**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**ý****                                ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the period ended March 31, 2005**

 

**- or -**

 

**o****                                ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition 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 Incorporation   or Organization) |       | (I.R.S. Employer Identification No.) |
|                                                             |       |                                 |
| **3 Penns Trail, Newtown, Pennsylvania**                         | ** ** | **18940**                            |
| (Address of Principal Executive Offices)                         |       | (Zip Code)                           |

 

Registrant’s telephone number, including area code:  **(215) 579-4000**

 

Securities registered pursuant to Section 12(b) of the Act:  **None**

 

Securities registered pursuant to Section 12(g) of the Act:

 

**Common Stock, par value $.10 per share**

(Title of Class)

 

Indicateby check mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days.  YES ý**  **NO o

 

Indicateby check mark whether the registrant is an accelerated filer as defined inExchange Act Rule 12b-2.  YES o**  **NO ý

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock as of thelatest practicable date: **May 6, 2005**

 
| ** ** | **Class**                    | ** ** | **Outstanding**   |
|------------|------------------------------|------------|-------------------|
|       | $.10  par value common stock |       | 2,952,473  shares |

 

 

 

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**CONTENTS**

 
| **PART I-CONSOLIDATED FINANCIAL INFORMATION** | ** **                                                                    |
|-----------------------------------------------|-------------------------------------------------------------------------------|
|                                          |                                                                          |   |   |
|                                          | Item1.                                                                        | Consolidated  Financial Statements |   |
|                                          |                                                                          |   |   |
|                                          | Item  2.                                                                      | Management’s  Discussion and Analysis of Financial Position and Results of Operations |   |
|                                          |                                                                          |   |   |
|                                          | Item  3.                                                                      | Quantitative  and Qualitative Disclosures about Market Risk |   |
|                                          |                                                                          |   |   |
|                                          | Item 4.                                                                       | Controls and Procedures |   |
|                                          |                                                                          |   |   |
| ** **                                    | **PART II-OTHER INFORMATION**                                                 |   |
|                                          |                                                                          |   |   |
|                                          | Item1.                                                                        | Legal Proceedings |   |
|                                          |                                                                          |   |   |
|                                          | Item  2.                                                                      | Unregistered  Sale of Equity Securities and Use of Proceeds |   |
|                                          |                                                                          |   |   |
|                                          | Item 3.                                                                       | Defaults Upon  Senior Securities |   |
|                                          |                                                                          |   |   |
|                                          | Item  4.                                                                      | Submission  of Matters to a Vote of Security Holders |   |
|                                          |                                                                          |   |   |
|                                          | Item 5.                                                                       | Other Information |   |
|                                          |                                                                          |   |   |
|                                          | Item 6.                                                                       | Exhibits |   |
|                                          |                                                                          |   |   |
| ** **                                    | **Signatures**                                                                |   |
|                                          |                                                                          |   |   |
| ** **                                    | **Exhibits**                                                                  | ** ** |
|                                          |                                                                          |   |   |
|                                          | 31. Certifications  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |   |
|                                          |                                                                          |   |   |
|                                          | 32. Certification pursuant  of Section 906 of the Sarbanes-Oxley Act of 2002  |   |

 

2

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**TFFinancial Corporation and Subsidiaries**

 

**CONSOLIDATED STATEMENTS OF FINANCIAL POSITION**

 
| ** **                                                                                                                                                                                                                                                     | ** ** | **Unaudited  March 31,  2005** | ** ** | **Audited  December   31,  2004** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                                                                                                                                                                                     | ** ** | **(in thousands)**             | ** ** |
| ASSETS                                                                                                                                                                                                                                                         |       |                           |       |                              |       |
| Cash and cash equivalents                                                                                                                                                                                                                                      |       | $                              | 4,674      |                              | $          | 7,900 |   |
| Certificates of deposit in other financial  institutions                                                                                                                                                                                                       |       | 38                             |       | 38                                |       |
| Investment securities available for sale—at  fair value                                                                                                                                                                                                   |       | 20,202                         |       | 17,625                            |       |
| Investment securities held to maturity  (fair value of $7,100 and $7,188 respectively)                                                                                                                                                                         |       | 7,010                          |       | 7,027                             |       |
| Mortgage-backed securities available for  sale—at fair value                                                                                                                                                                                              |       | 103,534                        |       | 103,610                           |       |
| Mortgage-backed securities held to maturity  (fair value of $14,453 and $15,546, respectively)                                                                                                                                                                 |       | 13,991                         |       | 14,900                            |       |
| Loans receivable, net (including loans held  for sale of $189 and $680, respectively)                                                                                                                                                                          |       | 454,412                        |       | 442,195                           |       |
| Federal Home Loan Bank stock—at cost                                                                                                                                                                                                                      |       | 7,711                          |       | 7,460                             |       |
| Accrued interest receivable                                                                                                                                                                                                                                    |       | 2,451                          |       | 2,500                             |       |
| Premises and equipment, net                                                                                                                                                                                                                                    |       | 6,045                          |       | 5,963                             |       |
| Core deposit intangible asset, net of  accumulated amortization of $2,645 and $2,611, respectively                                                                                                                                                             |       | 179                            |       | 213                               |       |
| Goodwill                                                                                                                                                                                                                                                       |       | 4,324                          |       | 4,324                             |       |
| Other assets                                                                                                                                                                                                                                                   |       | 15,940                         |       | 15,211                            |       |
| TOTAL ASSETS                                                                                                                                                                                                                                                   |       | $                              | 640,511    |                              | $          | 628,966 |   |
|                                                                                                                                                                                                                                                           |       |                           |       |                              |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                      |       |                           |       |                              |       |
|                                                                                                                                                                                                                                                           |       |                           |       |                              |       |
| Liabilities                                                                                                                                                                                                                                                    |       |                           |       |                              |       |
| Deposits                                                                                                                                                                                                                                                       |       | $                              | 454,871    |                              | $          | 459,903 |   |
| Advances from the Federal Home Loan Bank                                                                                                                                                                                                                       |       | 119,361                        |       | 102,747                           |       |
| Advances from borrowers for taxes and  insurance                                                                                                                                                                                                               |       | 1,703                          |       | 1,778                             |       |
| Accrued interest payable                                                                                                                                                                                                                                       |       | 2,196                          |       | 1,638                             |       |
| Other liabilities                                                                                                                                                                                                                                              |       | 1,513                          |       | 1,745                             |       |
| Total liabilities                                                                                                                                                                                                                                              |       | 579,644                        |       | 567,811                           |       |
|                                                                                                                                                                                                                                                           |       |                           |       |                              |       |
| Stockholders’ equity                                                                                                                                                                                                                                      |       |                           |       |                              |       |
| Preferred stock, no par value; 2,000,000  shares authorized at March 31, 2005 and December 31, 2004, none issued                                                                                                                                          |       | —                         |       | —                            |       |
| Common stock, $0.10 par value; 10,000,000  shares authorized, 5,290,000 shares issued, 2,752,976 and 2,742,345 shares  outstanding at March 31, 2005 and December 31, 2004, respectively, net  of shares in treasury 2,339,537 and 2,345,746 respectively |       | 529                            |       | 529                               |       |
| Retained earnings                                                                                                                                                                                                                                              |       | 58,411                         |       | 57,428                            |       |
| Additional paid-in capital                                                                                                                                                                                                                                     |       | 51,650                         |       | 51,675                            |       |
| Unearned ESOP shares                                                                                                                                                                                                                                           |       | (1,975                         | )          | (2,019                            | )          |
| Treasury stock—at cost                                                                                                                                                                                                                                    |       | (46,264                        | )          | (46,081                           | )          |
| Accumulated other comprehensive loss                                                                                                                                                                                                                           |       | (1,484                         | )          | (377                              | )          |
| Total stockholders’ equity                                                                                                                                                                                                                                |       | 60,867                         |       | 61,155                            |       |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                |       | $                              | 640,511    |                              | $          | 628,966 |   |

