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         June 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                (I.R.S. employer identification no.)
of 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: August 1, 2003
                                                           --------------

                     Class                              Outstanding
        ----------------------------                  ----------------
        $.10 par value common stock                   2,800,231 shares


<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                    FORM 1O-Q

                       FOR THE QUARTER ENDED JUNE 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    20

        Item 4. Controls and Procedures                                       20

PART II - OTHER INFORMATION

        Item 1. Legal Proceedings                                             23

        Item 2. Changes in Securities and Use of Proceeds                     23

        Item 3. Defaults Upon Senior Securities                               23

        Item 4. Other Information                                             23

        Item 5. Exhibits and Reports on Form 8-K                              23


SIGNATURES                                                                    24

EXHIBITS

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

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

                                        2



<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                      Unaudited        Audited
                                                                                       June 30,      December 31,
                                                                                         2003           2002
                                                                                         ----           ----
<S>                                                                                <C>            <C>
                                     Assets
Cash and cash equivalents                                                              $ 37,589       $100,580
Certificates of deposit in other financial institutions                                     228            220
Investment securities available for sale - at fair value                                 88,446         27,243
Investment securities held to maturity (fair value of $13,359 and $15,187,               12,696         14,563
    respectively)
Mortgage-backed securities available for sale - at fair value                           137,213        115,243
Mortgage-backed securities held to maturity (fair value of $37,491 and                   35,755         54,592
    $57,346, respectively)
Loans receivable, net                                                                   359,208        370,092
Federal Home Loan Bank stock - at cost                                                   11,250         11,424
Accrued interest receivable                                                               3,184          3,576
Core deposit intangible, net of accumulated amortization of $2,367 and
    $2,271, respectively                                                                    457            553
Goodwill                                                                                  4,324          4,324
Premises and equipment, net                                                               6,659          6,742
Other assets                                                                             15,627         11,880
                                                                                       --------       --------
                                Total assets                                           $712,636       $721,032
                                                                                       ========       ========

                    Liabilities and stockholders' equity
Liabilities
   Deposits                                                                            $448,139       $442,558
   Advances from the Federal Home Loan Bank                                             192,359        207,359
   Advances from borrowers for taxes and insurance                                        1,513          1,330
   Accrued interest payable                                                               2,949          2,897
   Other liabilities                                                                      3,795          4,048
                                                                                       --------       --------
                              Total liabilities                                         648,755        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; 2,566,352 and 2,482,586 shares outstanding at June 30, 2003 and
       December 31, 2002, net of
       treasury shares of 2,493,551 and 2,567,268, respectively.                            529            529
   Retained earnings                                                                     60,445         59,978
   Additional paid-in capital                                                            51,331         51,647
   Unearned ESOP shares                                                                  (2,302)        (2,401)
   Treasury stock - at cost                                                             (47,410)       (48,809)
   Accumulated other comprehensive income                                                 1,288          1,896
                                                                                       --------       --------
                         Total stockholders' equity                                      63,881         62,840
                                                                                       --------       --------

Total liabilities and stockholders' equity                                             $712,636       $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 Six Months
                                                                          Ended June 30,        Ended June 30,
                                                                          --------------        --------------
                                                                         2003       2002       2003       2002
                                                                         ----       ----       ----       ----

<S>                                                                  <C>         <C>       <C>        <C>
Interest income
   Loans                                                                $5,625      $6,429    $11,676    $13,160
   Mortgage-backed securities                                            1,845       3,188      3,697      6,248
   Investment securities                                                   518         565      1,026      1,152
   Interest bearing deposits and other                                     168         271        414        480
                                                                        ------      ------     ------     ------
       Total interest income                                             8,156      10,453     16,813     21,040
                                                                        ------      ------     ------     ------
Interest expense
   Deposits                                                              1,824       2,707      3,868      5,537
   Advances from the Federal Home Loan Bank and other borrowings         2,701       3,071      5,480      6,108
                                                                        ------      ------     ------     ------
       Total interest expense                                            4,525       5,778      9,348     11,645
                                                                        ------      ------     ------     ------
       Net interest income                                               3,631       4,675      7,465      9,395

