SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT of 1934

                    ------------------------------------------------------------
For the quarterly period ended          June 30, 1998

                                       OR

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

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

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

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

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

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

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

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

     Indicate  by check _ whether  the  registrant  (1) has  filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X    No
                                              ---      ---

                     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 July 31, 1998
                                                     ------------------

                  Class                                  Outstanding
        ---------------------------                    ----------------
        $.10 par value common stock                    2,898,510 shares


<PAGE>




                   TF FINANCIAL CORPORATION AND SUBSIDIARIES

                                   FORM 1O-Q

                      FOR THE QUARTER ENDED JUNE 30, 1998


                                     INDEX


                                                                            Page
                                                                          Number
                                                                          ------

PART I - CONSOLIDATED FINANCIAL INFORMATION

Item     1.       Consolidated Financial Statements                           3
Item     2.       Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                9
Item     3.       Quantitative and Qualitative Disclosures about Market Risk 17

PART II- OTHER INFORMATION

Item     1.       Legal Proceedings                                          18
Item     2.       Changes in Securities                                      18
Item     3.       Defaults upon Senior Securities                            18
Item     4.       Submission of Matters to a Vote of Security Holders        18
Item     5.       Other Materially Important Events                          18
Item     6.       Exhibits and Reports on Form 8-K                           18

SIGNATURES

                                       2
<PAGE>



                    TF FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                     Unaudited      Audited
                                                                                     ---------      -------
                                                                                      June 30,    December 31,
              ASSETS                                                                   1998           1997

<S>                                                                                <C>             <C>   
Cash and cash equivalents                                                          $   33,414        41,625
Securities purchased under agreements to resell                                        10,064        10,000
Certificates of deposit in other financial institutions                                 2,437         2,737
Investment securities available for sale - at market value                             37,898        32,037
Investment securities held to maturity (market value of $69,863 and $57,944            69,933        57,740
   respectively, for the periods shown)
Mortgage-backed securities available for sale - at market value                        41,723        36,847
Mortgage-backed securities held to maturity (market value of $235,901 and
    $145,723 respectively, for the periods shown)                                     234,144       144,074
Loans receivable, net                                                                 237,407       250,711
Accrued interest receivable                                                             4,463         3,957
Goodwill/Core deposit intangible                                                        7,823         8,274
Premises and equipment, net                                                             8,523         7,889
Other assets                                                                            1,455         1,156
                                                                                     --------      --------
         Total Assets                                                                $689,284      $597,047
                                                                                     ========      ========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
   Deposits                                                                          $448,625      $450,429
   Advances from the Federal Home Loan Bank                                           178,356        88,359
   Advances from borrowers for taxes and insurance                                      1,721         1,591
   Accrued interest payable                                                             5,750         2,470
   Other liabilities                                                                    3,194         4,103
                                                                                     --------      --------
         Total Liabilities                                                            637,646       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; 2,892,522 and 2,886,251 shares outstanding
      at June 30, 1998 and December 31, 1997, net of treasury shares of
      2,098,551 and 2,102,767 respectively                                                529           529
   Additional paid-in capital                                                          51,888        51,775
   Net unrealized loss on investment securities available for sale                        (27)          169
   Unearned ESOP shares-at cost                                                        (2,943)       (3,010)
   Shares acquired by MSBP                                                               (682)         (895)
   Treasury stock - at cost                                                           (41,565)      (41,649)
   Retained earnings                                                                   44,438        43,176
                                                                                     --------      --------
         Total Stockholders' Equity                                                    51,638        50,095
                                                                                     --------      --------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $689,284      $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>
                                                                For Six Months                For Quarter        
                                                                Ended June 30,              Ended June 30,
                                                           ------------------------    ------------------------
                                                              1998           1997          1998          1997     
                                                              ----           ----          ----          ----     
<S>                                                        <C>           <C>           <C>           <C>      
Interest Income                                                                                      
  Loans                                                      $ 9,509       $12,413       $ 4,605       $ 6,221
  Mortgage-backed securities                                   7,573         6,379         4,335         3,271
  Investment securities                                        3,327         2,955         1,750         1,388
  Interest bearing deposits and other                            730           534           308           226
                                                             -------       -------       -------       -------
TOTAL INTEREST INCOME                                         21,139        22,281        10,998        11,106
Interest expense                                                                                     
  Deposits                                                     8,678         9,320         4,364         4,663
  Borrowings                                                   3,574         2,930         2,226         1,473
                                                             -------       -------       -------       -------
TOTAL INTEREST EXPENSE                                        12,252        12,250         6,590         6,136
NET INTEREST INCOME                                            8,887        10,031         4,408         4,970
Provision for loan losses                                         30           180            15            75
                                                             -------       -------       -------       -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES            8,857         9,851         4,393         4,895
Non-interest income                                                                                  
  Gain on sale of real estate acquired through foreclosure        24             0            25             0
  Gain on sale of mortgage-backed securities                     345           188           345           115
  Gain on sale of loans                                           91            39            17            40
  Service fees, charges and other operating income               646           651           299           333
                                                             -------       -------       -------       -------
    TOTAL NON-INTEREST INCOME                                  1,106           878           686           488
Non-interest expense                                                                                 
  Employee compensation and benefits                           3,285         3,299         1,620         1,626
  Occupancy and equipment                                        923           904           484           459
  Federal deposit insurance premium                              140           153            70            76
  Data processing                                                449           346           274           166
  Professional fees                                              284           276           149           143
  Goodwill and other intangible amortization                     450           488           225           244
  Advertising                                                    180           188            90            90
  Other operating                                              1,117         1,072           541           514
                                                             -------       -------       -------       -------
TOTAL NON-INTEREST EXPENSE                                     6,828         6,726         3,453         3,318
  INCOME BEFORE INCOME TAXES                                   3,135         4,003         1,626         2,065
Income taxes                                                   1,153         1,574           637           800
                                                             -------       -------       -------       -------
NET INCOME                                                   $ 1,982       $ 2,429       $   989       $ 1,265
                                                             =======       =======       =======       =======
                                                                                                     