 

Theaccompanying notes are an integral part of these statements

 

3

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**TF FinancialCorporation and Subsidiaries**

 

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                           | ** ** | **For the three months ended  March 31,  (in thousands, except  per share data)** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                           | ** ** | **2005**                                                                          | ** ** | **2004** | ** ** |
| Interest income                                      |       |                                                                              |       |   |   |
| Loans, including fees                                |       | $                                                                                 | 6,471      |   | $ | 5,990 |   |
| Mortgage-backed securities                           |       | 1,303                                                                             |       | 1,457 |   |
| Investment securities                                |       | 313                                                                               |       | 280 |   |
| Interest-bearing deposits and other                  |       | 10                                                                                |       | 3 |   |
|                                                 |       |                                                                              |       |   |   |
| TOTAL INTEREST INCOME                                |       | 8,097                                                                             |       | 7,730 |   |
|                                                 |       |                                                                              |       |   |   |
| Interest expense                                     |       |                                                                              |       |   |   |
| Deposits                                             |       | 1,536                                                                             |       | 1,506 |   |
| Borrowings                                           |       | 931                                                                               |       | 646 |   |
|                                                 |       |                                                                              |       |   |   |
| TOTAL INTEREST EXPENSE                               |       | 2,467                                                                             |       | 2,152 |   |
|                                                 |       |                                                                              |       |   |   |
| NET INTEREST INCOME                                  |       | 5,630                                                                             |       | 5,578 |   |
| Provision for loan losses                            |       | 150                                                                               |       | 150 |   |
|                                                 |       |                                                                              |       |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR  LOAN LOSSES |       | 5,480                                                                             |       | 5,428 |   |
|                                                 |       |                                                                              |       |   |   |
| Non-interest income                                  |       |                                                                              |       |   |   |
| Service fees, charges and other operating  income    |       | 640                                                                               |       | 709 |   |
| Gain on sale of loans                                |       | 22                                                                                |       | — |   |
|                                                 |       |                                                                              |       |   |   |
| TOTAL NON-INTEREST INCOME                            |       | 662                                                                               |       | 709 |   |
|                                                 |       |                                                                              |       |   |   |
| Non-interest expense                                 |       |                                                                              |       |   |   |
| Employee compensation and benefits                   |       | 2,391                                                                             |       | 2,274 |   |
| Occupancy and equipment                              |       | 661                                                                               |       | 595 |   |
| Federal deposit insurance premium                    |       | 17                                                                                |       | 18 |   |
| Professional fees                                    |       | 226                                                                               |       | 206 |   |
| Marketing and advertising                            |       | 176                                                                               |       | 163 |   |
| Other operating                                      |       | 626                                                                               |       | 621 |   |
| Amortization of core deposit intangible  asset       |       | 34                                                                                |       | 40 |   |
|                                                 |       |                                                                              |       |   |   |
| TOTAL NON-INTEREST EXPENSE                           |       | 4,131                                                                             |       | 3,917 |   |
|                                                 |       |                                                                              |       |   |   |
| INCOME BEFORE INCOME TAXES                           |       | 2,011                                                                             |       | 2,220 |   |
|                                                 |       |                                                                              |       |   |   |
| Income taxes                                         |       | 535                                                                               |       | 611 |   |
|                                                 |       |                                                                              |       |   |   |
| NET INCOME                                           |       | $                                                                                 | 1,476      |   | $ | 1,609 |   |
| Earnings per share—basic                        |       | $                                                                                 | 0.54       |   | $ | 0.61 |   |
| Earnings per share—diluted                      |       | $                                                                                 | 0.52       |   | $ | 0.57 |   |
| Dividends paid                                       |       | $                                                                                 | 0.18       |   | $ | 0.15 |   |

 

Theaccompanying notes are an integral part of these statements

 

