SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                -----------------

                                   FORM 10-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     March 31, 1997
                               -------------------------------------------------

                                       OR

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

For the transition period from                    to
                               ------------------    --------------------

                             COMMISSION FILE NUMBER   0-24168
                                                      -------

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



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

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

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

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

              Indicate  by check _  whether  the  registrant  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such 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
                                              ---      ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date May 14, 1998


                Class                                     Outstanding
        ---------------------------                    ----------------
        $.10 par value common stock                    2,891,022 shares


                                       1
<PAGE>

                   TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                   FORM 1O-Q

                      FOR THE QUARTER ENDED MARCH 31, 1998


                                     INDEX


                                                                            Page
                                                                          Number
                                                                          ------

PART I - CONSOLIDATED FINANCIAL INFORMATION

Item     1.       Unaudited Consolidated Financial Statements                  3
Item     2.       Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                 9
Item     3.       Quantitative and Qualitative Disclosures about Market Risk  15

PART II- OTHER INFORMATION

Item     1.       Legal Proceedings                                           16
Item     2.       Changes in Securities                                       16
Item     3.       Defaults upon Senior Securities                             16
Item     4.       Submission of Matters to a Vote of Security Holders         16
Item     5.       Other Materially Important Events                           16
Item     6.       Exhibits and Reports on Form 8-K                            16

SIGNATURES

                                       2
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                            March 31,    December 31,
         ASSETS                                                                1998         1997
                                                                             --------     --------
<S>                                                                         <C>           <C>
Cash and cash equivalents                                                   $  34,793       41,625
Securities purchased under agreements to resell                                     0       10,000
Certificates of deposit in other financial institutions                         2,537        2,737
Investment securities available for sale - at market value                     44,333       32,037
Investment securities held to maturity (market value of $60,786 and
   $53,026 respectively, for the periods shown)                                60,565       57,740
Mortgage-backed securities available for sale - at market value                45,321       36,847
Mortgage-backed securities held to maturity (market value of $191,514 and
    $145,723 respectively, for the periods shown)                             189,697      144,074
Loans receivable, net                                                         240,552      250,711
Accrued interest receivable                                                     4,062        3,957
Goodwill/Core deposit intangible                                                8,048        8,274
Premises and equipment, net                                                     8,113        7,889
Other assets                                                                    1,434        1,156
                                                                             --------     --------
         Total Assets                                                        $639,455     $597,047
                                                                             ========     ========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
   Deposits                                                                  $450,629     $450,429
   Advances from the Federal Home Loan Bank                                   128,359       88,359
   Advances from borrowers for taxes and insurance                              1,442        1,591
   Accrued interest payable                                                     4,566        2,470
   Other liabilities                                                            3,480        4,103
                                                                             --------     --------
         Total Liabilities                                                    588,476      546,952
                                                                             --------     --------

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; 2,891,022 and 2,886,251 shares outstanding
       at March 31, 1998 and December 31, 1997, net of treasury shares of
       2,101,301 and 2,102,767 respectively                                       529          529
   Additional paid-in capital                                                  51,823       51,775
   Net unrealized gain on investment securities available for sale                196          169
   Unearned ESOP shares-at cost                                                (2,976)      (3,010)
   Shares acquired by MSBP                                                       (789)        (895)
   Treasury stock - at cost                                                   (41,620)     (41,649)
   Retained earnings                                                           43,816       43,176
                                                                             --------     --------
         Total Stockholders' Equity                                            50,979       50,095
                                                                             --------     --------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $639,455     $597,047
                                                                             ========     ========
</TABLE>