Basic earnings per share                                     $  0.68       $  0.63       $  0.34       $  0.33
Diluted earnings per share                                   $  0.61       $  0.61       $  0.30       $  0.32
Weighted average number of shares outstanding - Basic      2,892,522     3,836,006     2,895,580     3,772,709
Weighted average number of shares outstanding - Diluted    3,249,145     4,008,885     3,254,270     4,025,742
                                                                                                     
</TABLE>                                                              
                                                                           
                                                                   
See notes to consolidated financial statement                    
                                                              
                                       4                            
                                                                    
<PAGE>

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                  For the Six Months
                                                                                     Ended June 30,
                                                                            ------------------------------
                                                                               1998                1997
                                                                               ----                ----
<S>                                                                         <C>                   <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                  $   1,982            $   2,429
Adjustments to reconcile net income to net cash provided by 
operating activities:
Amortization of:
  Mortgage loan servicing rights                                                    9                   47
  Deferred loan origination fees                                                  (91)                 (77)
  Premiums and discounts on investment securities net                              36                   25
  Premiums and discounts on mortgage-backed securities and 
  loans net                                                                       291                   69
  Amortization of goodwill and core deposit intangible                            451                  488
Provision for loan losses and provision for losses on real estate                  30                  180
Depreciation of premises and eqipment                                             387                  351
Recognition of ESOP and MSBP expenses                                             411                  454
(Gain) loss on sale of mortgage-backed securities - available for sale            (80)                (188)
(Gain) on sale of investment securities - available for sale                     (265)                  --
(Gain) loss on sale of real estate acquired through foreclosure                   (24)                  --
(Gain) on sale of mortgage servicing rights                                        --                   --
(Gain) loss on sale of mortgage loans                                             (91)                 (39) 
Decrease (increase) in
  Acquired interest receivable                                                   (506)                (568)
  Other assets                                                                   (337)                 (65)
Increase (decrease) in
  Accrued interest payable                                                      3,280                1,255
  Other liabilities                                                            (1,140)               1,154
                                                                             --------              -------    
  NET CASH PROVIDED BY OPERATING ACTIVITIES                                     4,343                5,515

