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, 2003
                               -------------------------------------------------
                                       OR

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

For the transition period from ________________________ to _____________________

                         Commission file number 0-24168
                                               --------

                            TF FINANCIAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



           Delaware                                      74-2705050
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. employer identification no.)
incorporation or organization)

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

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

                                       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 7, 2003
                                                           ----------------


             Class                              Outstanding
   ---------------------------               ----------------
   $.10 par value common stock               2,809,364 shares

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                    FORM 1O-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2003


                                      INDEX


                                                                           Page
                                                                          Number
                                                                          ------

PART I - CONSOLIDATED FINANCIAL INFORMATION

         Item  1.  Consolidated Financial Statements                           3
         Item  2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                        12
         Item  3.  Quantitative and Qualitative Disclosures
                   about Market Risk                                          21
         Item  4.  Controls and Procedures                                    21

PART II- OTHER INFORMATION

         Item  1.  Legal Proceedings                                          24
         Item  2.  Changes in Securities and Use of Proceeds                  24
         Item  3.  Defaults Upon Senior Securities                            24
         Item  4.  Other Information                                          24
         Item  5.  Exhibits and Reports on Form 8-K                           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

<PAGE>


                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                     Unaudited        Audited
                                                                                    September 30,   December 31,
                                                                                        2003           2002
                                                                                        ----           ----
<S>                                                                                  <C>            <C>
                                   Assets
Cash and cash equivalents                                                              $  6,106       $100,580
Certificates of deposit in other financial institutions                                     229            220
Investment securities available for sale - at fair value                                 11,416         27,243
Investment securities held to maturity (fair value of $10,935 and $15,187,
  respectively)                                                                          10,408         14,563
Mortgage-backed securities available for sale - at fair value                           102,362        115,243
Mortgage-backed securities held to maturity (fair value of $29,469 and
  $57,346, respectively)                                                                 28,110         54,592
Loans receivable, net                                                                   400,766        370,092
Federal Home Loan Bank stock - at cost                                                   11,260         11,424
Accrued interest receivable                                                               2,467          3,576
Core deposit intangible, net of accumulated amortization of $2,416 and
  $2,271, respectively                                                                      408            553
Goodwill                                                                                  4,324          4,324
Premises and equipment, net                                                               6,346          6,742
Other assets                                                                             20,480         11,880
                                                                                       --------       --------
                                Total assets                                           $604,682       $721,032
                                                                                       ========       ========

                    Liabilities and stockholders' equity
Liabilities
   Deposits                                                                            $454,748       $442,558
   Advances from the Federal Home Loan Bank                                              87,100        207,359
   Advances from borrowers for taxes and insurance                                        1,122          1,330
   Accrued interest payable                                                               2,518          2,897
   Other liabilities                                                                      5,020          4,048
                                                                                       --------       --------
                              Total liabilities                                         550,508        658,192
                                                                                       --------       --------
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;  2,579,272 and 2,482,586 shares outstanding
       at September 30, 2003 and December 31, 2002, net of treasury
       shares of 2,485,896 and 2,567,268, respectively.                                     529            529
   Retained earnings                                                                     51,497         59,978
   Additional paid-in capital                                                            51,384         51,647
   Unearned ESOP shares                                                                  (2,249)        (2,401)
   Treasury stock - at cost                                                             (47,262)       (48,809)
   Accumulated other comprehensive income                                                   275          1,896
                                                                                       --------       --------
                         Total stockholders' equity                                      54,174         62,840
                                                                                       --------       --------

                  Total liabilities and stockholders' equity                           $604,682       $721,032
                                                                                       ========       ========
</TABLE>

                                       3

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                  UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                      For Three Months        For Nine Months
                                                                      Ended September 30,    Ended September 30,
                                                                      --------------------   --------------------
                                                                        2003        2002       2003        2002
                                                                      --------    --------   --------    --------
<S>                                                                 <C>          <C>      <C>          <C>
Interest income
   Loans                                                              $  5,660     $ 6,238  $ 17,336     $ 19,398
   Mortgage-backed securities                                            1,621       2,872     5,318        9,120
   Investment securities                                                   505         608      1,531       1,760
   Interest bearing deposits and other                                      49         320        463         800
                                                                      --------    --------   --------    --------
       Total interest income                                             7,835      10,038     24,648      31,078
                                                                      --------    --------   --------    --------
Interest expense
   Deposits                                                              1,638       2,565      5,506       8,102
   Advances from the Federal Home Loan Bank and other borrowings         2,078       3,059      7,558       9,167
                                                                      --------    --------   --------    --------
       Total interest expense                                            3,716       5,624     13,064      17,269
                                                                      --------    --------   --------    --------
       Net interest income                                               4,119       4,414     11,584      13,809
Provision for loan losses                                                   90         150        270         838
                                                                      --------    --------   --------    --------
       Net interest income after provision for loan losses               4,029       4,264     11,314      12,971
                                                                      --------    --------   --------    --------