See notes to consolidated financial statement

                                       3
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                  UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                           Three Months
                                                                          Ended March 31,
                                                                          ---------------
                                                                        1998         1997
                                                                        ----         ----
<S>                                                                   <C>         <C>
Interest income
   Loans                                                              $  4,904    $  6,192
   Mortgage-backed securities                                            3,238       3,108
   Investment securities                                                 1,577       1,567
   Interest bearing deposits and other                                     422         308
                                                                      --------    --------
         TOTAL INTEREST INCOME                                          10,141      11,175
Interest expense
   Deposits                                                              4,314       4,657
   Borrowings                                                            1,348       1,457
                                                                      --------    --------
         TOTAL INTEREST EXPENSE                                          5,662       6,114
         NET INTEREST INCOME                                             4,479       5,061
Provision for loan losses                                                   15         105
                                                                      --------    --------
         NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES             4,464       4,956
Non-interest income
   Gain (loss) on sale of real estate acquired through foreclosure          (1)          0
   Gain on sale of mortgage-backed securities                                0          73
   Gain (loss) on sale of loans                                             74          (1)
   Gain on sale of servicing                                                 0           0
   Service fees, charges and other operating income                        347         318
                                                                      --------    --------
                TOTAL NON-INTEREST INCOME                                  420         390
Non-interest expense
   Employee compensation and benefits                                    1,665       1,673
   Occupancy and equipment                                                 439         445
   Federal deposit insurance premium                                        70          77
   Data processing                                                         175         180
   Professional fees                                                       135         133
   Goodwill and other intangible amortization                              225         244
   Provision for losses on real estate acquired through foreclosure          0           0
   Advertising                                                              90          98
   Other operating                                                         576         558
                                                                      --------    --------
         TOTAL NON-INTEREST EXPENSE                                      3,375       3,408
              INCOME BEFORE INCOME TAXES                                 1,509       1,938
Income taxes                                                               516         774
                                                                      --------    --------
         NET INCOME                                                   $    993    $  1,164
                                                                      ========    ========

Per share data
         Basic earnings per share                                     $   0.34    $   0.30
         Diluted earnings per share                                   $   0.31    $   0.29
Weighted average number of shares outstanding - Basic                    2,888       3,900
Weighted average number of shares outstanding - Diluted                  3,242       4,073
</TABLE>

See notes to consolidated financial statement

                                       4

<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                    Three Months
                                                                                   Ended March 31,
                                                                                --------------------
                                                                                    1998     1997
                                                                                ---------  ---------

<S>                                                                             <C>        <C>
CASH FLOWS FROM  OPERATING  ACTIVITIES
         Net Income                                                             $     993  $   1,164
         Adjustments to reconcile net income to net cash provided by
         operating activities:
           Amortization of:
                  Mortgage loan servicing rights                                        6         23
                  Deferred loan origination fees                                      (59)       (43)
                  Premiums and discounts on investment securities. net                 31         (7)
                  Premiums and discounts on mortgage-backed securities and
                  loans, net                                                           85        (11)
                  Amortization of goodwill and core deposit intangible                225        244
         Provision for loan losses and provision for losses on real estate             15        105
         Depreciation of premises and equipment                                       179        173
         Recognition of ESOP and MSBP expenses                                        206        228
         (Gain) loss on sale of mortgage-backed securities - available for sale         0        (73)
         (Gain) on sale of investment securities - available for sale                   0          0
         (Gain) loss on sale of real estate acquired through foreclosure                1          0
         (Gain) on sale of mortgage servicing rights                                    0          0
         (Gain) loss on sale of mortgage loans                                        (74)         1
         Decrease (increase) in
                  Accrued interest receivable                                        (105)       (11)
                  Other assets                                                       (334)      (120)
         Increase (decrease) in
                  Accrued interest payable                                          2,096      2,251
                  Other liabilities                                                  (711)       552
                                                                                ---------  ---------
                  NET CASH PROVIDED BY OPERATING ACTIVITIES                         2,554      4,476