4

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**TFFinancial Corporation and Subsidiaries**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                | ** ** | **For the three months ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| ** **                                                                                | ** ** | **(in thousands)**                        | ** ** |
| OPERATING ACTIVITIES                                                                      |       |                                      |       |   |   |
| Net income                                                                                |       | $                                         | 1,476      |   | $ | 1,609 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities         |       |                                      |       |   |   |
| Amortization of                                                                           |       |                                      |       |   |   |
| Mortgage loan servicing rights                                                            |       | 1                                         |       | — |   |
| Deferred loan origination fees                                                            |       | (29                                       | )          | (8 | ) |
| Premiums and discounts on investment  securities, net                                     |       | 19                                        |       | 21 |   |
| Premiums and discounts on mortgage-backed  securities, net                                |       | 151                                       |       | 224 |   |
| Premiums and discounts on loans, net                                                      |       | 32                                        |       | 25 |   |
| Core deposit intangibles                                                                  |       | 34                                        |       | 40 |   |
| Provision for loan losses                                                                 |       | 150                                       |       | 150 |   |
| Depreciation of premises and equipment                                                    |       | 235                                       |       | 234 |   |
| Increase in value of bank-owned life  insurance                                           |       | (122                                      | )          | (132 | ) |
| Stock-based benefit programs                                                              |       | 137                                       |       | 144 |   |
| Gain on sale of                                                                           |       |                                      |       |   |   |
| Real estate acquired through foreclosure                                                  |       | —                                    |       | (1 | ) |
| Mortgage loans available for sale                                                         |       | (22                                       | )          | — |   |
| (Increase) decrease in                                                                    |       |                                      |       |   |   |
| Accrued interest receivable                                                               |       | 49                                        |       | 241 |   |
| Other assets                                                                              |       | (292                                      | )          | 842 |   |
| Increase (decrease) in                                                                    |       |                                      |       |   |   |
| Accrued interest payable                                                                  |       | 558                                       |       | 397 |   |
| Other liabilities                                                                         |       | 20                                        |       | (226 | ) |
|                                                                                      |       |                                      |       |   |   |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                                 |       | 2,397                                     |       | 3,560 |   |
|                                                                                      |       |                                      |       |   |   |
| INVESTING ACTIVITIES                                                                      |       |                                      |       |   |   |
| Loan originations                                                                         |       | (36,531                                   | )          | (29,335 | ) |
| Purchases of loans                                                                        |       | —                                    |       | (3,428 | ) |
| Loan principal payments                                                                   |       | 20,873                                    |       | 18,251 |   |
| Principal repayments on mortgage-backed  securities held to maturity                      |       | 903                                       |       | 2,517 |   |
| Principal repayments on mortgage-backed  securities available for sale                    |       | 7,616                                     |       | 7,196 |   |
| Proceeds from loan sales                                                                  |       | 3,311                                     |       | — |   |
| Purchases and maturities of certificates of  deposit in other financial institutions, net |       | —                                    |       | 117 |   |
| Purchase of investment securities available  for sale                                     |       | (2,984                                    | )          | — |   |
| Purchase of mortgage-backed securities  available for sale                                |       | (8,956                                    | )          | (6,129 | ) |
| Proceeds from maturities of investment  securities held to maturity                       |       | —                                    |       | 2,000 |   |
| (Purchase) redemption of Federal Home Loan  Bank stock                                    |       | (251                                      | )          | 566 |   |
| Proceeds from sale of real estate                                                         |       | —                                    |       | 32 |   |
| Purchase of premises and equipment                                                        |       | (317                                      | )          | (196 | ) |
| NET CASH USED IN INVESTING ACTIVITIES                                                     |       | (16,336                                   | )          | (8,409 | ) |
|                                                                                           |            |                                           |            |  |  |  |  |

 

5

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| ** **                                                                                                     | ** ** | **For the three months ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                     | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| ** **                                                                                                     | ** ** | **(in thousands)**                        | ** ** |
| FINANCING ACTIVITIES                                                                                           |       |                                      |       |   |   |
| Net increase (decrease) in demand  deposit/NOW accounts, passbook savings accounts and certificates of deposit |       | (5,032                                    | )          | 11,575 |   |
| Net increase (decrease) in advances from  Federal Home Loan Bank                                               |       | 16,614                                    |       | (7,944 | ) |
| Net increase (decrease) in advances from  borrowers for taxes and insurance                                    |       | (75                                       | )          | 59 |   |
| Treasury stock acquired                                                                                        |       | (823                                      | )          | (1,216 | ) |
| Exercise of stock options                                                                                      |       | 521                                       |       | 1,245 |   |
| Common stock dividends paid                                                                                    |       | (492                                      | )          | (394 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                      |       | 10,713                                    |       | 3,325 |   |
|                                                                                                           |       |                                      |       |   |   |
| NET DECREASE IN CASH AND CASH EQUIVALENTS                                                                      |       | (3,226                                    | )          | (1,524 | ) |
|                                                                                                           |       |                                      |       |   |   |
| Cash and cash equivalents at beginning of  period                                                              |       | 7,900                                     |       | 8,241 |   |
|                                                                                                           |       |                                      |       |   |   |
| Cash and cash equivalents at end of period                                                                     |       | $                                         | 4,674      |   | $ | 6,717 |   |
|                                                                                                           |       |                                      |       |   |   |
| Supplemental disclosure of cash flow  information                                                              |       |                                      |       |   |   |
| Cash paid for                                                                                                  |       |                                      |       |   |   |
| Interest on deposits and advances from  Federal Home Loan Bank                                                 |       | $                                         | 1,909      |   | $ | 1,755 |   |
| Income taxes                                                                                                   |       | $                                         | —     |   | $ | — |   |
| Non-cash transactions                                                                                          |       |                                      |       |   |   |
| Transfers from loans to real estate  acquired through foreclosure                                              |       | $                                         | —     |   | $ | — |   |

 

Theaccompanying notes are an integral part of these statements

 

6

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**TF FINANCIAL CORPORATION AND SUBSIDIARIES**

**NOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1 -PRINCIPLES OF CONSOLIDATION**

The consolidated financial statements as ofMarch 31, 2005 (unaudited) and December 31, 2004 and for the three-monthperiods ended March 31, 2005 and 2004 (unaudited) include the accounts of TFFinancial Corporation (the “Company”) and its wholly owned subsidiaries ThirdFederal Bank (the “Bank”), TF Investments Corporation and Penns TrailDevelopment Corporation. The Company’s business is conducted principallythrough the Bank. All significant intercompany accounts and transactions havebeen eliminated in consolidation.

 

**NOTE 2 - BASISOF PRESENTATION**

The accompanying unaudited consolidatedfinancial statements were prepared in accordance with instructions for Form10-Q and, therefore, do not include all of the disclosures or footnotesrequired by accounting principles generally accepted in the United States ofAmerica. In the opinion of management, all adjustments, consisting of normalrecurring accruals, necessary for fair presentation of the consolidated financialstatements have been included.  Theresults of operations for the period ended March 31, 2005 are not necessarilyindicative of the results which may be expected for the entire fiscal year orany other period. For further information, refer to consolidated financialstatements and footnotes thereto included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2004.

 

**NOTE 3 –CONTINGENCIES**

The Company, from time to time, is a party toroutine litigation that arises in the normal course of business. In the opinionof management, the resolution of this litigation, if any, would not have amaterial adverse effect on the Company’s consolidated financial position orresults of operations.

