                            Volume              Rate              Net
                                                        -----------------------------------------------
<S>                                                         <C>              <C>            <C>
     Interest income:

          Loans receivable, net                               $1,573           $(1,138)       $   435

          Mortgage-backed securities                            (896)              765           (131)

          Investment securities                               (1,566)            1,354           (212)

          Other interest-earning assets                         (251)              206            (45)
                                                        -----------------------------------------------
             Total interest-earning assets
                                                              (1,140)            1,187             47
                                                        ===============================================

     Interest expense:

          Deposits                                               287              (469)          (182)

          Advances from the FHLB and other borrowings           (657)            (663)         (1,320)
                                                        -----------------------------------------------
             Total interest-bearing liabilities
                                                                (370)           (1,132)        (1,502)
                                                        ===============================================

     Net change in net interest income                        $ (770)          $ 2,319        $ 1,549
                                                        ===============================================

</TABLE>


Total Interest Income.  Total interest income,  on a taxable  equivalent  basis,
increased by $47,000 or 0.6% to $7.9 million for the quarter ended September 30,
2004, compared with the same quarter of 2003. Low market interest rates on loans
resulted in a  significant  amount of loan  prepayments  during the  intervening
period, lowering the yield on the remaining portfolio.  However,  increased loan
originations at the Bank and resulting loan portfolio growth contributed to loan
interest  income in a manner that largely  offset the impact caused by the lower
market  interest  rates.   Interest  income  from  mortgage-backed   securities,
investment securities and other  interest-earning  assets was lower in the third
quarter of 2004 in  comparison  to the same period of 2003.  This  decrease  was
largely  caused by the reduction in the lower  yielding  balances  maintained in
these  types of  interest-earning  assets  as a result  of the debt  refinancing
transaction executed during the third quarter of 2003.

Total Interest Expense. Total interest expense decreased by $1.5 million to $2.2
million during the three-month  period ended September 30, 2004 as compared with
the related  quarter of 2003. The decrease in the market  interest rates and the
lower rates paid on the Bank's  renewing  certificates  of deposit that had been
originated  when market  interest  rates were higher was more than offset by the
increase in the  average  balance of deposits  during the period.  However,  the
repayment and  refinancing  of the Federal Home Loan Bank Advances that occurred
at the end of the third  quarter of 2003 was the  primary  factor in the overall
reduction of interest expense.


                                       16
<PAGE>

Non-interest  income. Total non-interest income was $595,000 for the three-month
period ended  September  30, 2004  compared with $322,000 for the same period in
2003.  Net  losses  on  sales  of  mortgage-backed  securities  and  investments
available  for sale during the third  quarter of 2003  totaled  $377,000  while,
conversely,  there  were no such  sales  during  the same  period  in  2004.  In
addition,  the Company  recorded a gain of $110,000  during the third quarter of
2003 on the sale of real  estate  while  there was no such gain during the third
quarter of 2004.

Non-interest  expense.  Total non-interest expense decreased by $13.7 million to
$3.7 million for the three months ended  September 30, 2004 compared to the same
period in 2003. The decrease in  non-interest  expense was  associated  with the
debt  prepayment fee of $13.8 million paid during the third quarter of 2003 as a
result the  repayment  and  refinancing  of Federal  Home Loan Bank  borrowings.
Without this fee,  non-interest  expenses  increased by $30,000 during the third
quarter  of 2004  compared  with the third  quarter  of 2003.  Compensation  and
benefit  expenses  were higher by $164,000  due largely to  additional  mortgage
origination and commercial  lending personnel added during the fourth quarter of
2003 and the first nine months of 2004.  Occupancy and  equipment  costs dropped
due to a one time  $62,000  expense  booked  during  the third  quarter  of 2003
associated  with  revisions  in the  useful  lives of  certain  depreciable  and
amortizable  assets.  Additionally,  other operating expenses decreased $100,000
between the two  quarters  primarily  due to $80,000 of various  deposit  items,
reconciling  and other losses,  which were expensed  during the third quarter of
2003.






                                       17
<PAGE>



RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

Net Income. The Company recorded net income of $4,979,000,  or $1.86 per diluted
share, for the nine months ended September 30, 2004 as compared to a net loss of
$7,350,000,  or $2.91 per diluted share, for the nine months ended September 30,
2003.