CASH FLOWS FROM INVESTING ACTIVITIES
Loan origination and principal payments on loans. net                              (4,271)    (2,822)
Purchases of loans                                                                      0    (12,211)
Proceeds from loan sales                                                           14,527      6,518
Purchases and maturities of certificates of deposit in other
   financial institutions. net                                                        200       (475)
Purchases and maturities of securities purchased under
  agreements to resell, net                                                        10,000      8,022
Purchases of investment securities -
  available for sale                                                              (73,998)    (6,982)
Purchases of investment securities - held to maturity                             (16,415)   (45,425)
Purchases of mortgage-backed securities - available for sale                      (10,154)    (4,935)
Purchase of mortgage-backed securities - held to maturity                         (54,734)   (15,071)
Proceeds from maturities of investment securities - held to maturity               14,582     30,680
Proceeds from maturities of investment securities - available for sale             62,265      1,350
Principal repayments from maturities of mortgage-backed securities-
   held to maturity                                                                 9,072      5,811
Principal repayments from maturities of mortgage-backed securities-
   available for sale                                                               1,664        571
Proceeds from the sale of mortgage-backed securities - available for sale               0      2,647
Proceeds from the sale of investment securities - available for sale                    0          0
Purchases and redemptions of Federal Home Loan Bank Stock, net                     (1,500)      (250)
Proceeds from sales of real estate acquired through foreclosure                        50          0
Purchase of premises and equipment                                                   (403)      (112)
                                                                                ---------  ---------
          NET CASH PROVIDED BY (USED IN)  INVESTING ACTIVITIES                    (49,115)   (32,684)
</TABLE>

See notes to consolidated financial statement

                                       5
<PAGE>

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






<TABLE>
<CAPTION>
                                                                                     For the Three Months
                                                                                        Ended March 31,
                                                                                       1998        1997
                                                                                       ----        ----

<S>                                                                                  <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits/NOW accounts,
  passbook savings accounts and certificates of deposit                              $    200    $ (8,178)
Advances from Federal Home Loan Bank - net                                             40,000       5,000
Net (decrease) increase in advances from borrowers for taxes
         and insurance                                                                   (149)       (271)
Purchase of treasury stock                                                                  0      (3,513)
Common stock cash dividend                                                               (322)       (391)

         NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           39,729      (7,353)

         NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (6,832)    (35,561)

Cash and cash equivalents at beginning of period                                       41,625      54,132

Cash and cash equivalents at end of period                                           $ 34,793    $ 18,571
                                                                                     --------    --------

Supplemental disclosure of cash flow information
         Cash paid for
                  Interest on deposits and advances                                  $  3,565    $  3,863
                  Income taxes                                                       $  1,112    $     47
         Non-cash transactions
                  Transfers from loans to real estate acquired through foreclosure   $      0    $     39

</TABLE>


See notes to consolidated financial statement

                                       6
<PAGE>

                   TF FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements as of March 31, 1998,  December 31,
     1997, and for the three month periods ended March 31, 1998 and 1997 include
     the accounts of TF Financial Corporation (the "Corporation") and its wholly
     owned  subsidiaries  Third Federal  Savings Bank (the "Savings  Bank"),  TF
     Investments  Corporation,  Penns Trail Development  Corporation and Teragon
     Financial Corporation.  The Corporation's business is conducted principally
     through  the  Savings  Bank.  All  significant  intercompany  accounts  and
     transactions have been eliminated in consolidation.

NOTE 2 - BASIS OF PRESENTATION

     The accompanying  unaudited consolidated financial statements were prepared
     in  accordance  with  instructions  for Form  10-Q and,  therefore,  do not
     include information or footnotes  necessary for a complete  presentation of
     consolidated financial condition,  results of operations, and cash flows in
     conformity with generally  accepted  accounting  principles.  However,  all
     adjustments, consisting of normal recurring accruals, which, in the opinion
     of  management,  are necessary for fair  presentation  of the  consolidated
     financial statements have been included.  The results of operations for the
     periods ended March 31, 1998 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 Corporation's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1997.


NOTE 3 -  CONTINGENCIES

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

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


NOTE 4 -  NEW PRONOUNCEMENTS

     On  January  1,  1998,  the  Corporation  adopted  Statement  of  Financial
     Accounting Standards (SFAS) No. 129, "Disclosure  Information about Capital
     Structure".  SFAS No. 129 summarizes  previously issued disclosure guidance
     contained within APB Opinion No. 10 and No. 15, as well as SFAS No. 47. The
     Corporation's current disclosures were not affected by the adoption of SFAS
     No. 129.