Non-interest income
   Service fees, charges and other operating income                        435         433      1,320       1,179
   Bank-owned life insurance                                               154         130        416         390
   Gain (loss) on sale of investment and mortgage-backed                  (377)        419        208         419
     securities available for sale
   Gain on sale of real estate                                             110           -        110           -
                                                                      --------    --------   --------    --------
       Total non-interest income                                           322         982      2,054       1,988
                                                                      --------    --------   --------    --------
Non-interest expense
   Compensation and benefits                                             1,996       1,945      6,056       5,790
   Occupancy and equipment                                                 675         570      1,905       1,724
   Federal deposit insurance premium                                        18          18         55          56
   Professional fees                                                       110         119        428         304
   Amortization of core deposit intangible                                  49          58        145         174
   Advertising                                                             138         110        413         330
   Debt prepayment fee                                                  13,765           -     13,765           -
   Other operating                                                         727         613      2,049       1,781
                                                                      --------    --------   --------    --------
       Total non-interest expense                                       17,478       3,433     24,816      10,159
                                                                      --------    --------   --------    --------
       Income (loss) before income taxes                               (13,127)      1,813    (11,448)      4,800
Income tax expense (benefit)                                            (4,562)        438     (4,098)      1,145
                                                                      --------    --------   --------    --------
       Net income (loss)                                              $ (8,565)   $  1,375   $ (7,350)   $  3,655
                                                                      ========    ========   ========    ========

Basic earnings per share                                              $  (3.33)   $   0.55   $  (2.91)   $   1.48
Diluted earnings per share                                            $  (3.33)   $   0.52   $  (2.91)   $   1.38
</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,
                                                                                       2003         2002
                                                                                    ---------    ---------
<S>                                                                               <C>          <C>
Cash flows from operating activities
Net income (loss)                                                                   $  (7,350)   $   3,655
Adjustments to reconcile net income to net cash provided by operating activities:
         Mortgage loan servicing rights                                                    11           10
         Deferred loan origination fees                                                  (174)        (198)
         Premiums and discounts on investment securities, net                             150           93
         Premiums and discounts on mortgage-backed securities and loans, net            1,642          417
         Amortization of core deposit intangible                                          145          174
Provision for loan losses                                                                 282          838
Depreciation of premises and equipment                                                    809          760
Recognition of ESOP and MSBP expenses                                                     427          204
Gain on sale of investment and mortgage-backed securities available for sale             (208)        (419)
Gain on sale of real estate                                                              (123)         (60)
Increase in value of bank-owned life insurance                                           (416)        (390)
(Increase) decrease in:
         Accrued interest receivable                                                    1,109          219
         Other assets                                                                  (5,012)         715
Increase (decrease) in:
         Accrued interest payable                                                        (379)         114
         Other liabilities                                                              1,807       (1,188)
                                                                                    ---------    ---------
         Net cash provided (used) by operating activities                              (7,280)       4,944
                                                                                    ---------    ---------

Cash flows  from investing activities
Loan originations                                                                    (131,604)     (48,234)
Purchases of loans                                                                    (23,035)     (27,188)
Loan principal payments                                                               121,646      102,539
Proceeds from sale of investment securities available for sale                         70,753            -
Proceeds from sale of mortgage-backed securities available for sale                    24,440       17,427
Purchases of mortgage-backed securities available for sale                            (65,873)     (67,997)
Purchase of mortgage-backed securities held to maturity                                     -       (1,139)
Purchase of investment securities available for sale                                  (95,737)      (6,453)
Purchase of investment securities held to maturity                                          -       (6,821)
Proceeds from maturities of investment securities held to maturity                      4,105        2,060
Proceeds from maturities of investment securities available for sale                   40,000        2,000
Principal repayments from mortgage-backed securities held to maturity                  26,533       29,843
Principal repayments from mortgage-backed securities available for sale                51,451       22,762
Purchase of bank-owned life insurance                                                  (1,500)           -
Purchase of certificates of deposit in other financial institutions                        (9)          (5)
Purchases and redemptions of Federal Home Loan Bank stock, net                            164          250
Proceeds from sales of real estate                                                        473          275
Purchase of real estate held for investment                                                (5)        (765)
Purchase of premises and equipment                                                       (597)        (158)
                                                                                    ---------    ---------
         Net cash provided by (used in) investing activities                           21,205       18,396
                                                                                    ---------    ---------
</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,
                                                                               2003         2002
                                                                            ---------    ---------
<S>                                                                        <C>          <C>
Cash flows from financing activities
Net increase in deposits                                                       12,190       16,070
Net decrease in advances from Federal Home Loan Bank                         (120,259)      (5,000)
Net decrease in advances from borrowers for taxes and insurance                  (208)        (344)
Exercise of stock options                                                       1,009          249
Purchase of treasury stock, net                                                     -         (376)
Common stock cash dividend                                                     (1,131)      (1,110)
                                                                            ---------    ---------
         Net cash provided by (used in) financing activities                 (108,399)       9,489
                                                                            ---------    ---------

         Net (decrease) increase in cash and cash equivalents                 (94,474)      32,829

Cash and cash equivalents at beginning of period                              100,580       69,139
                                                                            ---------    ---------

Cash and cash equivalents at end of period                                  $   6,106    $ 101,968
                                                                            =========    =========

Supplemental disclosure of cash flow information
Cash paid for
         Interest on deposits and advances                                  $  13,443    $  17,155
         Income taxes                                                       $     250    $   1,600
Non-cash transactions
         Transfers from loans to real estate acquired through foreclosure   $   1,857    $     269
</TABLE>

                 See notes to consolidated financial statements

                                       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,  2003
         (unaudited) and December 31, 2002 and for the nine-month  periods ended
         September  30, 2003 and 2002  (unaudited)  include  the  accounts of TF
         Financial Corporation (the "Company") and its wholly owned subsidiaries
         Third Federal  Savings Bank (the "Bank"),  TF Investments  Corporation,
         Penns Trail Development  Corporation and Teragon Financial 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, 2003 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, 2002.