Provision for loan losses                                                   90         538        180        688
                                                                        ------      ------     ------     ------
       Net interest income after provision for loan losses               3,541       4,137      7,285      8,707
                                                                        ------      ------     ------     ------
Non-interest income
   Service fees, charges and other operating income                        440         329        885        736
   Bank-owned life insurance                                               129         137        262        270
   Gain on sale of investment and mortgage-backed
      securities available for sale                                         79           -        585          -
                                                                        ------      ------     ------     ------
       Total non-interest income                                           648         466      1,732      1,006
                                                                        ------      ------     ------     ------
Non-interest expense
   Compensation and benefits                                             2,036       1,916      4,060      3,845
   Occupancy and equipment                                                 602         576      1,230      1,154
   Federal deposit insurance premium                                        18          19         37         38
   Professional fees                                                       158         105        318        185
   Amortization of core deposit intangible                                  48          58         96        116
   Advertising                                                             138         110        275        220
   Other operating                                                         599         522      1,322      1,168
                                                                        ------      ------     ------     ------
       Total non-interest expense                                        3,599       3,306      7,338      6,726
                                                                        ------      ------     ------     ------
       Income before income taxes                                          590       1,297      1,679      2,987
Income taxes                                                               154         302        464        707
                                                                        ------      ------     ------     ------
       Net income                                                       $  436      $  995      1,215      2,280
                                                                        ======      ======     ======     ======

Basic earnings per share                                                 $0.17       $0.40      $0.49      $0.92
Diluted earnings per share                                               $0.16       $0.37      $0.45      $0.86
</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 six months ended
                                                                                             June 30,
                                                                                             --------
                                                                                         2003          2002
                                                                                         ----          ----
<S>                                                                                   <C>          <C>
Cash flows from operating activities
Net Income                                                                              $ 1,215      $ 2,280
Adjustments to reconcile net income to net cash provided by operating activities:
         Mortgage loan servicing rights                                                       7            7
         Deferred loan origination fees                                                    (139)         (99)
         Premiums and discounts on investment securities, net                                26           68
         Premiums and discounts on mortgage-backed securities and loans, net              1,179         (264)
         Amortization of core deposit intangible                                             96          116
Provision for loan losses                                                                   180          688
Depreciation of premises and equipment                                                      502          507
Recognition of ESOP and MSBP expenses                                                       267          140
Gain on sale of investment and mortgage-backed securities available for sale               (585)           -
Gain on sale of real estate                                                                 (12)         (57)
Increase in value of bank-owned life insurance                                             (262)        (262)
(Increase) decrease in:
         Accrued interest receivable                                                        392         (135)
         Other assets                                                                      (219)        (117)
Increase (decrease) in:
         Accrued interest payable                                                            52         (449)
         Other liabilities                                                                   59         (483)
                                                                                        -------      -------
         Net cash provided by operating activities                                        2,758        1,940
                                                                                        -------      -------

Cash flows  from investing activities
Loan originations                                                                       (55,286)     (17,821)
Purchases of loans                                                                      (21,927)     (16,685)
Loan principal payments                                                                  85,946       57,640
Proceeds from sale of mortgage-backed securities available for sale                      15,075            -
Purchases of mortgage-backed securities available for sale                              (65,873)     (62,848)
Purchase of investment securities  held to maturity                                           -       (6,821)
Purchase of investment securities available for sale                                    (91,122)      (6,000)
Proceeds from maturities of investment securities held to maturity                        1,830        1,055
Proceeds from maturities of investment securities available for sale                     30,000        1,000
Principal repayments from mortgage-backed securities held to maturity                    18,862       20,391
Principal repayments from mortgage-backed securities available for sale                  27,472       16,511
Purchase of bank-owned life insurance                                                    (1,500)           -
Purchase of certificates of deposit in other financial institutions                          (8)           -
Purchases and redemptions of Federal Home Loan Bank stock, net                              174          250
Proceeds from sales of real estate acquired through foreclosure                              96          272
Purchase of premises and equipment                                                         (419)         (62)
                                                                                        -------      -------
         Net cash used in investing activities                                          (56,680)     (13,118)
                                                                                        -------      -------
</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 six months ended
                                                                                          June 30,
                                                                                          --------
                                                                                      2003          2002
                                                                                      ----          ----