     On  January 1, 1998,  the  Corporation  adopted  SFAS No.  130,  "Reporting
     Comprehensive  Income".  SFAS No.  130  establishes  standards  to  provide
     prominent disclosure of comprehensive income items. Comprehensive income is
     the  change  in  equity  of a  business  enterprise  during a  period  from
     transactions  and other events and  circumstances  from non-owner  sources.
     Other  comprehensive

                                       7
<PAGE>

     income consists of net unrealized gains on investment  securities available
     for sale.  Subsequent to the adoption  date,  all prior period  amounts are
     required to be restated to conform to the provisions of SFAS No. 130. Total
     comprehensive  income for the first  three  months of 1998 was  $1,020,000,
     compared to $965,000  for the first three  months of 1997.  The adoption of
     SFAS 130 did not have a  material  impact  on the  Corporation's  financial
     position or results of operations.

     On January 1, 1998,  the  Corporation  adopted  SFAS No. 131,  "Disclosures
     about  Segments of an  Enterprise  and Related  Information".  SFAS No. 131
     requires that public business  enterprises report certain information about
     operating  segments  in a  complete  set  of  financial  statements  of the
     enterprise and in condensed financial  statements of interim periods issued
     to  shareholders.  It also  requires the  reporting of certain  information
     about  their  products  and  services,  the  geographic  area in which they
     operate,  and their major  customers.  The adoption of SFAS No. 131 did not
     have an  impact on the  Corporation's  financial  position  or  results  of
     operations.

     The American  Institute of Certified Public  Accountants  (AICPA) executive
     committee has issued  Statement of Position (SOP) 98-1,  Accounting for the
     Costs of Computer Software  Developed or Obtained for Internal Use. The SOP
     was issued to provide  authoritative  guidance on the subject of accounting
     for the cost  associated  with the  purchase  or  development  of  computer
     software.  The  statement is effective  for fiscal  years  beginning  after
     December  15,  1998 for  costs  incurred  in  those  fiscal  years  for all
     projects,  including  projects  in progress  when the SOP is  adopted.  The
     adoption  of SOP 98-1 is not  expected  to have a  material  impact  on the
     Corporation's financial position or results of operations.

                                       8
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------

GENERAL

TF Financial  Corporation  (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  economics  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.

The  Corporation's  total assets at March 31, 1998 and December 31, 1997 totaled
$639.5 million and $597.0 million, respectively, an increase of $42.5 million or
7.1% for the three month  period.  This  increase was  primarily a result of the
$54.1 million  increase in  mortgage-backed  securities,  coupled with the $15.2
million increase in investment securities,  partially offset by the $6.8 million
decrease in cash and cash equivalents,  the $10.0 million decrease in securities
purchased under  agreements to resell,  and the $10.1 million  decrease in loans
receivable.  The  increase  in total  assets  was  funded by the  $40.0  million
increase  in  advances  from the  Federal  Home  Loan  Bank.  Total  liabilities
increased to $588.5  million at March 31, 1997 from $547.0 at December 31, 1997.
This increase was primarily the result of the $40.0 million, or 45.2%,  increase
in advances from the Federal Home Loan Bank to $128.4  million at March 31, 1998
from $88.4 million at December 31, 1997. Total deposits  balances remained level
at $450.6 million at March 31, 1998 from $450.4 million at December 31, 1997.

The decrease in loans  receivable of $10.1 million or, 4.0%, from $250.7 million
at  December  31,  1997 to  $240.6  million  at March  31,  1998 was a result of
mortgage loan amortization.

Cash and cash  equivalent  balances  decreased by $6.8 million,  or 16.3%,  from
$41.6 million at December 31, 1997 to $34.8 million at March 31, 1998  primarily
as a result of the reinvestment into mortgage-backed and investment securities.