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  condition or
         results of operations.

NOTE 4 - OTHER COMPREHENSIVE INCOME
         The Company's  other  comprehensive  income  consists of net unrealized
         gains on investment securities and mortgage-backed securities available
         for sale. Total comprehensive income (loss) for the three-month periods
         ended September 30, 2003 and 2002 was $(9,578,000) and $1,682,000,  net
         of applicable  income tax of $(5,084,000)  and $596,000,  respectively.
         Total  comprehensive  income  (loss) for the  nine-month  periods ended
         September 30, 2003 and 2002 was  $(8,971,000)  and  $5,416,000,  net of
         applicable income tax of $(4,933,000) and $2,052,000, 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, 2003
                                                                         -------------------------------------
                                                                                          Weighted
                                                                        (000's)           Average
                                                                        Income             Shares            Per share
                                                                      (numerator)       (denominator)          Amount
                                                                      -----------       -------------          ------
<S>                                                                  <C>                  <C>               <C>
         Basic earnings per share
                  Income available to common stockholders              $ (8,565)            2,571,947         $  (3.33)

         Effect of dilutive securities
                  Stock options                                               -                     -                -
                                                                       --------             ---------         --------
         Diluted earnings per share
                  Income available to common stockholders plus
                  effect of dilutive securities                        $ (8,565)            2,571,947         $  (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 per share
                  Income available to common stockholders              $ (7,350)            2,525,970         $  (2.91)

         Effect of dilutive securities
                  Stock options                                               -                     -                -
                                                                       --------             ---------         --------

         Diluted earnings per share
                  Income available to common stockholders plus
                  effect of dilutive securities                        $ (7,350)            2,525,970         $  (2.91)
                                                                       ========             =========         ========
</TABLE>

There were no options  included in the calculation of diluted earnings per share
for the quarter and year to date periods  ended  September 30, 2003 because such
securities would be anti-dilutive.

                                       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, 2002
                                                                         -------------------------------------
                                                                                          Weighted
                                                                        (000's)           Average
                                                                        Income             Shares            Per share
                                                                      (numerator)       (denominator)          Amount
                                                                      -----------       -------------          ------
<S>                                                                  <C>                  <C>               <C>
         Basic earnings per share
                  Income available to common stockholders              $  1,375             2,478,252         $   0.55

         Effect of dilutive securities
                  Stock options                                               -               170,152            (0.03)
                                                                       --------             ---------         --------
         Diluted earnings per share
                  Income available to common stockholders plus
                  effect of dilutive securities                        $  1,375             2,648,404         $   0.52
                                                                       ========             =========         ========
</TABLE>

         There were options to purchase  15,000 shares of common stock at $28.00
         per share which were  outstanding  during the three-month  period ended
         September 30, 2002 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.


<TABLE>
<CAPTION>
                                                                            Nine months ended September 30, 2002
                                                                            ------------------------------------
                                                                                          Weighted
                                                                        (000's)           Average
                                                                        Income             Shares             Per share
                                                                     (numerator)        (denominator)           Amount
                                                                     -----------        -------------           ------
<S>                                                                  <C>                  <C>               <C>
         Basic earnings per share
                  Income available to common stockholders              $  3,655)            2,470,501         $   1.48

         Effect of dilutive securities
                  Stock options                                               -              1183,269            (0.10)
                                                                       --------             ---------         --------

         Diluted earnings per share
                  Income available to common stockholders plus
                  effect of dilutive securities                        $  3,655             2,653,770         $   1.38
                                                                       ========             =========         ========
</TABLE>


         There were options to purchase  20,000 shares of common stock at $28.00
         per share which were  outstanding  during the  nine-month  period ended
         September 30, 2002 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):

<TABLE>
<CAPTION>
           Three months ended September 30,                              2003         2002
           ---------------------------------                             ----         ----
<S>                                                               <C>           <C>
           Net income
                    As reported                                      $(8,565)      $ 1,375
                    Deduct: stock-based compensation expense
                    determined using the fair value method, net of
                    related tax effects                                   17            14
                                                                     -------        ------
                    Pro forma                                        $(8,582)       $1,361
                                                                     =======        ======

           Basic earnings per share
                    As reported                                       $(3.33)       $ 0.55
                    Pro forma                                         $(3.34)       $ 0.55

           Diluted earnings per share
                    As reported                                       $(3.33)       $ 0.52
                    Pro forma                                         $(3.34)       $ 0.52
</TABLE>

         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  $140,000  and $53,000 for the
         three-month periods ended September 30, 2003 and 2002, respectively.