<S>                                                                              <C>         <C>
Cash flows from financing activities
Net increase in deposits                                                               5,581       15,451
Net decrease in advances from Federal Home Loan Bank                                 (15,000)           -
Net decrease in advances from borrowers for taxes and insurance                          183           59
Exercise of stock options                                                                915          232
Purchase of treasury stock, net                                                            -         (337)
Common stock cash dividend                                                              (748)        (739)
                                                                                    --------      -------
         Net cash provided by (used in) financing activities                          (9,069)      14,666
                                                                                    --------      -------

         Net (decrease) increase in cash and cash equivalents                        (62,991)       3,488

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

Cash and cash equivalents at end of period                                          $ 37,589      $72,627
                                                                                    ========      =======

Supplemental disclosure of cash flow information
Cash paid for
         Interest on deposits and advances                                          $  9,296      $12,098
         Income taxes                                                               $    250      $ 1,000
Non-cash transactions
         Transfers from loans to real estate acquired through foreclosure           $  1,857      $   185
</TABLE>

                 See notes to consolidated financial statements

                                        6
<PAGE>
                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -  RESTATEMENT  OF  INFORMATION  FOR THE PERIOD  ENDED  JUNE 30,  2002

     On October 1, 2002 the FASB  issued SFAS No.  147,"Acquisitions  of Certain
     Financial Institutions." Except for transactions between two or more mutual
     enterprises,   SFAS  No.  147  removed  the   acquisitions   of   financial
     institutions from the scope of both SFAS No. 72 and FASB Interpretation No.
     9 and required that those  transactions be accounted for in accordance with
     SFAS No. 141 and SFAS No.  142.  Thus,  the  requirement  of SFAS No. 72 to
     recognize  (and  subsequently  amortize)  any  excess of the fair  value of
     liabilities  assumed  over the  fair  value of  tangible  and  identifiable
     intangible  assets  acquired  ("SFAS  72  goodwill")  as an  unidentifiable
     intangible no longer applied to  acquisitions  within the scope of SFAS No.
     147. Finally,  SFAS No. 147 provided that branch acquisitions that meet the
     definition of a business should be accounted for as a business combination.
     SFAS No. 147 was effective  October 1, 2002,  although earlier  application
     was permitted.  The Company has elected to apply SFAS No. 147 as of January
     1,  2002.  In  accordance  with  the  provisions  of SFAS No.  147  interim
     financial  statements of the Company issued after January 1, 2002 have been
     restated  to  remove  amortization  expense  associated  with  SFAS No.  72
     goodwill.  Such expense totaled  $164,000,  net of a tax benefit of $58,000
     for the six months ended June 30, 2002.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements as of June 30, 2003 (unaudited) and
     December  31, 2002 and for the  six-month  periods  ended June 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 3 - 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 June 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 4 - 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 5 - 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 for the three-month periods ended June 30, 2003
     and 2002 was  $425,000  and  $2,932,000,  net of  applicable  income tax of
     $148,000 and $1,299,000,  respectively.  Total comprehensive income for the
     six-month periods ended June 30, 2003 and 2002 was $607,000 and $3,734,000,
     net of applicable income tax of $151,000 and $1,455,000, respectively.

                                       7
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                                                 Three months ended June 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                $   436            2,516,638          $  0.17

         Effect of dilutive securities
                  Stock options                                                -              208,264            (0.01)
                                                                         -------            ---------          -------

         Diluted earnings per share
                  Income available to common stockholders plus
                    effect of dilutive securities                        $   436            2,724,902          $  0.16
                                                                         =======            =========          =======
</TABLE>

<TABLE>
<CAPTION>

                                                                                    Six months ended June 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                $ 1,215            2,502,600          $  0.49

         Effect of dilutive securities
                  Stock options                                                -              207,467            (0.04)
                                                                         -------           ----------          -------

         Diluted earnings per share
                  Income available to common stockholders plus
                    effect of dilutive securities                        $ 1,215            2,710,067          $  0.45
                                                                         =======           ==========          =======
</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
          six-month  period  ended June 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.