Average Balance Sheet

The following  table sets forth  information  relating to the Company's  average
balance  sheet and  reflects  the average  yield on assets and  average  cost of
liabilities for the periods  indicated.  Yield and cost are computed by dividing
income or expense by the average  daily  balance of  interest-earning  assets or
interest-bearing liabilities, respectively, for the periods indicated.

<TABLE>
<CAPTION>

                                                                        Nine months ended September 30,
                                                                        -------------------------------
                                                                 2004                                    2003
                                                    --------------------------------      ---------------------------------
                                                  Average                   Average       Average                    Average
                                                  Balance     Interest      Yld/Cost      Balance     Interest       Yld/Cost
                                                  -------     --------      --------      -------     --------       --------
                                                                            (dollars in thousands)
<S>                                             <C>           <C>             <C>       <C>           <C>             <C>
Assets:
  Interest-earning assets:
    Loans receivable (1).......................    $418,765      $18,045         5.76%     $370,543      $17,336         6.26%
    Mortgage-backed securities.................     130,835        4,478         4.57%      163,697        5,318         4.34%
    Investment securities......................      30,563        1,001         4.37%       73,131        1,644         3.01%
    Other interest-earning assets(2)...........       1,299           11         1.13%       59,882          463         1.03%
                                                   --------      -------                   --------      -------
      Total interest-earning assets............     581,462       23,535         5.41%      667,253       24,761         4.96%
Non interest-earning assets....................      34,841      -------                     34,789      -------
                                                   --------                                --------
      Total assets.............................    $616,303                                $702,042
                                                   ========                                ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities
    Deposits...................................    $467,304        4,440         1.27%     $447,049        5,506         1.65%
    Advances from the FHLB.....................      87,494        2,077         3.17%      186,377        7,558         5.42%
                                                   --------      -------                   --------      -------
Total interest-bearing liabilities.............     554,798        6,517         1.57%      633,426       13,064         2.76%
Non interest-bearing liabilities...............       5,453      -------                      5,439      -------
                                                   --------                                --------
      Total liabilities........................     560,251                                 638,865
Stockholders' equity...........................      56,052                                  63,177
                                                   --------                                --------
      Total liabilities and stockholders' equity   $616,303                                $702,042
                                                   ========                                ========
Net interest income............................                  $17,018                                 $11,697
                                                                 =======                                 =======
Interest rate spread (3).......................                                  3.84%                                   2.20%
Net yield on interest-earning assets (4).......                                  3.91%                                   2.34%
Ratio of average interest-earning assets to
  average interest-bearing liabilities...........                                 105%                                    105%


</TABLE>

(1)  Nonaccrual loans have been included in the appropriate average loan balance
     category,  but  interest  on  nonaccrual  loans has not been  included  for
     purposes of determining interest income.

(2)  Tax  equivalent  adjustments  to interest on investment  securities for the
     nine months ended  September  30, 2004 and 2003 were  $162,000 and $113,000
     respectively.  Tax  equivalent  interest  income is based  upon a  marginal
     effective tax rate of 34%.

(3)  Includes interest-bearing deposits in other banks.

(4)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.

(5)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                       18


<PAGE>

Rate/Volume Analysis

The following table presents, for the periods indicated,  the change in interest
income and interest  expense (in thousands)  attributed to (i) changes in volume
(changes in the weighted average balance of the total interest earning asset and
interest bearing  liability  portfolios  multiplied by the prior year rate), and
(ii) changes in rate (changes in rate multiplied by prior year volume).  Changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately based on the absolute value of changes due to volume and changes
due to rate.