                                       9
<PAGE>

Investment securities at March 31, 1998 totaled $104.9 million, which represents
an increase of $15.2  million or 16.9% as compared to December  31,  1997.  This
increase is primarily  due to the  reinvestment  of cash and cash flow caused by
amortization of mortgage loans.

Mortgage-backed  securities totaled $235.0 million at March 31, 1998 as compared
to $180.9  million at December  31,  1997.  This  increase of $54.1  million or,
29.9%,  is a result  the  investment  of the  proceeds  of the $40.0  million of
Federal Home Loan  advances,  coupled with the decrease in securities  purchased
under agreements to resell.

Total consolidated  stockholders' equity of the Corporation  increased $900,000,
or 1.8%,  to $51.0  million,  or 8.0% of total assets,  at March 31, 1998,  from
$50.1  million or 8.39 % of total assets at December 31, 1997,  primarily due to
the  $640,000  increase to retained  earnings  for the three month  period.  The
increase in net unrealized gain on investment  securities  available for sale of
$27,000, coupled with the amortization of stock incentive plans of $140,000 also
contributed to this increase in stockholders' equity.




                                       10
<PAGE>

Average Balance Sheet

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

<TABLE>
<CAPTION>
                                          Three Months Ended March 31,     Three Months Ended March 31,
                                                       1998(5)                       1997(5)
                                        --------------------------------   ----------------------------
                                                                Average                        Average
                                        Average                 Yield/      Average            Yield/
                                        Balance       Interest   Cost       Balance  Interest    Cost
                                        -------       --------   ----       -------  --------    ----
                                                             (Dollars in Thousands)
<S>                                     <C>           <C>        <C>       <C>        <C>        <C>
Assets:
Interest-earning assets:
  Loans receivable (4)................  $244,847      $ 4,904    8.01%     $310,389   $ 6,192    7.98%
  Mortgage-backed securities..........   202,952        3,238    6.38%      185,167     3,108    6.71%
  Investment securities...............   104,046        1,577    6.06%      101.023     1,567    6.20%
  Other interest-earning assets(1)....    36,046          422    4.68%       24,130       308    5.11%
                                        --------      -------              --------   -------
    Total interest-earning assets.....  $587,891      $10,141    6.90%     $620,709   $11,175    7.20%
                                        ========       ======              ========   =======
Non interest-earning assets...........    21,529                            $22,540
                                        --------                           --------
    Total  assets.....................  $609,420                           $643,249
                                        ========                           ========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
  Savings deposits....................   450,952       $4,314    3.83%     $462,572   $ 4,657    4.03%
  Borrowings..........................    98,359        1,348    5.48%      100,026     1,457    5.83%
                                        --------      -------              --------   -------
    Total interest-bearing liabilities  $549,311       $5,662    4.12%     $562,598   $ 6,114    4.35%
                                        ========       ======              ========   =======
Non interest-bearing liabilities......     9,451                              9,327
    Total  liabilities................   558,762                            571,925

Stockholders' equity..................    50,658                             71,324
                                        --------                           --------
  Total liabilities and Stockholders'
    equity............................  $609,420                           $643,249
                                        ========                           ========
Net interest income...................                 $4,479                         $ 5,061
                                                       ======                         =======
Interest rate spread (2)..............                           2.78%                           2.85%
Net yield on interest-earning assets(3)                          3.05%                           3.26%
Ratio of Average  interest-earning
  assets to Average interest bearing
  liabilities.........................                            107%                            110%

</TABLE>

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

                                       11

<PAGE>


RESULTS OF OPERATIONS

Net Income.  The  Corporation  recorded net income of $1.0 million for the three
months  ended March 31, 1998 as  compared to $1.2  million for the three  months
ended March 31, 1997.  This  decrease of $200,000,  or 16.7%,  was primarily the
result of the decrease in the average balance of  interest-earnings  assets from
$620.7  million  at March 31,  1997 to $587.9  million  at March 31,  1998.  Net
interest income before provisions for loan losses was $4.5 million for the three
month  period  ended March 31,  1998 as  compared  to $5.1  million for the same
period in 1997. For these same periods,  total interest expense was $5.7 million
and $6.1 million,  respectively.  Non-interest income was $420,000 and $390,000,
respectively,  for these same periods. Operating expenses (non-interest expense)
remained  level at $3.4 million for the three month periods ended March 31, 1998
and March 31, 1997, respectively.