                                       8
<PAGE>



                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>

                                                                                 Three months ended June 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                $   995            2,470,258          $  0.40

         Effect of dilutive securities
                  Stock options                                                -              197,525            (0.03)
                                                                         -------           ----------          -------

         Diluted earnings per share
                  Income available to common stockholders plus
                    effect of dilutive securities                        $   995            2,667,783          $  0.37
                                                                         =======           ==========          =======
</TABLE>

         There were  options to purchase  5,000 shares of common stock at $28.00
         per share which were  outstanding  during the three-month  period ended
         June 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>
                                                                                 Six months ended June 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                $ 2,280            2,466,561          $  0.92

         Effect of dilutive securities
                  Stock options                                                -              189,937            (0.06)
                                                                         -------            ---------          -------

         Diluted earnings per share
                  Income available to common stockholders plus
                    effect of dilutive securities                        $ 2,280            2,656,498          $  0.86
                                                                         =======            =========          =======

</TABLE>

         There were  options to purchase  5,000 shares of common stock at $28.00
         per share which were outstanding during the six-month period ended June
         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 7- 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 June 30,                                      2003                 2002
     ----------------------------                                     ----                 ----

<S>                                                              <C>                  <C>
     Net income
              As reported                                            $  436               $  995
              Deduct: stock-based compensation expense
                  determinded using the fair value method, net
                  of related tax effects                                 11                   14
                                                                     ------               ------
              Pro forma                                              $  425               $  981
                                                                     ======               ======

     Basic earnings per share
              As reported                                            $ 0.17               $ 0.40
              Pro forma                                              $ 0.17               $ 0.40

     Diluted earnings per share
              As reported                                            $ 0.16               $ 0.37
              Pro forma                                              $ 0.16               $ 0.37

</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 $131,000 and $53,000 for the three-month periods ended
     June 30, 2003 and 2002, respectively.





                                       10


<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7- STOCK BASED COMPENSATION (continued)

<TABLE>
<CAPTION>

                    Six months ended June 30,                                      2003             2002
                    --------------------------                                     ----             ----
<S>                                                                            <C>              <C>
                    Net income
                             As reported                                         $ 1,215          $ 2,280
                             Deduct: stock-based compensation expense
                                   determined using the fair value method,
                                   net of related tax effects                         22               31
                                                                                 -------          -------
                             Pro forma                                           $ 1,193          $ 2,249
                                                                                 =======          =======

                    Basic earnings per share
                             As reported                                         $  0.49          $  0.92
                             Pro forma                                           $  0.48          $  0.92

                    Diluted earnings per share
                             As reported                                         $  0.45          $  0.86
                             Pro forma                                           $  0.45          $  0.85
</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  $227,000 and $101,000 for the
         six-month periods ended June 30, 2003 and 2002, respectively.


NOTE 8- 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 June 30, 2003 and December 31, 2002 were $712.6
million and $721.0 million,  respectively,  a decrease of $8.4 million, or 1.2%,
during  the  six-month  period.  Cash and cash  equivalents  decreased  by $62.9
million.  Investment  securities  available for sale increased by $61.2 million,
the net effect of the purchase of $91.2 million less the calls and maturities of
$30.0  million  of such  securities.  Investment  securities  held  to  maturity
decreased  by $1.8  million  due to calls  and  maturities  of such  securities.
Mortgage-backed  securities  available  for sale  increased by $21.9  million as
$65.8 million in purchases of such securities more than off-set the $1.0 million
decrease in  unrealized  gains plus the sale of $14.4  million and the principal
pay-downs  of $27.4  million  received  from these  securities.  Mortgage-backed
securities  held to maturity  decreased by $18.8 million due to the high rate of
prepayments  of  the  mortgages   underlying  these   pass-through   securities.
Similarly,  high  prepayments  of  existing  mortgages  in the loans  receivable
portfolio  caused a decrease of $85.9  million in loans  receivable.  Offsetting
this reduction in existing loans receivable was the origination of $55.2 million
in predominately consumer and single-family  residential mortgage loans, and the
purchase  of  $21.9  million  in  newly  originated,  single-family  residential
mortgage loans.