                                       10

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6- STOCK BASED COMPENSATION (continued)

<TABLE>
<CAPTION>
                    Nine months ended September 30,                             2003                 2002
                    --------------------------------                            ----                 ----
<S>                                                                       <C>                    <C>
                    Net income
                             As reported                                    $(7,350)               $3,655
                             Deduct: stock-based compensation expense
                             determined using the fair value method, net of
                             related tax effects                                 39                    45
                                                                            -------               -------
                             Pro forma                                      $(7,389)              $ 3,610
                                                                            =======               =======

                    Basic earnings per share
                             As reported                                     $(2.91)               $ 1.48
                             Pro forma                                       $(2.93)               $ 1.46

                    Diluted earnings per share
                             As reported                                     $(2.91)               $ 1.38
                             Pro forma                                       $(2.93)               $ 1.37
</TABLE>

         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  $368,000 and $147,000 for the
         nine-month periods ended September 30, 2003 and 2002, respectively.


NOTE 7- RECLASSIFICATIONS
         Certain  prior year  amounts have been  reclassified  to conform to the
         current period presentation.

                                       11

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION 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 Condition

The  Company's  total  assets at  September  30, 2003 and December 31, 2002 were
$604.7 million and $721.0 million,  respectively,  a decrease of $116.3 million,
or 16.1%,  during the  nine-month  period.  This  decrease in total  assets is a
direct result of a debt refinancing transaction, which occurred during the third
quarter of 2003. At that time,  the Company  completed a series of  transactions
that resulted in the repayment and refinancing of $187.4 million of Federal Home
Loan Bank borrowings  which carried a weighted  average  interest rate of 5.46%.
$80 million of these  borrowings were refinanced at 3.23%,  the remaining $107.4
million was repaid.  A portion of the funds used to repay these  borrowings came
from the sale of $79.7  million of  investment  securities  and  mortgage-backed
securities,  which had been yielding a 1.93%. Over the nine-month  period,  cash
and cash equivalents were reduced by $94.5 million due to the purchase of higher
yielding investment and mortgage-backed securities and the use of these funds to
originate  loans. In addition,  $41.8 million of cash and cash  equivalents were
used in the Federal Home Loan Bank debt refinancing transaction described above.
Investment  securities  available for sale decreased by $15.8  million,  the net
effect of the sales,  calls and  maturities  of $110.5  million and a decline of
$0.1  million in the market  value  which were  offset by the  purchase of $95.7
million of such securities.  Investment securities held to maturity

                                       12
<PAGE>

decreased  by $4.2  million  due to calls  and  maturities  of such  securities.
Mortgage-backed  securities  available  for  sale  decreased  by  $12.9  million
resulting from sales of $24.0 million,  principal repayments of $51.5 million, a
decline  of $2.0  million  in  unrealized  gains  and $1.3  million  of  premium
amortization,  which were off-set by purchases of $65.9 million. Mortgage-backed
securities  held to maturity  decreased by $26.5 million due to the high rate of
prepayments  of the mortgages  underlying  these  pass-through  securities.  The
Company's loan receivable  portfolio at September 30, 2003 was $400.7 million, a
$30.7 million or 8.3% increase  since  December 31, 2002, and a $41.5 million or
11.6% increase  during the third quarter.  During the first nine months of 2003,
there were $121.6  million of  prepayments  of existing  mortgages  in the loans
receivable portfolio;  however, offsetting this reduction was the origination of
$131.6 million in predominately consumer and single-family  residential mortgage
loans,  and the  purchase of $23.0  million in newly  originated,  single-family
residential  mortgage loans.  Other assets  increased by $8.6 million during the
nine-month  period as a result of a $4.9 million  federal  income tax receivable
resulting from a net operating loss carryback,  additions to foreclosed property
of $1.8 million, and additions to bank-owned life insurance of $1.5 million.

Total liabilities  decreased by $107.7 million.  Deposit growth during the first
nine months of 2003 was $12.1 million. Non-interest bearing demand deposits grew
by $6.1 million while  savings,  money  market,  and  interest-bearing  checking
accounts increased by a combined $9.3 million. Certificates of deposit decreased
by $3.2 million.  Advances  from the Federal Home Loan Bank  decreased by $120.3
million as a consequence  of the repayment of $187.4 million and the maturity of
$20 million of such advances. Offsetting these reductions were new borrowings of
$87.1 million.

Total  consolidated  stockholders'  equity of the Company  was $54.2  million or
8.96% of total assets at September 30, 2003. During the first  three-quarters of
2003 the Company did not  repurchase  any shares of its common  stock and issued
80,372  shares  pursuant to the exercise of stock  options.  As of September 30,
2003, there were approximately 114,000 shares available for repurchase under the
previously announced share repurchase plan.


Asset Quality

During the nine-month  period ended  September 30, 2003,  the Company  completed
foreclosure  proceedings on two related parcels of commercial real estate with a
combined  loan  balance of $1.7  million.  These  loans were  non-performing  at
December 31, 2002.  These parcels have been recorded as real estate owned at the
lower of the  recorded  investment  in the loan or  estimated  fair value in the
amount of $1.7  million and are  included in other  assets in the  statement  of
financial  condition at September 30, 2003.  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,
                                                        -------------    ------------    -------------
                                                            2003             2002            2002
                                                            ----             ----            ----
<S>                                                     <C>              <C>             <C>
Non-performing loans                                      $2,905           $3,822          $3,275
Ratio of non-performing loans to gross loans                0.72%           1.03%            0.93%
Ratio of non-performing loans to total assets               0.48%           0.53%            0.45%
Foreclosed property                                       $1,763           $  84           $   84
Foreclosed property to total assets                         0.29%           0.01%            0.01%
Ratio of total non-performing assets to total assets        0.77%           0.54%            0.46%