Total Interest  Income.  Total interest income decreased by $1.1 million or 9.8%
to $10.1  million for the three months ended March 31, 1998,  from $11.2 million
for the three  months  ended March 31, 1997 due  primarily  to  decreases in the
average balance of loans receivable  somewhat offset by increases in the average
balance of mortgage-backed securities,  investment securities and other interest
earning assets. The average balance of loans receivable decreased $65.6 million,
or 21.1%, to $244.8 million from $310.4 million for the three months ended March
31, 1998 and 1997,  respectively.  The decrease in the average  balance of loans
receivable  is primarily  attributable  to the sale of $43.6 million of mortgage
loans coupled with mortgage loan  amortization.  Interest  attributable to loans
receivable decreased $1.3 million or 21.0% to $4.9 million from $6.2 million for
these same periods.  This decrease is primarily  attributable to the decrease in
the average balance of loans  receivable  partially offset by an increase in the
average yield on loans  receivable from 7.98% for the period end March 31, 1997,
to 8.01% for the  period  ended  March 31,  1998.  Interest  on  mortgage-backed
securities  increased $100,000,  or 3.2%, for the three month period ended March
31, 1998, from $3.1 million at March 31, 1997 primarily as a result of increases
in the average balances of these securities partially offset by decreases in the
average  yield.  The average yield on  mortgage-backed  securities  decreased to
6.38% for the three month period ended March 31, 1998  compared to 6.71% for the
similar period in 1997 while the average balance of  mortgage-backed  securities
increased by $17.8 million, or 9.6%, when comparing these two periods.  Interest
on  investment  securities  remained  level at $1.6  million for the three month
periods ended March 31, 1998 and 1997. Interest on other interest-earning assets
increased by $114,000  for the three month period ended March 31, 1998  compared
to the similar  period ended March 31, 1997 primarily as a result of the average
balance  increasing by $11.9 million to $36.0 million,  partially  offset by the
decrease in the average yield to 4.68% at March 31, 1998 from 5.11% at March 31,
1997.  The  increases  in the average  balances of  mortgage-backed  securities,
investment securities and other interest-earning assets are primarily the result
of the  reinvestment  of $43.6  million in  proceeds  from the sale of  mortgage
loans.  The average  balance of total interest  earning assets  decreased  $32.8
million,  or 5.3%,  to $587.9  million at March 31, 1998 from $620.7  million at
March 31, 1997.

Total Interest Expense. Total interest expense decreased to $5.7 million for the
three month  period  ended March 31, 1998 from $6.1  million at March 31,  1997.
This  decrease in total  interest  expense is a result of the  decreases  in the
average balance and average rate paid on savings  deposits.  The average balance
of savings  deposits  decreased  from $462.6 million at March 31, 1997 to $451.0
million at March 31, 1998. The average rate paid on savings  deposits  decreased
from 4.03% in the March 31, 1997  period to 3.83% in the March 31, 1998  period.
As a result of the  decrease  in the average  balance  and average  rate paid on
savings deposits,  the portion of total interest expense attributable to savings
deposits  decreased to $4.3 million from $4.7 million at March 31, 1998 and 1997
respectively.   The  average  balance  of  total  interest-bearing   liabilities
decreased to $549.3  million at March 31, 1998 from $562.6  million at March 31,
1997 as a result of the decrease in savings  deposits coupled with the decreases
in the average balance and rate of Federal Home Loan Bank advances.