 

**NOTE 4 - OTHERCOMPREHENSIVE INCOME (LOSS)**

TheCompany’s other comprehensive income (loss) consists of net unrealized gains(losses) on investment securities and mortgage-backed securities available forsale. Total comprehensive income for the three-month periods ended March 31,2005 and 2004 was $369,000 and $2,408,000, net of applicable income taxexpense(benefit) of $(34,000) and $1,023,000, respectively.

 

**NOTE 5—EARNINGS PER SHARE**

The following tables illustrate the reconciliation ofthe numerators and denominators of the basic and diluted earnings per sharecomputations (dollars in thousands, except per share data):

 
| ** **                                                                  | ** ** | **Three months ended March 31, 2005** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                  | ** ** | **Income  (numerator)**                    | ** ** | **Weighted  average  shares  (denominator****)** | ** ** | **Per share  Amount** | ** ** |
| Basic earnings per share                                                    |       |                                       |       |   |   |   |   |
| Income available to common stockholders                                     |       | $                                          | 1,476      |   | 2,749,053 |   | $ | 0.54 |   |
| Effect of dilutive securities                                               |       |                                       |       |   |   |   |   |
| Stock options                                                               |       | —                                     |       | 74,507 |   | (0.02 | ) |
|                                                                        |       |                                       |       |   |   |   |   |
| Diluted earnings per share                                                  |       |                                       |       |   |   |   |   |
| Income available to common stockholders  plus effect of dilutive securities |       | $                                          | 1,476      |   | 2,823,560 |   | $ | 0.52 |   |

 

There were options to purchase 28,714 shares ofcommon stock at a price of $34.14 per share which were outstanding during thefirst quarter of 2005 that were not included in the computation of dilutedearnings per share because the options’ exercise prices were greater than theaverage market price of the common shares.

 

7

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| ** **                                                                  | ** ** | **Three months ended March 31, 2004** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                  | ** ** | **Income  (numerator)**                    | ** ** | **Weighted average  shares  (denominator)** | ** ** | **Per share  Amount** | ** ** |
| Basic earnings per share                                                    |       |                                       |       |   |   |   |   |
| Income available to common stockholders                                     |       | $                                          | 1,609      |   | 2,649,208 |   | $ | 0.61 |   |
| Effect of dilutive securities                                               |       |                                       |       |   |   |   |   |
| Stock options                                                               |       | —                                     |       | 171,464 |   | (0.04 | ) |
|                                                                        |       |                                       |       |   |   |   |   |
| Diluted earnings per share                                                  |       |                                       |       |   |   |   |   |
| Income available to common stockholders  plus effect of dilutive securities |       | $                                          | 1,609      |   | 2,820,672 |   | $ | 0.57 |   |

 

There were options to purchase 32,248 shares ofcommon stock at a price of $34.14 per share which were outstanding during thefirst quarter of 2004 that were not included in the computation of dilutedearnings per share because the options’ exercise prices were greater than theaverage market price of the common shares.

 

**NOTE 6- STOCKBASED COMPENSATION**

TheCompany has two fixed stock option plans. The Company’s employee stock optionplans are accounted for using the intrinsic value method under APB Opinion No.25, as permitted by SFAS No. 123. No stock-based compensation expense isreflected in net income, as all options granted under the plans had an exerciseprice equal to the market value of the underlying common stock on the date ofthe grant.

 

Hadcompensation cost for the plans been determined based on the fair value ofoptions at the grant dates consistent with the method of SFAS No. 123, “Accountingfor Stock-Based Compensation,” the Company’s net income and earnings per sharewould have been reduced to the pro forma amounts indicated below (in thousands,except per share data):

 
| ** **                                                                                                   | ** ** | **Three months ended  March 31** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                   | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Net income                                                                                                   |       |                                  |       |   |   |
| As reported                                                                                                  |       | $                                     | 1,476      |   | $ | 1,609 |   |
| Deduct: stock-based compensation expense  determined using the fair value method, net of related tax effects |       | 19                                    |       | 25 |   |
| Pro forma                                                                                                    |       | $                                     | 1,457      |   | $ | 1,584 |   |
|                                                                                                         |       |                                  |       |   |   |
| Basic earnings per share                                                                                     |       |                                  |       |   |   |
| As reported                                                                                                  |       | $                                     | 0.54       |   | $ | .061 |   |
| Deduct: stock-based compensation expense  determined using the fair value method, net of related tax effects |       | 0.01                                  |       | 0.01 |   |
| Pro forma                                                                                                    |       | $                                     | 0.53       |   | $ | 0.60 |   |
|                                                                                                         |       |                                  |       |   |   |
| Diluted earnings per share                                                                                   |       |                                  |       |   |   |
| As reported                                                                                                  |       | $                                     | 0.52       |   | $ | 0.57 |   |
| Deduct: stock-based compensation expense  determined using the fair value method, net of related tax effects |       | —                                |       | — |   |
| Pro forma                                                                                                    |       | $                                     | 0.52       |   | $ | 0.57 |   |

 

8

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Stock-based compensation expense included in netincome is related to stock grants in lieu of salary and the Company’s employeestock ownership plan. Such expense totaled $108,000 and $121,000 for thethree-month periods ended March 31, 2005 and 2004, respectively.

 

On April 27, 2005, the Company’s shareholdersapproved the 2005 Stock-Based Incentive Plan (the “2005” Plan) which providesfor grants of stock options an/or restricted stock aggregating up to 240,000shares of the Company’s common stock, with a maximum of 40,000 shares ofrestricted stock. No grants may be issued from the 2005 Plan prior to June 1,2005.

 

**NOTE 7-EMPLOYEE BENEFIT PLANS**

Net periodic definedbenefit pension cost included the following (in thousands):

 
| ** **                                    | ** ** | **Three months ended  March 31** | ** ** |
|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** |
|                                          |       |                                  |       |   |   |
| Components of net periodic benefit cost       |       |                                  |       |   |   |
| Service cost                                  |       | $                                     | 78         |   | $ | 58 |   |
| Interest cost                                 |       | 53                                    |       | 44 |   |
| Expected return on plan assets                |       | (47                                   | )          | (52 | ) |
| Amortization of prior service cost            |       | 16                                    |       | 16 |   |
| Amortization of transition obligation (asset) |       | —                                |       | 1 |   |
| Recognized net actuarial (gain) loss          |       | 11                                    |       | 4 |   |
|                                          |       |                                  |       |   |   |
| Net periodic benefit cost                     |       | $                                     | 111        |   | $ | 71 |   |

 

The employer contributionmade for the three months ended March 31, 2005 and 2004 was $341,000 and $0,respectively.