<TABLE>
<CAPTION>
                                                                         Nine months ended
                                                                           September 30,
                                                                           2004 vs. 2003
                                                              -------------------------------------------
                                                                        Increase (decrease)
                                                                              Due to
                                                              -------------------------------------------
                                                                  Volume          Rate           Net
                                                              -------------------------------------------
     Interest income:

<S>                                                             <C>           <C>             <C>
          Loans receivable, net                                   $  2,733      $(2,024)        $   709

          Mortgage-backed securities                                (1,258)         418            (840)

          Investment securities                                     (1,484)         841            (643)

          Other interest-earning assets                               (519)          67            (452)
                                                              -------------------------------------------
             Total interest-earning assets
                                                                      (528)        (698)         (1,226)
                                                              ===========================================

     Interest expense:

          Deposits                                                     381       (1,447)         (1,066)

          Advances from the FHLB and other borrowings               (3,075)      (2,406)         (5,481)
                                                              -------------------------------------------
             Total interest-bearing liabilities
                                                                    (2,694)      (3,853)         (6,547)
                                                              ===========================================
     Net change in net interest income                            $  2,166      $ 3,155         $ 5,321
                                                              ===========================================
</TABLE>

Total Interest Income.  Total interest income,  on a taxable  equivalent  basis,
decreased  by $1.2  million or 5.0% to $23.5  million for the nine months  ended
September  30, 2004 as compared  with the first nine months of 2003.  Low market
interest  rates on loans  resulted in a significant  amount of loan  prepayments
during the intervening  period,  lowering the yield on the remaining  portfolio.
However,  increased  loan  originations  at the  Bank  and  the  resulting  loan
portfolio growth  contributed to loan income in a manner that largely offset the
impact  caused  by  the  lower  market  interest  rates.  Interest  income  from
mortgage-backed  securities,  investment  securities and other  interest-earning
assets was lower during the first nine months of 2004 in  comparison to the same
period of 2003.  This decrease was largely  caused by the reduction in the lower
yielding  balances  maintained  in these types of  interest-earning  assets as a
result of the debt refinancing  transaction executed during the third quarter of
2003.

Total Interest Expense. Total interest expense decreased by $6.5 million to $6.5
million during the nine-month  period ended  September 30, 2004 as compared with
the same period in 2003.  The decrease in the market  interest  rates during the
period and the lower rates paid on the Bank's  renewing  certificates of deposit
which had been originated when market interest rates were higher  contributed to
this  reduction.  Yet,  the  repayment of $120 million of Federal Home Loan Bank
Advances and the refinancing of the remaining debt at significantly  lower rates
is the foremost reason for the overall reduction of interest expense.

                                       19
<PAGE>

Non-interest income. Total non-interest income was $1,985,000 for the nine-month
period ended  September 30, 2004 in contrast with $2,054,000 for the same period
in 2003.  The  decrease was  primarily  due to $208,000 in net gains on sales of
mortgage-backed securities available for sale and a gain of $110,000 on the sale
of real estate during 2003 while, conversely, there were no such sales of either
securities  or real estate during the same period in 2004.  Retail  banking fees
were  $264,000  greater  over the period as a result of a $188,000  increase  in
overdraft and uncollected fees. Also, the collection of mortgage  brokerage fees
and a growth in other loan fees contributed to the increase during the period.

Non-interest  expense.  Total non-interest expense decreased by $13.3 million to
$11.5 million for the nine months ended  September 30, 2004 compared to the same
time in 2003. The decrease in  non-interest  expense was mainly  associated with
the debt  prepayment fee of $13.8 million paid as a consequence of the repayment
and refinancing of Federal Home Loan Bank borrowings in 2003. Excluding the debt
prepayment  fee,  non-interest  expense  increased  by  $478,000.  During  2004,
compensation and benefit expenses  increased by $625,000 over the same period of
2003. The increase in salary and compensation costs of the Company resulted from
the hiring of additional mortgage  origination and commercial lending personnel,
and increased anticipated incentive compensation expense because this expense is
related to the net income of the Company.  Occupancy and equipment costs dropped
due to a one time $62,000  expense booked during 2003  associated with revisions
in the  useful  lives of  certain  depreciable  and  amortizable  assets.  Other
operating expenses decreased $176,000 between the two periods mostly as a result
of various deposit items and  reconciling  losses of $170,000 that were expensed
during 2003.



                                       20
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The  Company'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  Company's   short-term  sources  of  liquidity  include  maturity,
repayment and sales of assets,  excess cash and cash equivalents,  new deposits,
broker deposits,  other borrowings,  and new advances from the Federal Home Loan
Bank.  There has been no material  adverse change during the  nine-month  period
ended  September 30, 2004 in the ability of the Company and its  subsidiaries to
fund their operations.