Net Interest Income.  Net interest income for the three month period ended March
31, 1998 decreased by $600,000,  or 11.8%, to $4.5 million from $5.1 million for
the same period in 1997.  This  decrease  is  primarily  due to the  decrease in
interest-earning  assets  partially  offset by the decrease in  interest-bearing
liabilities.  The average  balance of total interest-  earning assets  decreased
$32.8 million,  or 5.3%, to $587.9 million at March 31, 1998 from $620.7 million
at  March  31,  1997.  During  these  same  periods,  the  average  balances  on
interest-bearing  liabilities  decreased to $549.3 million from

                                       12
<PAGE>

$562.6 million. The cost of interest-bearing liabilities decreased from 4.35% to
4.12% while the yield on  interest-earning  assets decreased from 7.20% to 6.90%
for the three month periods ended March 31, 1997 and 1998 respectively.

Allowance for Loan Losses.  The allowance for loan losses increased at March 31,
1998 to $2.0 million from $1.9 million at March 31, 1997. Such totals  correlate
to  non-performing  loans of $1.6  million at March 31, 1998 and $2.0 million at
March 31,  1997.  The  increase  in the  allowance  for loan  losses of $139,000
resulted  from the addition of $307,000 to the provision for loan losses and the
deduction of $168,000 of net charge offs for losses on loans.  The provision for
losses on loans is the  method by which the  allowance  for  losses is  adjusted
during the period.  The  provision for losses on loans was $15,000 for the three
months ended March 31, 1998.  At March 31, 1998,  the  allowance for loan losses
was 126.8% of non-performing  loans as compared to 95.6% of non-performing loans
at March 31, 1997.  While  management  maintains  its  allowance for losses at a
level which it considers to be adequate to provide for potential  losses,  there
can be no assurance that further additions will not be made to the allowance and
that such losses will not exceed the estimated amounts.

Non-interest  Income.  Total  non-interest  income increased to $420,000 for the
three  months  ended March 31, 1998 from  $390,000  for the same period in 1997.
This  increase of $30,000 can be primarily  attributable  to the increase in the
gain on sale of loans of $75,000 and the  increase  of $29,000 to service  fees,
charges and other operating income,  partially offset by the decrease of $73,000
in the gain on sale of mortgage-backed securities.

Non-interest Expense.  Total non-interest expense remained level at $3.4 million
for the three months ended March 31, 1998 as compared for the similar  period in
1997. Employee  compensation and benefits remained level at $1.7 million for the
compared  periods,  while  occupancy  and  equipment  decreased by $6,000,  data
processing  expense  decreased  by $5,000,  amortization  of goodwill  and other
intangibles  decreased by $19,000,  federal deposit insurance premiums decreased
by $7,000 and other operating costs increased by $18,000.

Income Tax Expense. Income taxes decreased by $258,000 to $516,000 for the three
month  period  ended March 31,  1998,  from  $774,000 for the three months ended
March 31,  1997.  The primary  reason for this  decrease was the decrease in net
income  before  taxes to $1.5  million at March 31,  1998,  from $1.9 million at
March 31, 1997.

                                       13
<PAGE>

Liquidity and Capital Resources

Under current Office of Thrift Supervision (OTS)  regulations,  the Savings Bank
must have core capital equal to 4% of total assets and risk-based  capital equal
to 8% of risk-weighted assets, of which 1.5% must be tangible capital, excluding
goodwill and certain other intangible assets.

On March 31, 1998, the Savings Bank was in compliance with its three  regulatory
capital requirements as follows:

                                             Amount             Percent
                                             ------             -------
                                    (dollars in thousands)
Tangible capital                            $43,037               6.8%
Tangible capital requirement                  9,537               1.5
                                            -------              ----
Excess over requirement                     $33,500               5.3%
                                            =======               ===

Core capital                                $43,037               6.8%
Core capital requirement                     25,431               4.0
                                            -------              ----
Excess over requirement                     $17,606               2.8%
                                            =======               ===

Risk based capital                          $45,086              18.4%
Risk based capital requirement               19,641               8.0
                                            -------              ----
Excess over requirement                     $25,445              10.4%
                                            =======              ====