 

**NOTE 8-RECLASSIFICATIONS**

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

 

9

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**TF FINANCIAL CORPORATION ANDSUBSIDIARIES**

 

**MANAGEMENT’SDISCUSSION AND ANALYSIS OF**

### **FINANCIAL POSITION AND RESULTS OF OPERATIONS**

### ** **

**GENERAL**

TheCompany may from time to time make written or oral “forward-looking statements”,including statements contained in the Company’s filings with the Securities andExchange Commission (including this Quarterly Report on Form 10-Q and theexhibits thereto), in its reports to stockholders and in other communicationsby the Company, which are made in good faith by the Company pursuant to the “SafeHarbor” Provisions of the Private Securities Litigation Reform Act of 1995.

 

Theseforward-looking statements involve risks and uncertainties, such as statementsof the Company’s plans, objectives, expectations, estimates and intentions thatare subject to change based on various important factors (some of which arebeyond the Company’s control).  Thefollowing factors, among others, could cause the Company’s financialperformance to differ materially from the plans, objectives, expectations,estimates and intentions expressed in such forward-looking statements: thestrength of the United States economy in general and the strength of the localeconomies in which the Company conducts operations; the effects of, and changesin, trade, monetary and fiscal policies and laws, including interest ratepolicies of the Board of Governors of the Federal Reserve System, inflation,interest rate, market and monetary fluctuations; the timely development of andacceptance of new products and services of the Company and the perceivedoverall value of these products and services by users, including the features,pricing and quality compared to competitors’ products and services; thewillingness of users to substitute competitors’ products and services for theCompany’s products and services; the success of the Company in gainingregulatory approval of its products and services, when required; the impact ofchanges in financial services’ laws and regulations (including laws concerningtaxes, banking, securities and insurance); technological changes, acquisitions;changes in consumer spending and saving habits; and the success of the Companyat managing the risks involved in the foregoing.

 

TheCompany cautions that the foregoing list of important factors is notexclusive.  The Company does notundertake to update any forward-looking statement, whether written or oral,that may be made from time to time by or on behalf of the Company.

 

**Financial Position**

 

The Company’s total assets at March 31, 2005 and December 31, 2004 were$640.5 million and $629.0 million, respectively, an increase of $11.5 million,or 1.8%, during the three-month period. Cash and cash equivalents decreased by$3.2 million. Investment securities available for sale increased by $2.6million due to purchases of $3.0 million of tax free municipal bonds and a $0.4million reduction in the market value of investment securities available forsale. Investment securities held to maturity decreased by $0.2 million due to amortizationof net premiums on the securities. Mortgage-backed securities available forsale decreased by $0.1 million as $9.0 million of security purchases wasoff-set by $7.6 million in principal pay-downs received as well as a decreasein the market value of these securities totaling $1.3 million. Mortgage-backedsecurities held to maturity decreased by $0.9 million as a result of principalrepayments. Loans receivable increased by $12.2 million for the first quarterof 2005. Consumer and single-family residential mortgage loans of $21.6 millionand commercial loans of $14.9 million were originated during the first quarterof 2005. Proceeds from the sale of loans in the secondary market were $3.3million during the three-month period. In addition, principal repayments ofloans receivable were $20.9 million in the first quarter of 2005.

 

10

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Total liabilities increased by $11.8 million. Deposit balances declinedby $5.0 million during the first three months of 2005. Non-interest bearingdemand deposits grew by $1.7 million while savings, money market, andinterest-bearing checking accounts decreased by a combined $8.7 million.Certificates of deposit increased by $2.0 million. Advances from the FederalHome Loan Bank increased by $16.6 million due to an $11.3 million increase inlong-term fixed rate advances and $8.9 million of short-term advances, lessscheduled amortization payments of $3.6 million. These borrowings were mainlyused to fund loan portfolio growth and deposit outflows that occurred duringthe quarter.

 

Totalconsolidated stockholders’ equity of the Company was $60.9 million or 9.50% oftotal assets at March 31, 2005. During the first quarter of 2005 the Companyrepurchased 26,237 shares of its common stock and issued 32,446 shares pursuantto the exercise of stock options. As of March 31, 2005, there wereapproximately 101,000 shares available for repurchase under the previouslyannounced share repurchase plan.

 

###### **AssetQuality**

 

During the first quarter of 2005 and 2004, the Company’s provision forloan losses was $150,000.  As of March31, 2005, the Company owned one parcel of foreclosed real estate. This parcelhas been recorded as real estate owned at the lower of the recorded investmentin the loan or estimated fair value in the amount of $0.7 million and isincluded in other assets in the statement of financial position at March 31,2005. Management of the Company believes that there has not been any significantdeterioration in its asset quality during such period.

 

Thefollowing table sets forth information regarding the Company’s asset quality(dollars in thousands):

 
| ** **                                            | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** | **March 31,  2004** | ** ** |
|-------------------------------------------------------|------------|---------------------|------------|------------------------|------------|---------------------|------------|
| ** **                                            | ** ** | ** **          | ** ** | ** **             | ** ** | ** **          | ** ** |
| Non-performing loans                                  |       | $                   | 727        |                   | $          | 960                 |       | $ | 2,710 |   |
| Ratio of non-performing loans  to gross loans         |       | 0.16                | %          | 0.22                   | %          | 0.64                | %          |
| Ratio of non-performing loans  to total assets        |       | 0.11                | %          | 0.15                   | %          | 0.44                | %          |
| Foreclosed property                                   |       | $                   | 700        |                   | $          | 700                 |       | $ | 837 |   |
| Foreclosed property to total  assets                  |       | 0.11                | %          | 0.11                   | %          | 0.14                | %          |
| Ratio of total non-performing  assets to total assets |       | 0.22                | %          | 0.26                   | %          | 0.58                | %          |

 

Managementmaintains an allowance for loan losses at levels that are believed to beadequate; however, there can be no assurances that further additions will not benecessary or that losses inherent in the existing loan portfolio will notexceed the allowance.  The followingtable sets forth the activity in the allowance for loan losses during theperiods indicated (in thousands):

 
| ** **                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| Beginning balance, January 1,              |       | $        | 2,307      |     | $          | 2,111 |   |
| Provision                                  |       | 150      |       | 150      |       |
| Less: charge-off’s  (recoveries), net |       | 236      |       | 39       |       |
| Ending balance, March 31,                  |       | $        | 2,221      |     | $          | 2,222 |   |

 

11

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**RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND2004**

 

**Net Income**.  The Company recorded a net income of$1,476,000, or $0.52 per diluted share, for the three months ended March 31,2005 as compared to net income of $1,609,000, or $0.57 per diluted share, forthe three months ended March 31, 2004.