                                       12

<PAGE>

Total liabilities decreased by $9.4 million. Deposit growth during the first six
months of 2003 was $5.6 million.  Non-interest  bearing demand  deposits grew by
$2.3 million while savings, money market, and interest-bearing checking accounts
increased by a combined $7.6 million.  Certificates of deposit decreased by $4.3
million. Advances from the Federal Home Loan Bank decreased by $15.0 million due
to scheduled maturity of advances.

Total  consolidated  stockholders'  equity of the Company  was $63.9  million or
8.96% of assets at June 30, 2003.  During the first half of 2003 the Company did
not repurchase any shares of its common stock and issued 72,717 shares  pursuant
to the exercise of stock options.  As of June 30, 2003, there were approximately
114,000 shares  available for repurchase  under the previously  announced  share
repurchase  plan,  and the Company will continue to  repurchase  shares as share
availability and market conditions permit.

Asset Quality

During the first half of 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 June 30,
2003. Management of the Company believes that there has not been any significant
deterioration in its asset quality during the first half of 2003.

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

                                                        June 30,    December 31,   June 30,
                                                        --------    ------------   --------
                                                          2003          2002         2002
                                                          ----          ----         ----
<S>                                                   <C>           <C>          <C>
Non-performing loans                                     $2,231        $3,822       $3,925
Ratio of non-performing loans to gross loans               0.62%         1.03%        1.10%
Ratio of non-performing loans to total assets              0.31%         0.53%        0.54%
Foreclosed property                                      $1,857        $   84            -
Foreclosed property to total assets                        0.26%         0.01%        0.00%
Ratio of total non-performing assets to total assets       0.57%         0.54%        0.54%
</TABLE>


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                                         180            688

Less: charge-off's (recoveries), net              304            765
                                               ------         ------
Ending balance, June 30,                       $1,923         $1,895
                                               ======         ======


                                       13
<PAGE>

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

Net Income.  The Company  recorded net income of $436,000,  or $0.16 per diluted
share,  for the three  months  ended June 30, 2003 as compared to  $995,000,  or
$0.37 per diluted share, for the three months ended June 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 June 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).......................    $363,906    $5,625      6.20%       $360,448      $ 6,429         7.15%
    Mortgage-backed securities.................     172,259     1,845      4.30%        212,146        3,188         6.03%
    Investment securities......................      76,608       518      2.71%         49,845          565         4.55%
    Other interest-earning assets(2)...........      64,376       168      1.05%         64,617          271         1.68%
                                                   --------    ------                  --------      -------
      Total interest-earning assets............     677,149     8,156      4.83%        687,056       10,453         6.10%
                                                               ------                                -------
Non interest-earning assets....................      35,748                              34,628
                                                   --------                            --------
      Total assets.............................    $712,897                            $721,684
                                                   ========                            ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities
    Deposits...................................    $446,212     1,824      1.64%       $432,918        2,707         2.51%
    Advances from the FHLB and other
               Borrowings......................     197,249     2,701      5.49%        222,359        3,071         5.54%
                                                   --------    ------                  --------      -------
      Total interest-bearing liabilities.......     643,461     4,525      2.82%        655,277        5,778         3.54%
                                                               ------                                -------
Non interest-bearing liabilities...............       6,266                               7,879
                                                   --------                            --------
      Total liabilities........................     649,727                             663,156
Stockholders' equity...........................      63,170                              58,528
                                                   --------                            --------
      Total liabilities and
        stockholders' equity..................     $712,897                            $721,684
                                                   ========                            ========
Net interest income............................                $3,631                                $ 4,675
                                                               ======                                =======
Interest rate spread (3).......................                            2.01%                                     2.56%
Net yield on interest-earning assets (4).......                            2.15%                                     2.73%

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.