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

The Savings  Bank's  liquidity  is a measure of its  ability to fund loans,  pay
withdrawals of deposits, and other cash outflows in an efficient, cost-effective
manner.  The Savings  Bank's  primary source of funds are deposits and scheduled
amortization and prepayment of loan and  mortgage-backed  securities  principal.
During the past several years, the Savings Bank has used such funds primarily to
fund maturing time deposits, pay savings withdrawals,  fund lending commitments,
purchase new investments,  and increase liquidity. The Savings Bank is currently
able to fund its operations  internally but has, when deemed  prudent,  borrowed
funds from the Federal Home Loan Bank of Pittsburgh.  As of March 31, 1998, such
borrowed funds total $128.4  million.  Loan payments,  maturing  investments and
mortgage-backed  security prepayments are greatly influenced by general interest
rates, economic conditions and competition.

The Savings  Bank is required  under  federal  regulations  to maintain  certain
specified  levels of "liquid  investments",  which include certain United States
government  obligations  and other  approved  investments.  Current  regulations
require the Savings  Bank to maintain  liquid  assets of not less than 5% of its
net withdrawable  accounts plus short term borrowings.  Short term liquid assets
must consist of not less than 1% of such accounts and  borrowings,  which amount
is also  included  within the 5%  requirement.  These levels may be changed from
time to time by the  regulators  to reflect  current  economic  conditions.  The
Savings Bank has  generally  maintained  liquidity  far in excess of  regulatory
requirements.  The Savings  Bank's  regulatory  liquidity was 19.8% and 26.6% at
March 31, 1998 and 1997,  respectively,  and its short-term  liquidity was 10.1%
and 19.1%, at such dates, respectively.

The amount of  certificate  accounts,  which are  scheduled to mature during the
twelve months  ending March 31 1999, is  approximately  $147.5  million.  To the
extent that these deposits do not remain at the Savings Bank upon maturity,  the
Savings Bank  believes  that it can replace  these funds with  deposits,  excess
liquidity,  FHLB advances or outside borrowings.  It has been the Savings Bank's
experience  that a substantial  portion of such maturing  deposits remain at the
Savings Bank.

                                       14
<PAGE>

At March 31, 1998,  the Savings Bank had  outstanding  commitments  to originate
loans of $6.2  million.  Funds  required to fill these  commitments  are derived
primarily from current excess  liquidity,  deposit  inflows or loan and security
repayments.  At March 31, 1998, the Savings Bank had outstanding  commitments to
sell loans of $5.8 million.

Year 2000 Issue

The  Corporation is utilizing both internal and external  resources to identify,
correct  or  reprogram,  and  test  its  computer  systems  for  the  year  2000
compliance.  The year 2000  problem is the  result of  computer  programs  being
written using two digits  rather than four to define the  applicable  year.  The
Corporation  presently  believes  that  the  year  2000  problem  will  not pose
significant  operational  problems for the Corporation's  computer systems as so
modified and reprogramed.  It is anticipated that all reprogramming efforts will
be completed by December 31, 1998,  allowing adequate time for testing. To date,
confirmations  have been  received  from the  Corporation's  primary  processing
vendors that plans are being developed to address  processing of transactions in
the year 2000.  Management  believes the year 2000  compliance  expense will not
have a material adverse effect on the Corporation.


Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           Not Applicable.

                                       15
<PAGE>

                    TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

         Neither the  Corporation nor the Savings Bank was engaged in any  legal
         proceeding  of a material  nature at May 14, 1998.  From time to  time,
         the Corporation is a party to legal proceedings in the ordinary  course
         of business wherein it enforces its security interest in loans.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

         None

         (b)      Reports on Form 8-K

         None



                                       16
<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/John R. Stranford
                           ----------------------------------
Date:      May 14, 1998             John R. Stranford
                                     President and CEO
                                    (Principal Executive Officer)

                              /s/William C. Niemczura
                           ---------------------------------
Date:      May 14, 1998              Senior Vice President and
                                     Chief Financial Officer
                                     (Principal Financial & Accounting Officer)