 

### **Average Balance Sheet**

 

Thefollowing table sets forth information relating to the Company’s averagebalance sheet and reflects the average yield on assets and average cost ofliabilities for the periods indicated. Yield and cost are computed by dividingincome or expense by the average daily balance of interest-earning assets orinterest-bearing liabilities, respectively, at-or for the three month periodsindicated.

 
| ** **                                                                         | ** ** | **March 31,**        | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                         | ** ** | **2005**             | ** ** | **2004** | ** ** |
| ** **                                                                         | ** ** | **Average  balance** | ** ** | **Interest** | ** ** | **Average  yld/cost** | ** ** | **Average  balance** | ** ** | **Interest** | ** ** | **Average  yld/cost** | ** ** |
| **ASSETS**                                                                         |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| **Interest-earning assets:**                                                       |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| Loans receivable(1)                                                                |       | $                    | 446,618    |   | $ | 6,471 |   | 5.88 | % | $ | 410,976 |   | $ | 5,990 |   | 5.86 | % |
| Mortgage-backed securities                                                         |       | 118,816              |       | 1,303 |   | 4.45 | % | 130,658 |   | 1,457 |   | 4.49 | % |
| Investment securities(2)                                                           |       | 32,861               |       | 379 |   | 4.68 | % | 30,453 |   | 328 |   | 4.33 | % |
| Other interest-earning assets(3)                                                   |       | 1,135                |       | 10 |   | 3.57 | % | 1,570 |   | 3 |   | 0.77 | % |
| Total interest-earning assets                                                      |       | 599,430              |       | 8,163 |   | 5.52 | % | 573,657 |   | 7,778 |   | 5.45 | % |
| Non interest-earning assets                                                        |       | 33,211               |       |   |   |   |   | 35,513 |   |   |   |   |   |
| Total assets                                                                       |       | $                    | 632,641    |   |   |   |   |   | $ | 609,170 |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY:**                                     |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing liabilities**                                                   |       |                 |       |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                           |       | 455,316              |       | 1,536 |   | 1.37 | % | 464,744 |   | 1,506 |   | 1.30 | % |
| Advances from the FHLB                                                             |       | 111,888              |       | 931 |   | 3.37 | % | 83,314 |   | 646 |   | 3.12 | % |
| Total interest-bearing liabilities                                                 |       | 567,204              |       | 2,467 |   | 1.76 | % | 548,058 |   | 2,152 |   | 1.58 | % |
| Non interest-bearing liabilities                                                   |       | 5,155                |       |   |   |   |   | 5,233 |   |   |   |   |   |
| Total liabilities                                                                  |       | 572,359              |       |   |   |   |   | 553,291 |   |   |   |   |   |
| Stockholders’ equity                                                          |       | 60,282               |       |   |   |   |   | 55,879 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                    |       | $                    | 632,641    |   |   |   |   |   | $ | 609,170 |   |   |   |   |   |
| Net interest income                                                                |       |                 |       | $ | 5,696 |   |   |   |   |   | $ | 5,626 |   |   |   |
| Interest rate spread(4)                                                            |       |                 |       |   |   | 3.76 | % |   |   |   |   | 3.87 | % |
| Net yield on interest-earning assets(5)                                            |       |                 |       |   |   | 3.85 | % |   |   |   |   | 3.94 | % |
| Ratio of average interest-earning assets to average interest- bearing  liabilities |       |                 |       |   |   | 106 | % |   |   |   |   | 105 | % |

 

----

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

(2)   Tax equivalent adjustments to interest on investment securitieswere $66,000 and $48,000 for the quarters ended March 31, 2005 and 2004,respectively. Tax equivalent interest income is based upon a marginal effectivetax rate of 34%.

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

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

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

 

12

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**Rate/Volume Analysis**

 

Thefollowing table presents, for the periods indicated, the change in interestincome and interest expense (in thousands) attributed to (i) changes in volume(changes in the weighted average balance of the total interest earning assetand 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 beenallocated proportionately based on the absolute value of changes due to volumeand changes due to rate.

 
| ** **                         | ** ** | **Three months ended March 31,**         | ** ** |
|------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2005 vs 2004   Increase (decrease) due to** | ** ** |
| ** **                         | ** ** | **Volume**                                    | ** ** | **Rate** | ** ** | **Net** | ** ** |
| **Interest income:**               |       |                                          |       |   |   |   |   |
| Loans receivable, net              |       | $                                             | 468        |   | $ | 13 |   | $ | 481 |   |
| Mortgage-backed securities         |       | (141                                          | )          | (13 | ) | (154 | ) |
| Investment securities (1)          |       | 25                                            |       | 26 |   | 51 |   |
| Other interest-earning assets      |       | (6                                            | )          | 13 |   | 7 |   |
| Total interest-earning assets      |       | 346                                           |       | 39 |   | 385 |   |
| **Interest expense:**              |       |                                          |       |   |   |   |   |
| Deposits                           |       | (166                                          | )          | 196 |   | 30 |   |
| Advances from the FHLB             |       | 230                                           |       | 55 |   | 285 |   |
| Total interest-bearing liabilities |       | 64                                            |       | 251 |   | 315 |   |
| Net change in net interest income  |       | $                                             | 282        |   | $ | (212 | ) | $ | 70 |   |

 

----

(1)          Tax equivalent adjustments to interest on investment securities were$66,000 and $48,000 for the quarters ended March 31, 2005 and 2004,respectively. Tax equivalent interest income is based upon a marginal effectivetax rate of 34%.

 

**Total Interest Income**.  Total interest income, on ataxable equivalent basis, increased by $0.4 million or 5.0% to $8.2 million forthe quarter ended March 31, 2005 compared with the first quarter of 2004primarily because of a $35.6 million increase in average loans outstanding.Interest income from mortgage-backed securities was lower in the first threemonths of 2005 in comparison to the same period of 2004. This decrease isconsistent with the reduction of balances maintained in mortgage-backedsecurities.