</TABLE>

                                       13

<PAGE>

Management  maintains an allowance  for loan and lease 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 and
lease  portfolios will not exceed the allowance.  The following table sets forth
the  activity  in the  allowance  for loan and lease  losses  during the periods
indicated (in thousands):

                                                2003           2002
                                               ------         ------
Beginning balance, January 1,                  $2,047         $1,972
Provision                                         270            838
Less: charge-off's (recoveries), net              345            850
                                               ------         ------
Ending balance, September 30,                  $1,972         $1,960
                                               ======         ======


                                       14
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Net Income. The Company recorded a net loss of $8,565,000,  or $3.33 per diluted
share,  for the three months ended  September 30, 2003 as compared to net income
of $1,375,000,  or $0.52 per diluted share, for the three months ended September
30, 2002.

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,
                                                                       --------------------------------
                                                                 2003                                    2002
                                                                 ----                                    ----
                                                    ----------------------------------      ----------------------------------
                                                    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).......................    $381,005       $5,660         5.89%     $348,675      $ 6,238         7.10%
    Mortgage-backed securities.................     155,260        1,621         4.14%      205,729        2,872         5.54%
    Investment securities......................      85,847          505         2.33%       54,051          608         4.46%
    Other interest-earning assets(2)...........      21,685           49         0.90%       80,811          320         1.57%
                                                   --------       ------                   --------      -------
      Total interest-earning assets............     643,797        7,835         4.83%      689,266       10,038         5.78%
                                                                  ------                                 -------
Non interest-earning assets....................      33,670                                  34,176
                                                   --------                                --------
      Total assets.............................    $677,467                                $723,442
                                                   ========                                ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities:
    Deposits...................................    $452,145        1,638         1.44%     $436,272        2,565         2.33%
    Advances from the FHLB and
      other borrowings.........................     158,357        2,078         5.21%      218,989        3,059         5.54%
                                                   --------       ------                   --------      -------
      Total interest-bearing liabilities.......     610,502        3,716         2.42%      655,261        5,624         3.41%
                                                                  ------                                 -------
Non interest-bearing liabilities...............       3,661                                   6,908
                                                   --------                                --------
      Total liabilities..........................   614,163                                 662,169
Stockholders' equity...........................      63,304                                  61,273
                                                   --------                                --------
   Total liabilities and stockholders' equity....  $677,467                                $723,442
                                                   ========                                ========
Net interest income............................                   $4,119                                 $ 4,414
                                                                  ======                                 =======
Interest rate spread (3).......................                                  2.41%                                   2.37%
Net yield on interest-earning assets (4).......                                  2.54%                                   2.54%
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)  Includes interest-bearing deposits in other banks.
(3)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(4)  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,
                                                                 2003 vs. 2002
                                                        --------------------------------
                                                              Increase (decrease)
                                                                     due to
                                                        --------------------------------
                                                         Volume       Rate         Net
                                                        --------------------------------
<S>                                                   <C>        <C>         <C>
     Interest income:
          Loans receivable, net                         $ 2,763    $(3,341)    $  (578)
          Mortgage-backed securities                       (617)      (634)     (1,251)
          Investment securities                           1,214     (1,317)       (103)
          Other interest-earning assets                    (171)      (100)       (271)
                                                        --------------------------------
             Total interest-earning assets                3,189     (5,392)     (2,203)
                                                        ================================
     Interest expense:
          Deposits                                          596     (1,523)       (927)
          Advances from the FHLB and other borrowings      (805)      (176)       (981)
                                                        --------------------------------
             Total interest-bearing liabilities            (209)    (1,699)     (1,908)
                                                        ================================
     Net change in net interest income                  $ 3,398    $(3,693)    $  (295)
                                                        ================================
</TABLE>

Total Interest Income.  Total interest income decreased by $2.2 million or 21.9%
to $7.8 million for the three months ended  September 30, 2003 compared with the
third quarter of 2002 primarily because of the consequences of record low market
interest rates. As a result, during the past year the Bank's callable investment
securities were called, higher coupon mortgage-related securities were paid down
at an accelerated  rate, and loans were  refinanced by borrowers at lower rates,
or away from the Bank, resulting in large pay-downs of higher yielding loans. In
addition,  the  interest  rates on the Bank's  adjustable  rate  loans  adjusted
downward.  Furthermore,  the rate earned on Company's cash and cash  equivalents
was substantially lower during the 2003 period.

Total Interest Expense. Total interest expense decreased by $1.9 million to $3.7
million for the  three-month  period ended  September 30, 2003 compared with the
third quarter of 2002. The increase in the average  balance of deposits was more
than offset by lower market interest rates during the period and the lower rates
paid on the Bank's  renewing  certificates  of deposit that had been  originated
when market  interest  rates were  higher.  In  addition,  the Bank  lowered the
interest  rates paid on several of its other  deposit  products in order to keep
them in line with short-term  market interest rates and the Bank's  competitors.
The repayment and  refinancing of the Federal Home Loan Bank Advances toward the
end of the third quarter of 2003 also  contributed  to the overall  reduction of
interest expense.