CASH FLOWS FROM INVESTING ACTIVITIES
Loan originating and principal payments on loans, net                          (6,142)             (11,009)
Purchases of loans                                                                 --              (12,663)
Proceeds from loan sales                                                       19,496               16,970
Purchases and maturities of certificates of deposit in other
  financial institutions net                                                      300                  769
Purchases and maturities of securities purchased
  under agreements to resell, net                                                 (64)              20,129
Purchases of investment securities - available for sale                      (137,644)              (6,982)
Purchases of investment securities - held to maturity                         (23,030)             (68,081)
Purchases of mortgage-backed securities - available for sale                  (16,244)             (23,412)
Purchases of mortgage-backed securities - held to maturity                   (114,358)             (15,071) 
Proceeds from maturities of investment securities - held to maturity           23,989               54,680
Proceeds from maturities of investment securities - available for sale        115,472                1,350
Principal repayments from maturities of mortgage-backed securities -
  held to maturity                                                             24,192               12,144
Principal repayments from maturities of mortgage-backed securities -
  available for sale                                                            5,627                1,189
Proceeds from the sale of mortgage-backed securities - available for sale       5,683                8,648
Proceeds from the sale of investment securites - available for sale             7,445                   --
Purchases and redemptions of Federal Home Loan Bank Stock, net                 (4,000)                  --
Proceeds from sales of real estate acquired through foreclosure                   114                   --
Purchases of premises and equipment                                            (1,021)                (187)
                                                                              -------              -------  
   NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                      $(100,185)            $(21,526)
</TABLE>


                                       5

<PAGE>


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

<TABLE>
<CAPTION>

                                                                       For the Six Months
                                                                         Ended June 30,
                                                                    -----------------------
                                                                       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              $ (1,804)   $ (8,241)
Advances from Federal Home Loan Bank - net                             89,997          --
Net (decrease) increase in advances from borrowers for taxes
  and insurance                                                           130         200
Purchase of treasury stock                                                 --      (3,587)
Common stock cash dividend                                               (692)       (768)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                    87,631     (12,396)

NET INCREASE (DECREASE) INCASH AND CAS EQUIVALENTS                     (8,211)    (28,407)

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

Cash and cash equivalents at end of period                           $ 33,414    $ 25,725

Supplemental disclosure of cash flow information
  Cash paid for
  Interest on deposits and advances                                  $  8,972    $ 10,995
  Income taxes                                                       $  1,692    $    801
Non-cash transactions
  Transfers from loans to real estate acquired through foreclosure   $     61    $     78

</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 June 30, 1998,  December 31,
     1997,  and for the three and six month periods ended June 30, 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
     period ended June 30, 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  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  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 six month  period
     ended June 30,  1998 was  $1,787,000,  compared to  $2,305,000  for the six
     month period ended June 30, 1997. Total comprehensive  income for the three
     month period ended June 30, 1998 was $767,000,  compared to $1,588,000  for
     the three month period  ended June 30,  1997.  The adoption of SFAS 130 did
     not have a  material  impact on the  Corporation's  financial  position  or
     results of operations.

                                       7
<PAGE>

     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.

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement of Financial Accounting Standards (SFAS) No. 113, "Accounting for
     Derivative  Instruments  and  Hedging  Activity"  SFAS No. 133  established
     accounting and reporting  standards for derivative  instruments,  including
     certain derivative instruments imbedded in other contracts, and for hedging
     activities.  It requires that an entity recognize all derivatives as either
     assets or  liabilities  in the statement of financial  position and measure
     those  instruments  at fair  value.  If certain  conditions  are not met, a
     derivative may be  specifically  designated as a hedge.  The accounting for
     changes in fair  value of a  derivative  (gains or  losses)  depends on the
     intended use of the derivative and resulting  designation.  SAFS No. 113 is
     effective for all fiscal  quarters of fiscal years beginning after June 15,
     1999. Early application is permitted only as of the beginning of any fiscal
     quarter. He Company is currently reviewing the provisions of SFAF No 133.