                                       14
<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
                                                                           June 30,
                                                                        2003 vs. 2002
                                                         -------------------------------------------
                                                                      Increase (decrease)
                                                                            due to
                                                         -------------------------------------------
                                                           Volume          Rate              Net
                                                         -------------------------------------------
<S>                                                  <C>               <C>            <C>
     Interest income:

          Loans receivable, net                          $   408          $(1,212)        $  (804)

          Mortgage-backed securities                        (531)            (812)         (1,343)

          Investment securities                            1,017           (1,064)            (47)

          Other interest-earning assets                       (1)            (102)           (103)
                                                         -------------------------------------------
             Total interest-earning assets
                                                             893           (3,190)         (2,297)
                                                         ===========================================

     Interest expense:

          Deposits                                           541           (1,424)           (883)

          Advances from the FHLB and other borrowings       (344)             (26)           (370)
                                                         -------------------------------------------
             Total interest-bearing liabilities
                                                             197           (1,450)         (1,253)
                                                         ===========================================
     Net change in net interest income                      (696)         $(1,740)        $(1,044)
                                                         ===========================================


</TABLE>

Total Interest Income.  Total interest income decreased by $2.3 million or 22.0%
to $8.1  million  for the three  months  ended June 30, 2003  compared  with the
second  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 were substantially lower during the 2003 period.

Total Interest Expense. Total interest expense decreased by $1.3 million to $4.5
million for the  three-month  period  ended June 30,  2003.  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.

Non-interest  income. Total non-interest income was $648,000 for the three-month
period ended June 30, 2003  compared  with $466,000 for the same period in 2002.
The  increase is primarily  due to $79,000 in gains on sales of  mortgage-backed
securities available for sale during the second quarter of 2003 while there were
no such sales during the 2002  period.  In  addition,  retail  banking fees were
$103,000  higher  due in large part to a $70,000  increase  in  commercial  loan
prepayment fees and a $33,000 increase in overdraft fees.

                                       15
<PAGE>




Non-interest  expense.  Total non-interest expense increased by $293,000 to $3.5
million for the three months ended June 30, 2003  compared to the same period in
2002. The increase in operating expense was associated with the opening of a new
branch location in Philadelphia during the early part of 2003. Benefits expenses
also were higher by $78,000 due to the cost of the Corporation's  employee stock
ownership plan where the cost of shares released is impacted by the higher share
price during the second  quarter of 2003 compared  with 2002.  In addition,  the
Corporation's  loan  origination  expense were $33,000  higher during the second
quarter of 2003,  corresponding  to an  increase  in loans  originated  to $31.3
million compared with $7.8 million during the second quarter of 2002.














                                       16
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002

Net Income. The Company recorded net income of $1,215,000,  or $0.45 per diluted
share,  for the six months  ended June 30, 2003 as compared  to  $2,280,000,  or
$0.86 per diluted share, for the six months ended June 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>
                                                                           Six months ended June 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).......................    $365,226   $11,676         6.45%     $366,435      $13,160         7.24%
    Mortgage-backed securities.................     167,985     3,697         4.44%      206,999        6,248         6.09%
    Investment securities......................      66,670     1,026         3.10%       48,921        1,152         4.75%
    Other interest-earning assets(2)...........      79,297       414         1.05%       59,225          480         1.63%
                                                   --------   -------                   --------      -------
      Total interest-earning assets............     679,179    16,813         4.99%      681,580       21,040         6.23%
                                                              -------                                 -------
Non interest-earning assets....................      35,355                               35,084
                                                   --------                             --------
      Total assets.............................    $714,534                             $716,664
                                                   ========                             ========

Liabilities and stockholders' equity:
  Interest-bearing liabilities
    Deposits...................................    $444,459     3,868         1.75%     $428,105        5,537         2.61%
    Advances from the FHLB and other
               Borrowings......................     200,619     5,480         5.51%      222,359        6,108         5.54%
                                                   --------   -------                   --------      -------
      Total interest-bearing liabilities.......     645,078     9,348         2.92%      650,464       11,645         3.61%
                                                              -------                                 -------
Non interest-bearing liabilities...............       6,344                                7,844
                                                   --------                             --------
      Total liabilities........................     651,422                              658,308
Stockholders' equity...........................      63,112                               58,356
                                                   --------                             --------
      Total liabilities and
        stockholders' equity...................    $714,534                             $716,664
                                                   ========                             ========
Net interest income............................               $ 7,465                                 $ 9,395
                                                              =======                                 =======
Interest rate spread (3).......................                               2.07%                                   2.62%
Net yield on interest-earning assets (4).......                               2.22%                                   2.78%

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.