                                       16
<PAGE>

Non-interest  income. Total non-interest income was $322,000 for the three-month
period ended  September  30, 2003  compared with $982,000 for the same period in
2002.  The  decrease  is  primarily  due to  $377,000  in net losses on sales of
mortgage-backed  securities and investment  securities available for sale during
the third  quarter of 2003  while,  conversely,  there were gains of $419,000 on
such gains during the same period in 2002. In addition,  the Company  recorded a
gain of $110,000  during the third  quarter of 2003 on the sale of real  estate.
The income from the Company's  bank-owned  life insurance was $27,000 higher for
the third  quarter  2003 as compared  with the same  quarter in 2002  because of
additional  purchases  of  bank-owned  life  insurance  at the end of the second
quarter of 2003.

Non-interest  expense.  Total non-interest expense increased by $14.0 million to
$17.5 million for the three months ended September 30, 2003 compared to the same
period in 2002. The increase in  non-interest  expense was associated with the a
debt  prepayment  fee of $13.8 million paid as a result the repayment of Federal
Home Loan Bank borrowings.  Also,  compensation and benefit expenses were higher
by $51,000 due to amounts paid to the retiring  president of the Company as well
as increased costs  associated with the Company's  employee stock ownership plan
which is impacted by the higher  share  price  during the third  quarter of 2003
compared with 2002.  Occupancy and equipment expense was higher during the third
quarter of 2003  compared to 2002 by an  additional  $62,000 due to revisions in
the useful lives of certain depreciable and amortizable assets.

                                       17
<PAGE>

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Net Income. The Company recorded a net loss of $7,350,000,  or $2.91 per diluted
share, for the nine months ended September 30, 2003 as compared to net income of
$3,655,000,  or $1.38 per diluted share, for the nine months ended September 30,
2002.

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,
                                                                        -------------------------------
                                                                 2003                                    2002
                                                    --------------------------------        -------------------------------
                                                  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).......................    $370,543      $17,336         6.26%     $360,215      $19,398         7.20%
    Mortgage-backed securities.................     163,697        5,318         4.34%      206,506        9,120         5.90%
    Investment securities......................      73,131        1,531         2.80%       50,650        1,760         4.65%
    Other interest-earning assets(2)...........      59,882          463         1.03%       66,499          800         1.61%
                                                   --------      -------                   --------      -------
      Total interest-earning assets............     667,253       24,648         4.94%      683,870       31,078         6.08%
                                                                 -------                                 -------
Non interest-earning assets....................      34,789                                  34,890
                                                   --------                                --------
      Total assets.............................    $702,042                                $718,760
                                                   ========                                ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities:
    Deposits...................................    $447,049        5,506         1.65%     $430,857        8,102         2.51%
    Advances from the FHLB and
      other borrowings.........................     186,377        7,558         5.42%      221,223        9,167         5.54%
                                                   --------      -------                   --------      -------
      Total interest-bearing liabilities.......     633,426       13,064         2.76%      652,080       17,269         3.54%
                                                                 -------                                 -------
Non interest-bearing liabilities...............       5,439                                   7,340
                                                   --------                                --------
      Total liabilities..........................   638,865                                 659,420
Stockholders' equity...........................      63,177                                  59,340
                                                   --------                                --------
   Total liabilities and stockholders' equity....  $702,042                                $718,760
                                                   ========                                ========
Net interest income............................                  $11,584                                 $13,809
                                                                 =======                                 =======
Interest rate spread (3).......................                                  2.18%                                   2.54%
Net yield on interest-earning assets (4).......                                  2.32%                                   2.70%
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)  Includes interest-bearing deposits in other banks.
(3)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(4)  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,
                                                                2003 vs. 2002
                                                        -------------------------------
                                                             Increase (decrease)
                                                                     Due to
                                                        -------------------------------
                                                         Volume       Rate        Net
                                                        -------------------------------
<S>                                                   <C>        <C>        <C>
     Interest income:
          Loans receivable, net                         $   851    $(2,913)   $(2,062)
          Mortgage-backed securities                     (1,671)    (2,131)    (3,802)
          Investment securities                             866     (1,095)      (229)
          Other interest-earning assets                     (73)      (264)      (337)
                                                        -------------------------------
             Total interest-earning assets                  (27)    (6,403)    (6,430)
                                                        ===============================
     Interest expense:
          Deposits                                          479     (3,075)    (2,596)
          Advances from the FHLB and other borrowings    (1,471)      (192)    (1,609)
                                                        -------------------------------
             Total interest-bearing liabilities            (938)    (3,267)    (4,205)
                                                        ===============================
     Net change in net interest income                  $   914    $(3,136)   $(2,225)
                                                        ===============================
</TABLE>

Total Interest Income.  Total interest income decreased by $6.4 million or 20.7%
to $24.6 million for the nine months ended  September 30, 2003 compared with the
corresponding period of 2002 primarily because of the consequences of record low
market  interest  rates.  As a result,  during the past year the Bank's callable
investment  securities were called,  higher coupon  mortgage-related  securities
were paid down at an accelerated rate, and loans were refinanced by borrowers at
lower  rates,  or away from the Bank,  resulting  in large  pay-downs  of higher
yielding  loans. In addition,  the interest rates on the Bank's  adjustable rate
loans adjusted downward. Furthermore, the rate earned on Company's cash and cash
equivalents was substantially lower during the 2003 period.