                                       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 June 30, 1998 and December 31, 1997 totaled
$689.3 million and $597.0 million, respectively, an increase of $92.3 million or
15.5% for the six month  period.  This  increase  was  primarily a result of the
$94.9 million  increase in  mortgage-backed  securities,  coupled with the $18.1
million increase in investment securities,  partially offset by the $8.2 million
decrease in cash and cash  equivalents,  and the $13.3 million decrease in loans
receivable.  The  increase  in total  assets  was  funded by the  $90.0  million
increase  in  advances  from the  Federal  Home  Loan  Bank.  Total  liabilities
increased  to $637.6  million at June 30, 1998 from $547.0 at December 31, 1997.
This increase was primarily the result of the $90.0 million, or 101.8%, increase
in advances  from the Federal Home Loan Bank to $178.4  million at June 30, 1998
from $88.4 million at December 31, 1997.  Total deposits  balances  decreased by
$1.8 million from $450.0  million at December 31, 1997 to $448.6 million at June
30, 1998.

The decrease in loans  receivable of $13.3 million or, 5.3%, from $250.7 million
at December 31, 1997 to $237.4 million at June 30, 1998 was a result of mortgage
loan repayments.

Cash and cash  equivalent  balances  decreased by $8.2 million,  or 19.7%,  from
$41.6 million at December 31, 1997 to $33.4  million at June 30, 1998  primarily
as a result of its reinvestment into mortgage-backed and investment securities.

Investment securities at June 30, 1998 totaled $107.8 million,  which represents
an increase of $18.1  million or 20.2% as compared to $89.7  million at December
31, 1997.  This increase is primarily due to the  reinvestment  of 


                                       9
<PAGE>

cash and cash flow caused by repayments of mortgage loans.

Mortgage-backed  securities  totaled $275.8 million at June 30, 1998 as compared
to $180.9  million at December  31,  1997.  This  increase of $94.9  million or,
52.5%,  is a result  the  investment  of the  proceeds  of the $90.0  million of
Federal  Home  Loan  advances,  coupled  with  the  decrease  in cash  and  cash
equivalents.

Total  consolidated  stockholders'  equity  of the  Corporation  increased  $1.5
million or 3.0%, to $51.6 million,  or 7.49% of total assets,  at June 30, 1998,
from $50.1 million or 8.39 % of total assets at December 31, 1997, primarily due
to the $1.2 million increase to retained earnings for the six month period.  The
amortization  of stock  incentive  plans of $300,000  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 June 30,       Three Months Ended June 30,
                                                  -------------------------------   -----------------------------
                                                                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 receivabe(4).........................     $232,336      $ 4,605    7.93%     $316,050    $ 6,221   7.87%
  Mortgage-backed securities.................      269,285        4,335    6.44%      196,144      3,271   6.67%
  Investment securities......................      116,558        1,750    6.01%       81,281      1,388   6.83%
  Other interest-earning assets(1)...........       29,984          308    4.11%       22,563        226   4.01%
                                                   -------       ------                ------     ------        
        Total interest-earning assets........     $648,163      $10,998    6.79%     $616,038    $11,106   7.21%
                                                  --------      -------              --------    -------        
  Non interest-earning assets................       23,002                             23,029
                                                   -------                            -------
        Total assets.........................     $671,165                           $639,067
                                                  ========                           ========


Liabilities and Stockholders' Equity:
  Interest-bearing liabilities:
    Savings deposits.........................      447,435       $ 4,364    3.90%    $459,122    $ 4,663   4.06%
    Borrowings...............................      161,691         2,226    5.51%      98,359      1,473   5.99%
                                                   -------         -----              -------      -----   
        Total interest-bearing liabilities...     $609,126       $ 6,590    4.33%    $557,481    $ 6,136   4.40%
                                                  ========       =======    ====     ========    =======   ==== 
Non interest-bearing liabilities.............       10,615                             11,025
        Total liabilities....................      619,741                            568,506
Stockholders' equity.........................       51,424                             70,561
                                                   -------                             ------
        Total liabilities and stockholders'
          equity.............................     $671,165                           $639,067
                                                  ========                           ========
Net interest income..........................                    $ 4,408                         $ 4,970
                                                                 =======                         =======
Interest rate spread(2)......................                               2.46%                          2.81%     
Net yield on interest-earning assets(3)......                               2.72%                          3.23%
Ratio of average interest-earning assets to
  average interest bearing liabilities.......                                106%                           111%
</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>