At September 30, 2004, the Company had commitments  outstanding under letters of
credit of $1.2 million,  commitments to originate  loans of $30.4  million,  and
commitments  to fund  undisbursed  balances of closed  loans and unused lines of
credit of $59.5  million.  There has been no  material  change  during  the nine
months  ended  September  30,  2004 in any of the  Company's  other  contractual
obligations or commitments to make future payments.

Capital Requirements

The Bank was in compliance with all of its capital  requirements as of September
30, 2004.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset and Liability Management

The  Company's  market risk  exposure is  predominately  caused by interest rate
risk,  which is defined as the  sensitivity of the Company's  current and future
earnings, the values of its assets and liabilities, and the value of its capital
to changes in the level of market  interest  rates.  Management  of the  Company
believes that there has not been a material adverse change in market risk during
the nine months ended September 30, 2004.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their  evaluation of the Company's  disclosure  controls and procedures
(as defined in Rule  13a-15(e)  under the  Securities  Exchange Act of 1934 (the
"Exchange  Act")),  the  Company's  principal  executive  officer and  principal
financial  officer have  concluded  that as of the end of the period  covered by
this Quarterly  Report on Form 10-Q such disclosure  controls and procedures 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.

Changes in Internal Controls over Financial Reporting

During the quarter under report,  there was no change in the Company's  internal
control over financial reporting that has materially affected,  or is reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.


                                       21
<PAGE>

CRITICAL ACCOUNTING POLICIES

Certain  critical  accounting  policies  of  the  Company  require  the  use  of
significant  judgment  and  accounting  estimates  in  the  preparation  of  the
consolidated  financial  statements  and  related  data  of the  Company.  These
accounting  estimates require  management to make assumptions about matters that
are highly  uncertain at the time the  accounting  estimate is made.  Management
believes  that  the  most  critical  accounting  policy  requiring  the  use  of
accounting estimates and judgment is the determination of the allowance for loan
losses.  If the  financial  position of a significant  amount of debtors  should
deteriorate  more than the  Company has  estimated,  present  reserves  for loan
losses may be  insufficient  and  additional  provisions  for loan losses may be
required. The allowance for loan losses was $2,185,000 at September 30, 2004.

NEW ACCOUNTING PRONOUNCEMENTS

On March 31, 2004,  the  Financial  Accounting  Standards  Board (FASB) issued a
proposed Statement, "Share-Based Payment an Amendment of FASB Statements No. 123
and  APB  No.  95",  that  addresses  the  accounting  for  share-based  payment
transactions in which an enterprise  receives  employee services in exchange for
(a) equity  instruments of the enterprise or (b)  liabilities  that are based on
the fair value of the enterprise's  equity instruments or that may be settled by
the issuance of such equity instruments. Under the FASB's proposal, all forms of
share-based payments to employees, including stock options, would be treated the
same as other forms of  compensation  by  recognizing  the  related  cost in the
income  statement.  The expense of the award would generally be measured at fair
value at the grant date. Current  accounting  guidance requires that the expense
relating to so-called fixed plan employee stock options only be disclosed in the
footnotes to the financial  statements.  The proposed  Statement would eliminate
the  ability to account  for  share-based  compensation  transactions  using APB
Opinion No. 25, "Accounting for Stock Issued to Employees." On October 13, 2004,
FASB voted to delay the adoption of this proposed  standard by public  companies
until their first fiscal  quarter  beginning  after June 15,  2005.  The Company
continues to evaluate this proposed  statement and its effects on its results of
operations.

In March 2004 the  Securities  and  Exchange  Commission  staff  released  Staff
Accounting  Bulletin  (SAB) 105, "Loan  Commitments  Accounted for as Derivative
Instruments."  SAB 105 requires  that a lender  should not consider the expected
cash  flows  related  to loan  servicing  or include  any  internally  developed
intangible  assets in determining the fair value of loan  commitments  accounted
for as  derivatives.  The Company  adopted  SAB 105  effective  for  commitments
entered  into  after June 30,  2004.  The  requirements  of SAB 105 apply to the
Company's  mortgage  interest  rate lock  commitments  related to loans held for
sale. At September 30, 2004, the Company did not have such  commitments  subject
to the provisions of SAB 105. The Company's  application of SAB 105 did not have
a material impact on the effect on the Company's  financial  position or results
of operations.