Total  Interest  Expense.  Total interest  expense  decreased by $4.2 million to
$13.1 million for the nine-month  period ended  September 30, 2003. The interest
expense decrease  reflects lower market interest rates during the period and the
lower rates paid on the Bank's  renewing  certificates  of deposit that had been
originated when market interest rates were higher. In addition, the Bank lowered
the  interest  rates paid on several of its other  deposit  products in order to
keep  them in  line  with  short-term  market  interest  rates  and  the  Bank's
competitors.

                                       19
<PAGE>

Non-interest income. Total non-interest income was $2,054,000 for the nine-month
period ended  September 30, 2003 compared with $1,988,000 for the same period in
2002.  Net gains of  $208,000  on the sale of  investments  and  mortgage-backed
securities available for sale were realized during the nine-month period of 2003
while  $419,000 of such gains were realized  during the 2002 period.  Also,  the
Company  reported a gain of  $110,000  during this period of 2003 on the sale of
real estate.  Service  fees,  charges and other  operating  income were $131,000
higher  during the 2003 period  mainly due to a $42,000  increase in  commercial
loan prepayment fees and an $89,000 increase in overdraft fees.  Income from the
Company's bank-owned life insurance was $26,000 higher for the nine-month period
of 2003 as  compared  with the same time  frame in 2002  because  of  additional
purchases of bank-owned life insurance at the end of the second quarter of 2003.

Non-interest  expense.  Total non-interest expense increased by $14.7 million to
$24.8 million for the nine months ended  September 30, 2003 compared to the same
period in 2002. The increase in non-interest  expense was mainly associated with
the debt  prepayment  fee of $13.8  million  paid as a result the  repayment  of
Federal  Home  Loan Bank  borrowings.  Compensation  and  benefits  expense  was
$266,000  higher  during the 2003  period  due,  in part,  to a $93,000 one time
reduction  in  pension  expense  during  the  first  quarter  of 2002  caused by
participants who had very high balances leaving the plan. Benefits expenses also
reflect a $221,000 increase related to the cost of the Company's  employee stock
ownership plan where the cost of shares released is impacted by the higher share
price during the first nine months of 2003  compared  with 2002.  Occupancy  and
equipment  expense  reflect an  additional  $62,000  caused by  revisions in the
useful lives of certain  depreciable and amortizable assets.  Also,  maintenance
expenses were  unusually  high during the first quarter of 2003 due to inclement
weather.  In addition,  the  Company's  loan  origination  expenses were $74,000
higher  during the first nine  months of 2003,  corresponding  to an increase in
loans  originated of $131.6 million  compared with $48.2 million during the same
period of 2002.

                                       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  nine-month  period ended
September  30, 2003 in the ability of the Company and its  subsidiaries  to fund
their operations.

At September 30, 2003, the Company had commitments  outstanding under letters of
credit of $1 million,  commitments  to  originate  loans of $28.1  million,  and
commitments  to fund  undisbursed  balances of closed  loans and unused lines of
credit of $40.6  million.  There has been no  material  change  during  the nine
months  ended  September  30,  2003 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, 2003.


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, 2003.


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>

NEW ACCOUNTING PRONOUNCEMENTS

In  January  2003 the FASB  issued FIN Number  46,  "Consolidation  of  Variable
Interest Entities." This Interpretation of ARB No. 51,  "Consolidated  Financial
Statements,"  was issued to  address  perceived  weaknesses  in  accounting  for
entities commonly known as special-purpose or  off-balance-sheet  entities,  but
the  guidance  applies  to a larger  population  of  entities.  FIN 46  provides
guidance  for  identifying  the  party  with a  controlling  financial  interest
resulting  from  arrangements  or  financial  interests  rather than from voting
interests. FIN 46 defines the term "variable interest entity" (VIE) and is based
on the  premise  that  if a  business  enterprise  has a  controlling  financial
interest in a VIE, the assets, liabilities, and results of the activities of the
VIE should be included in the consolidated  financial statements of the business
enterprise.  An enterprise that consolidates a VIE is the primary beneficiary of
the VIE. The primary beneficiary is the party whose variable interest(s) absorbs
a majority of the entity's expected losses,  receives a majority of its expected
residual returns,  or both. FIN 46 requires the primary beneficiary of a VIE, as
well as other enterprises that hold a significant variable interest in a VIE, to
provide certain financial statement  disclosures.  Some disclosures are required
in all  financial  statements  issued after January 31, 2003 if it is reasonably
possible that an enterprise will consolidate or disclose information about a VIE
when FIN 46 becomes effective.  FIN 46 applies immediately to VIEs created after
January 31, 2003 and to VIEs in which an  enterprise  obtains an interest  after
that date. For variable  interests in VIEs created before  February 1, 2003, FIN
46  applies  to public  enterprises  no later  than the  beginning  of the first
interim or annual  period  beginning  after June 15,  2003.  The adoption of the
provisions of FIN 46 by the Company has not and will not have a material  impact
on the Company's financial condition or results of operations.