 

**Total Interest Expense.** Total interest expense increasedby $0.3 million to $2.5 million during the three-month period ended March 31, 2005as compared with the first quarter of 2004. The decrease in the average balanceof deposits was more than offset by an increase in interest rates on Bank’ssavings and passbook accounts in order to remain in line with short-term marketinterest rates and the Bank’s competitors. Increases in the advances from the Federal Home Loan Bank during 2004and the first quarter of 2005 is the primary cause for the increase in interestexpense between the two quarters.

 

**Non-interestincome.**  Total non-interest income was $662,000 forthe three-month period ended March 31, 2005 compared with $709,000 for the sameperiod in 2004.  The decrease was due toa reduction of $48,000 in loan prepayment fees and mortgage brokered feescollected in the first quarter of 2005 versus the same quarter of 2004. Retailbanking fees were $29,000 less between the two periods due to a decrease indemand deposit account fees. In contrast, during the first quarter of 2005 netgain on the sale of loans totaled $22,000 while there was no such gains duringthe first three months of 2004.

 

**Non-interestexpense.**  Total non-interest expense increased by$214,000 to $4.1 million for the three months ended March 31, 2005 compared tothe same period in 2004.  Compensationand benefit expenses were higher by $117,000 mainly due to additional staffingas well as salary increases. Office and occupancy costs rose $66,000 betweenthe two quarters due to $20,000 of greater office maintenance costs, $14,000 ofadditional space leased during the second quarter of 2004 for deposit servicessupport, annual rent increases, and additional security guard services.Professional expenses of the Company were $20,000 higher mainly because of ITcompliance and audit work.

 

13

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**LIQUIDITYAND CAPITAL RESOURCES**

 

**Liquidity**

 

The Company’s liquidity is a measure of its ability tofund loans, pay withdrawals of deposits, and other cash outflows in anefficient, cost-effective manner.  TheCompany’s short-term sources of liquidity include maturity, repayment and salesof assets, excess cash and cash equivalents, new deposits, broker deposits,other borrowings, and new advances from the Federal Home Loan Bank. There hasbeen no material adverse change during three-month period ended March 31, 2005in the ability of the Company and its subsidiaries to fund their operations.

 

At March 31, 2005, the Company had commitmentsoutstanding under letters of credit of $1.3 million, commitments to originateloans of $41.6 million, and commitments to fund undisbursed balances of closedloans and unused lines of credit of $57.2 million.  There has been no material change during thethree months ended March 31, 2005 in any of the Company’s other contractualobligations or commitments to make future payments.

 

**Capital Requirements**

 

The Bank was in compliance with all of its capitalrequirements as of March 31, 2005.

 

###### **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

###### **Assetand Liability Management**

 

TheCompany’s market risk exposure is predominately caused by interest rate risk,which is defined as the sensitivity of the Company’s current and futureearnings, the values of its assets and liabilities, and the value of itscapital to changes in the level of market interest rates.  Management of the Company believes that therehas not been a material adverse change in market risk during the three monthsended March 31, 2005.

 

**CONTROLSAND PROCEDURES**

 

**Evaluation of Disclosure Controls and Procedures**

 

Basedon their evaluation of the Company’s disclosure controls and procedures (asdefined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “ExchangeAct”)), the Company’s principal executive officer and principal financialofficer have concluded that as of the end of the period covered by thisQuarterly Report on Form 10-Q such disclosure controls and procedures areeffective to ensure that information required to be disclosed by the Company inreports that it files or submits under the Exchange Act is recorded, processed,summarized and reported within the time periods specified in Securities andExchange Commission rules and forms.

 

**Changes in Internal Controls over Financial Reporting**

 

Duringthe quarter under report, there was no change in the Company’s internal controlover financial reporting that has materially affected, or is reasonably likelyto materially affect, the Company’s internal control over financial reporting.

 

14

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**CRITICAL ACCOUNTING POLICIES**

 

Certaincritical accounting policies of the Company require the use of significantjudgment and accounting estimates in the preparation of the consolidatedfinancial statements and related data of the Company. These accountingestimates require management to make assumptions about matters that are highlyuncertain at the time the accounting estimate is made. Management believes thatthe most critical accounting policy requiring the use of accounting estimatesand judgment is the determination of the allowance for loan losses. If thefinancial position of a significant amount of debtors should deteriorate morethan the Company has estimated, present reserves for loan losses may beinsufficient and additional provisions for loan losses may be required. Theallowance for loan losses was $2,221,000 at March 31, 2005.

 

**NEW ACCOUNTING PRONOUNCEMENTS**

 

OnDecember 16, 2004, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards No. 123(R) (SFAS 123 R), “Share-BasedPayment. This statement establishes standards for the accounting fortransactions in which the entity exchanges its equity instruments in exchangefor goods and services and addresses transactions in which an entity incursliabilities in exchange for goods and services that are based on the fair valueof the entity’s equity instruments or that may be settled by the issuance ofthose equity instruments. SFAS123(R) focuses primarily on accounting fortransactions in which an entity obtains employee services in share-basedpayment transactions. Under SFAS123(R), all forms of share-based payments toemployees, including employee stock options, will be treated the same as otherforms of compensation by recognizing the related cost in the incomestatement.    The expense of the awardwill generally be measured at fair value at the grant date. The grant-date fairvalue of employee share options and similar instruments will be estimated usingoption pricing models. Current accounting guidance requires that the expenserelating to so-called fixed plan employee stock options only be disclosed inthe footnotes to the financial statements. In April 2005, the Securities andExchange Commission adopted a new rule amending Regulation S-X to amend thedate for compliance with SFAS123(R). Under SFAS123(R), registrants would havebeen required to apply the provisions of SFAS123(R) as of the first interim ofannual reporting period that begins after June 15, 2005 or after December 15,2005 for small business issuers. The Commission’s new rule allows registrants toimplement SFAS123(R) at the beginning of their next fiscal year that beginsafter June 15, 2005 or after December 15, 2005 for small business issuers.

 

InMarch 2005 the FASB issued Interpretation No. 47, “Accounting for ConditionalAsset Retirement Obligations” (FIN 47). FIN 47 requires an entity to recognizea liability for the fair value of a legal obligation to performasset-retirement activities that are conditional on a future event if theamount can be reasonably estimated. The Interpretation provides guidance toevaluate whether fair value is reasonably estimable.  FIN 47 is effective no later than the end offiscal years ending after December 15, 2005. FIN 47 is not expected to have amaterial impact on the Company’s financial position or results of operations.