Average Balance Sheet (continued)
<TABLE>
<CAPTION>
                                                     Six Months Ended June 30,         Six Months Ended June 30,
                                                  -------------------------------   -----------------------------
                                                                1998(5)                          1997(5)
                                                  -------------------------------   -----------------------------
                                                                          Average                        Average
                                                  Average                  Yield/    Average              Yield/
                                                  Balance      Interest    Cost      Balance     Interest  Cost
                                                  -------      --------    ----      -------     --------  ----
<S>                                              <C>           <C>       <C>        <C>         <C>      <C>  
Assets:
Interest-earning assets:
  Loans receivabe(4).........................     $238,592      $ 9,509    7.97%     $313,320    $12,413   7.93%
  Mortgage-backed securities.................      236,119        7,573    6.41%      190,656      6,379   6.69%
  Investment securities......................      110,302        3,327    6.03%       91,152      2,955   6.48%
  Other interest-earning assets(1)...........       33,014          730    4.42%       23,347        534   4.57%
                                                   -------       ------                ------     ------        
        Total interest-earning assets........     $618,027      $21,139    6.84%     $618,375    $22,281   7.21%
                                                  --------      -------              --------    -------        
  Non interest-earning assets................       22,266                             22,783
                                                   -------                            -------
        Total assets.........................     $640,293                           $641,158
                                                  ========                           ========


Liabilities and Stockholders' Equity:
  Interest-bearing liabilities:
    Savings deposits.........................      449,193       $ 8,678    3.86%    $460,847    $ 9,320   4.04%
    Borrowings...............................      130,025         3,574    5.50%      99,192      2,930   5.91%
                                                   -------         -----              -------      -----   
        Total interest-bearing liabilities...     $579,218       $12,252    4.23%    $560,039    $12,250   4.37%
                                                  ========       =======    ====     ========    =======   ==== 
Non interest-bearing liabilities.............       10,034                             10,176
        Total liabilities....................      589,252                            570,215
Stockholders' equity.........................       51,041                             70,943
                                                   -------                             ------
        Total liabilities and stockholders'
          equity.............................     $640,293                           $641,158
                                                  ========                           ========
Net interest income..........................                    $ 8,887                         $10,031
                                                                 =======                         =======
Interest rate spread(2)......................                               2.61%                          2.84%     
Net yield on interest-earning assets(3)......                               2.87%                          3.24%
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.

                                       12
<PAGE>



RESULTS OF OPERATIONS

Net Income.  The  Corporation  recorded net income of $1.0 million for the three
months  ended June 30,  1998 as compared  to $1.3  million for the three  months
ended June 30, 1997.  This  decrease of $300,000,  or 23.1%,  was  primarily the
result of the decrease in total  interest  income from $11.1 million at June 30,
1997 to $11.0  million at June 30,  1998,  in  conjunction  with the increase in
total  interest  expense  from $6.1  million at June 30, 1997 to $6.6 million at
June 30, 1998.  Net interest  income before  provisions for loan losses was $4.4
million  for the three  month  period  ended June 30,  1998 as  compared to $5.0
million  for the same  period in 1997.  Non-interest  income  was  $700,000  and
$500,000, respectively, for these same periods. Operating expenses (non-interest
expense)  were $3.5  million for the three month  period ended June 30, 1998 and
$3.3 million for the three month period ended June 30, 1997.

The  Corporation  recorded  net income of $2.0  million for the six months ended
June 30,  1998 as compared  to $2.4  million  for the six months  ended June 30,
1997.  This  decrease of $400,000,  or 16.7%,  was  primarily  the result of the
decrease in total  interest  income from $22.3 million at June 30, 1997 to $21.1
million at June 30, 1998. Net interest  income before  provision for loan losses
was $8.9  million  for the six month  period  ended June 30, 1998 as compared to
$10.0  million  for the same  period in 1997.  For  these  same  periods,  total
interest expense remained level at $12.3 million.  Non-interest  income was $1.1
million and $900,000,  respectively,  for these same periods. Operating expenses
(non-interest  expense)  remained level at $6.8 million and $6.7 million for the
six month periods ended June 30, 1998 and June 30, 1997, respectively.