On April  30,  2003 the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  No. 149,  Amendment of Statement 133 on  Derivative  Instruments  and
Hedging Activities. The Statement amends and clarifies accounting for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts,  and for hedging  activities  under  Statement  133. The new guidance
amends   Statement  133  for  decisions   made:  as  part  of  the   Derivatives
Implementation  Group process that effectively  required amendments to Statement
133, in connection with other Board projects dealing with financial instruments,
and regarding implementation issues raised in relation to the application of the
definition   of  a  derivative,   particularly   regarding  the  meaning  of  an
"underlying"  and the  characteristics  of a derivative that contains  financing
components. This Statement clarifies under what circumstances a contract with an
initial net investment meets the  characteristic of a derivative as discussed in
Statement 133. In addition,  it clarifies when a derivative contains a financing
component  that  warrants  special  reporting  in the  statement  of cash flows.
Statement 149 amends  certain other existing  pronouncements.  This Statement is
effective  for  contracts  entered into or modified  after  September  30, 2003,
except as stated below and for hedging relationships  designated after September
30, 2003. The guidance should be applied  prospectively.  The provisions of this
Statement  that relate to  Statement  133  Implementation  Issues that have been
effective for fiscal quarters that began prior to June 15, 2003, should continue
to be applied in accordance with their respective  effective dates. In addition,
certain  provisions  relating  to  forward  purchases  or sales  of  when-issued
securities  or other  securities  that do not yet  exist,  should be  applied to
existing  contracts as well as new  contracts  entered into after  September 30,
2003.  The  Company  does not  expect  the  adoption  of SFAS No.  149 to have a
material effect on the Company's financial condition or results of operations.

                                       22
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS (continued)

On May 15, 2003 the Financial Accounting Standards Board (FASB) issued Statement
No. 150,  Accounting for Certain Financial  Instruments with  Characteristics of
both Liabilities and Equity.  The Statement  improves the accounting for certain
financial  instruments that, under previous guidance,  issuers could account for
as equity.  The new Statement  requires that those  instruments be classified as
liabilities  in  statements of financial  position.  Statement 150 affects three
types of freestanding financial instruments:  (1) mandatorily redeemable shares,
which the issuing company is obligated to buy back in exchange for cash or other
assets;  (2)  instruments  that do or may require the issuer to buy back some of
its shares in  exchange  for cash or other  assets,  including  put  options and
forward purchase contracts; and (3) obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to a variable
such as a market  index,  or varies  inversely  with the  value of the  issuer's
shares.  Statement  150  does not  apply to  features  embedded  in a  financial
instrument  that is not a derivative  in its  entirety.  Most of the guidance in
Statement  150 is  effective  for  all  financial  instruments  entered  into or
modified  after May 31, 2003 and  otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Company does not expect
Statement 150 to have a material effect on the Company's  consolidated financial
position, results of operations or cash flows.

In October 2003, the AICPA issued SOP 03-3, Accounting for Loans or Certain Debt
Securities  Acquired in a Transfer.  This  statement  addresses  accounting  for
differences  between  contractual  cash  flows  and cash  flows  expected  to be
collected  from an investor's  initial  investment  in loans or debt  securities
("loans")  acquired in a transfer as a result of credit  quality  deterioration.
The statement  requires  recognition of the excess of all cash flows expected at
acquisition  over the  investor's  initial  investment  in the loan as  interest
income on a level-yield basis over the life of the loan as the accretable yield.
The loan's contractual  required payments  receivable in excess of the amount of
its cash flows expected at acquisition  (nonaccretable difference) should not be
recognized as an adjustment  to yield,  a loss accrual or a valuation  allowance
for credit risk.  This statement is effective for loans acquired in fiscal years
beginning  after December 31, 2004.  Early adoption is permitted.  Management is
currently evaluating the provisions of SOP 03-3.

                                       23

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                     PART II

ITEM 1.       LEGAL PROCEEDINGS
              Not applicable.

ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS
              Not applicable.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES
              Not applicable.


ITEM 4.       OTHER INFORMATION
              None

ITEM 5.       EXHIBITS AND REPORTS ON FORM 8-K

              (a)  Exhibits

                    31.  Certification  pursuant  to  18  U.S.C.  ss.  1350,  as
                         adopted  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act of 2002.

                    32.  Certification  pursuant  to  18  U.S.C.  ss.  1350,  as
                         adopted  pursuant to Section 906 of the  Sarbanes-Oxley
                         Act of 2002.

               (b)  Reports on Form 8-K

                    On October 28, 2003 the Company filed a Form 8-K wherein the
                    Company included the press release  announcing the Company's
                    earnings for the third quarter of 2003.

                    On September 12, 2003,  the Company filed a Form 8-K wherein
                    the  company   included  a  Press  Release   announcing  the
                    refinancing  of certain debt of the  Company's  wholly-owned
                    subsidiary, Third Federal Savings Bank.

                                       24
<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: November 13, 2003            /s/ Kent C. Lufkin
                                       -----------------------------------------
                                       Kent C. Lufkin
                                       President and CEO
                                       (Principal Executive Officer)



Date: November 13, 2003            /s/ Dennis R. Stewart
                                       -----------------------------------------
                                       Dennis R. Stewart
                                       Executive Vice President and
                                       Chief Financial Officer
                                      (Principal Financial & Accounting Officer)


                                       25