On September 30, 2004,  the FASB issued a staff position EITF Issue 03-1-1 which
delayed  the  effective  date  for  the  measurement  and  recognition  guidance
contained  in  paragraphs  10-20  of EITF  Issue  03-1  from  reporting  periods
beginning after June 15,2004, until implementation  guidance is issued. The Bank
adopted  EITF  03-1,  The  Meaning of Other than  Temporary  Impairment  and Its
Application to Certain Investments,  as of December 31, 2003. EITF 03-1 includes
certain  disclosures  regarding  quantitative  and  qualitative  disclosures for
investment  securities  accounted  for under FAS 115,  "Accounting  for  Certain
Investments  in Debt and Equity  Securities,"  that are  impaired at the balance
sheet date,  but an  other-than-temporary  impairment  has not been  recognized.
Paragraphs  10-20 of EITF Issue  No.03-1  give  guidance on how to evaluate  and
recognize an impairment loss that is other than temporary. On September 15, 2004
the FASB  issued a proposed  staff  position  EITF Issue  03-1-a to address  the
implementation   guidance  to  evaluate  and  recognize   other  than  temporary
impairment.  The Company is in the process of  determining  the impact that this
EITF will have on its financial statements.


                                       22
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                     PART II

     ITEM 1.   LEGAL PROCEEDINGS

               Not applicable.

     ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

               The following  table  provides  information on repurchases by the
               Company  of its common  stock in each  month for the nine  months
               ended September 30, 2004:
<TABLE>
<CAPTION>
                                                                             Total Number of        Maximum Number of
                                                                           Shares Purchased as     Shares that may yet
                                       Total Number                          Part of Publicly       be Purchased Under
                                        of Shares        Average Price      Announced Plan of          the Plans or
           Month Ended                  Purchased       Paid per Share           Program                 Programs
           -----------                  ---------       --------------           -------                 --------

<S>                                 <C>               <C>                   <C>                   <C>
        January 31, 2004                    --                --                    --                   114,082

        February 29, 2004                   --                --                    --                   114,082

        March  31, 2004                 38,000            $32.00                    --                   114,082

        April 30, 2004                      --                --                    --                   114,082

        May 31, 2004                        --                --                    --                   114,082

        June  30, 2004                     359            $28.63                   359                   113,723

        July  31, 2004                  36,115            $26.99                 2,800                   110,923

        August  31, 2004                47,432            $26.93                   800                   110,123

        September  30, 2004             27,702            $28.01                 9,000                   101,123


</TABLE>

         The total  number of shares  repurchased  during the  quarter  includes
45,334  shares  repurchased  in  conjunction  with the exercise of 132,333 stock
options.  The repurchase  poses no modification  to the rights of  stockholders.
Furthermore,  there has been no  change in the  ability  of the  Company  to pay
dividends or any  material  change in the working  capital of the  Company.  The
stock repurchase did not alter the previously  approved stock repurchase plan of
the Company.








                                       23


<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                     PART II



          ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable.

          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None

          ITEM 5. OTHER INFORMATION None

          ITEM 6. EXHIBITS

                    (a)  Exhibits

                    10.  TF Financial Corporation Incentive Compensation Plan

                    31.  Certification   pursuant   to   Section   302   of  the
                         Sarbanes-Oxley Act of 2002.

                    32.  Certification   pursuant   to   Section   906   of  the
                         Sarbanes-Oxley Act of 2002.







                                       24
<PAGE>

                            TF FINANCIAL CORPORATION



                                   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.







Date: November 12, 2004               /s/ Kent C. Lufkin
-----------------------               ------------------
                                      Kent C. Lufkin
                                      President and CEO
                                      (Principal Executive Officer)





Date: November 12, 2004               /s/ Dennis R. Stewart
-----------------------               ---------------------
                                      Dennis R. Stewart
                                      Executive Vice President and
                                      Chief Financial Officer
                                      (Principal Financial & Accounting Officer)