 

15

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**TF FINANCIAL CORPORATION ANDSUBSIDIARIES**

 

**PART II**

 

**ITEM 1.****                                                                                               ****LEGAL PROCEEDINGS**

Not applicable.

 

**ITEM 2.****                                                                                               ****UNREGISTERED SALE OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

The following table provides information onrepurchases by the Company of its common stock in each month for the threemonths ended March 31, 2005:

 
| **Month**                            | ** ** | **Total Number of  Shares Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number of  Shares Purchased  as  Part of Publicly  Announced Plan of  Program** | ** ** | **Maximum Number   of  Shares that may yet  be Purchased  Under  the Plans or  Programs** | ** ** |
|--------------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|
|                                 |       |                                  |       |                              |       |                                                                                    |       |                                                                                      |       |
| January 1, 2005 - January 31, 2005   |       | —                                |       | —                            |       | —                                                                                  |       | 101,123                                                                                   |       |
|                                 |       |                                  |       |                              |       |                                                                                    |       |                                                                                      |       |
| February 1, 2005 - February 28, 2005 |       | —                                |       | —                            |       | —                                                                                  |       | 101,123                                                                                   |       |
|                                 |       |                                  |       |                              |       |                                                                                    |       |                                                                                      |       |
| March 1, 2005 - March 31, 2005       |       | 26,237                                |       | 31.35                             |       | —                                                                                  |       | 101,123                                                                                   |       |

 

Thetotal number of shares repurchased during the quarter comprises 26,237 sharesrepurchased in conjunction with the exercise of 18,000 stock options.  The repurchase poses no modification to therights of stockholders.  Furthermore,there has been no change in the ability of the Company to pay dividends or anymaterial change in the working capital of the Company.  The stock repurchase did not alter thepreviously approved stock repurchase plan of the Company.

 

**ITEM 3.                             DEFAULTS UPONSENIOR SECURITIES**

Not applicable.

 

16

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**ITEM 4.****                                                                                               ****SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS**

The Annual Meeting ofStockholders (the “Meeting”) of the Company was held on April 27, 2005. Therewere outstanding and entitled to vote at the Meeting 2,950,463 shares of CommonStock of the Company. There were present at the meeting or by proxy the holdersof 2,627,869 shares of Common Stock representing 89.07% of the total eligiblevotes to be cast. Proposal 1 was to elect two directors of the Company.Proposal 2 was to ratify the appointment of the independent auditor for theDecember 31, 2005 fiscal year. Proposal 3 was for the approval and adoption ofthe Company’s 2005 Stock-Based Incentive Plan. Proposal 4, a shareholdersubmitted proposal, was to take the necessary steps to remove any provisions inthe Company’s Certificate of Incorporation and Bylaws that segregate the Boardof Directors into separate classes with staggered terms of office. The resultof the voting at the Meeting is as follows (percentages in terms of votescast):

 

**Proposal 1**
| John R. Stranford     |   | FOR:      |   | 2,168,334 |   | PERCENT FOR:       |   | 82.51 | % |
|-----------------------|--------|-----------|--------|-----------|--------|--------------------|--------|-------|---|
|                  |   | WITHHELD: |   | 459,535   |   | PERCENT  WITHHELD: |   | 17.49 | % |
| Albert M.Tantala, Sr. |   | FOR:      |   | 2,196,139 |   | PERCENT FOR:       |   | 83.57 | % |
|                  |   | WITHHELD: |   | 431,730   |   | PERCENT  WITHHELD: |   | 16.43 | % |

 

**Proposal 2**

Ratification of the appointment of GrantThornton, LLP as independent auditor for the Company for the December 31, 2005fiscal year.

 
|   |   | FOR:     |   | 2,614,341 |   | PERCENT FOR:      |   | 99.49 | % |
|--------|--------|----------|--------|-----------|--------|-------------------|--------|-------|---|
|   |   | AGAINST: |   | 9,939     |   | PERCENT  AGAINST: |   | 0.38  | % |
|   |   | ABSTAIN: |   | 3,589     |   | PERCENT  ABSTAIN  |   | 0.13  | % |

 

**Proposal 3**

Approval and adoption of the Company’s 2005Stock-Based Incentive Plan.

 
|   |   | FOR:     |   | 1,469,409 |   | PERCENT FOR:      |   | 65.83 | % |
|--------|--------|----------|--------|-----------|--------|-------------------|--------|-------|---|
|   |   | AGAINST: |   | 733,216   |   | PERCENT  AGAINST: |   | 32.85 | % |
|   |   | ABSTAIN: |   | 29,584    |   | PERCENT  ABSTAIN  |   | 1.32  | % |

 

**Proposal 4**

To remove provisions from the Company’sCertificate of Incorporation and Bylaws that segregate the Board of Directorsinto separate classed with staggered terms of office.

 
|   |   | FOR:     |   | 879,962   |   | PERCENT FOR:      |   | 39.42 | % |
|--------|--------|----------|--------|-----------|--------|-------------------|--------|-------|---|
|   |   | AGAINST: |   | 1,315,064 |   | PERCENT  AGAINST: |   | 58.91 | % |
|   |   | ABSTAIN: |   | 37,183    |   | PERCENT  ABSTAIN  |   | 1.67  | % |

 

**ITEM 5.                            OTHER INFORMATION**

None

 

17

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**ITEM 6.                            EXHIBITS AND REPORTSON FORM 8-K**

(a)          Exhibits

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

 

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

 

18

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**TF FINANCIAL CORPORATION**

 

**SIGNATURES**

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

 

 
|   | /s/ Kent C. Lufkin                              |   |
|--------|-------------------------------------------------|--------|
| Date:  |  May 13, 2005                              |   | Kent C. Lufkin |
|   | President and CEO                               |
|   | (Principal Executive Officer)                   |
|   |                                            |
|   |                                            |
|   | /s/ Dennis R. Stewart                           |   |
| Date:  |  May 13, 2005                              |   | Dennis R. Stewart |
|   | Executive Vice President and                    |
|   | Chief Financial Officer                         |
|   | (Principal  Financial & Accounting Officer) |
|        |                                                 |        |  |  |  |

 

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