                                       17
<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>

                                                                                     Six months ended
                                                                                         June 30,
                                                                                      2003 vs. 2002
                                                                   ------------------------------------------------------
                                                                                    Increase (decrease)
                                                                                          due to
                                                                   -----------------------------------------------
                                                                         Volume            Rate             Net
                                                                   -----------------------------------------------
<S>                                                                  <C>             <C>             <C>
     Interest income:

          Loans receivable, net                                         $   (43)        $ (1,441)       $ (1,484)

          Mortgage-backed securities                                     (1,047)          (1,504)         (2,551)

          Investment securities                                             759             (885)           (126)

          Other interest-earning assets                                     304             (370)            (66)
                                                                   -----------------------------------------------
             Total interest-earning assets
                                                                            (27)          (4,200)         (4,227)
                                                                   ===============================================

     Interest expense:

          Deposits                                                          589           (2,258)         (1,669)

          Advances from the FHLB and other borrowings                      (594)             (34)           (628)
                                                                   -----------------------------------------------
             Total interest-bearing liabilities
                                                                             (5)          (2,292)         (2,297)
                                                                   ===============================================

     Net change in net interest income                                  $   (22)        $ (1,908)       $ (1,930)
                                                                   ===============================================

</TABLE>

Total Interest Income.  Total interest income decreased by $4.2 million or 20.0%
to $16.8  million for the six months ended June 30, 2003 compared with the first
half 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
were substantially lower during the 2003 period.

Total Interest Expense. Total interest expense decreased by $2.3 million to $9.3
million for the  six-month  period  ended June 30, 2003.  The  interest  expense
increase  due to an 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.

Non-interest  income. Total non-interest income was $1,732,000 for the six-month
period ended June 30, 2003 compared with $1,006,000 for the same period in 2002.
The increase is primarily  due to $585,000 in gains on sales of  mortgage-backed
securities available for sale during the second quarter of 2003 while there were
no such sales during the 2002  period.  In  addition,  retail  banking fees were
$134,000  higher  due in large part to a $94,000  increase  in  commercial  loan
prepayment fees and a $52,000 increase in overdraft fees.

                                       18
<PAGE>

Non-interest  expense.  Total non-interest expense increased by $612,000 to $7.3
million for the six months  ended June 30,  2003  compared to the same period in
2002. Compensation and benefits expense was higher during the 2003 period due 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 were  higher  by  $126,000  due to the cost of the  Corporation's
employee stock  ownership plan where the cost of shares  released is impacted by
the  higher  share  price  during  the first  half of 2003  compared  with 2002.
Occupancy and equipment expense increased in part because  maintenance  expenses
were unusually  high during the first quarter of 2003 due to inclement  weather.
In addition,  the  Corporation's  loan  origination  expense were $64,000 higher
during  the first six  months of 2003,  corresponding  to an  increase  in loans
originated to $55.3 million  compared with $17.8 million  during the same period
of 2002.










                                       19
<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  six-month period ended
June 30, 2003 in the ability of the Company and its  subsidiaries  to fund their
operations.

At June 30,  2003,  the Company had  commitments  outstanding  under  letters of
credit of $1 million,  commitments  to  originate  loans of $30.0  million,  and
commitments  to fund  undisbursed  balances of closed  loans and unused lines of
credit of $31.2 million. There has been no material change during the six months
ended June 30, 2003 in any of the Company's  other  contractual  obligations  or
commitments to make future payments.

Capital Requirements

The Bank is in compliance  with all of its capital  requirements  as of June 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 six months ended June 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.


                                       20

<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 June 30, 2003, except as
stated below and for hedging  relationships  designated after June 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  June 30,  2003.  The  Company is
presently  evaluating this new standard but does not expect the adoption of SFAS
No.  149 to have a  material  effect on the  Company's  financial  condition  or
results of operations.

                                       21
<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.














                                       22
<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 July 24,  2003 the  Company  filed a Form 8-K  wherein  the Company
          included the press release  announcing the Company's  earnings for the
          second quarter of 2003.









                                       23
<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




                                            /s/ Kent C. Lufkin
                                            ------------------
Date: August 13, 2003                       Kent C. Lufkin
      ---------------                       President and CEO
                                            (Principal Executive Officer)


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









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