Total Interest  Income.  Total interest income  decreased by $100,000 or 0.9% to
$11.0  million for the three months ended June 30, 1998,  from $11.1 million for
the three months  ended June 30, 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  $83.8 million,  or
26.5%, to $232.3 million from $316.1 million for the three months ended June 30,
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 in the third  quarter of 1997,  coupled  with  mortgage  loan  repayments.
Interest  attributable  to loans  receivable  decreased $1.6 million or 25.8% to
$4.6  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 7.87% for the three month period end June 30, 1997, to 7.93% for
the  three  month  period  ended  June 30,  1998.  Interest  on  mortgage-backed
securities increased $1,000,000, or 30.3%, for the three month period ended June
30, 1998,  from $3.3 million at June 30, 1997 primarily as a result of increases
in the average balances of mortgage-backed  securities to $269.3 million at June
30,  1998  from  $196.1  million  at June  30,  1997.  The  increase  in  income
attributable  to  the  increase  in  the  average  balance  of   mortgage-backed
securities  was  partially  offset by a  decrease  in the  average  yield of the
securities  to 6.44% at June 30,  1998 from 6.67% at June 30 1997.  Interest  on
investment  securities  increased  to $1.8 from $1.4 million for the three month
periods ended June 30, 1998 and 1997 respectively,  primarily as a result of the
increase in the average  balance of investment  securities to $116.6  million at
June  30,  1998  from  $81.3  million  at  June  30,  1997.  Interest  on  other
interest-earning  assets  increased by $100,000 for the three month period ended
June 30, 1998 compared to the similar  period ended June 30, 1997 primarily as a
result of the  average  balance  increasing  by $7.4  million to $30.0  million,
coupled  with the  increase in the average  yield to 4.11% at June 30, 1998 from
4.01% at June 30,  1997.  The  increases in the average  balances of  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
increase in the average balance of  mortgage-backed  securities is primarily the
result of the  reinvestment  of borrowed funds coupled with the  reinvestment of
mortgage loan  repayments.  The average balance of total interest earning assets
increased $32.2 million, or 5.2%, to $648.2 million at June 30, 1998 from $616.0
million at June 30, 1997.

Total interest income decreased by $1.2 million or 5.4% to $21.1 million for the
six months ended June 30, 1998, from $22.3 million for the six months ended June
30, 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 $74.6 million, or 23.8%, to $238.6 million
from  $313.2  million  for  the  six  months  ended  June  30,  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  $2.9 million or 23.4% to $9.5  million  from $12.4  million for these
same  periods. 

                                       13
<PAGE>

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 7.93% for the period end June 30, 1997, to 7.97% for the
period ended June 30, 1998.  Interest on  mortgage-backed  securities  increased
$1.2 million,  or 18.8%, for the six month period ended June 30, 1998, from $6.4
million at June 30,  1997  primarily  as a result of  increases  in the  average
balances of  mortgage-backed  securities to $236.1 million at June 30, 1998 from
$190.7  million at June 30,  1997.  The increase in income  attributable  to the
increase in the average  balance of  mortgage-backed  securities  was  partially
offset by a decrease in the average yield of the securities to 6.41% at June 30,
1998 from 6.69% at June 30 1997. Interest on investment  securities increased to
$3.3 from $3.0  million for the six month  periods  ended June 30, 1998 and 1997
respectively,  primarily as a result of the  increase in the average  balance of
investment  securities to $110.3  million at June 30, 1998 from $91.2 million at
June 30, 1997. Interest on other  interest-earning  assets increased by $200,000
for the six month  period  ended June 30, 1998  compared  to the similar  period
ended June 30, 1997 primarily as a result of the average  balance  increasing by
$9.7  million  to $33.0  million.  The  increases  in the  average  balances  of
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 increase in the average  balance of  mortgage-backed  securities  is
primarily  the result of the  reinvestment  of borrowed  funds  coupled with the
reinvestment  of  mortgage  loan  amortization.  The  average  balance  of total
interest  earning assets decreased  $400,000,  or .1%, to $618.0 million at June
30, 1998 from $618.4 million at June 30, 1997.

Total Interest Expense. Total interest expense increased to $6.6 million for the
three month period ended June 30, 1998 from $6.1 million at June 30, 1997.  This
increase in total  interest  expense is a result of the  increase in the average
balance of  borrowed  money  partially  offset by the  decrease  in the  average
balance of savings  deposits.  The average  balance of borrowed money  increased
from $98.4  million at June 30,  1997 to $161.7  million at June 30,  1998.  The
average  balance of savings  deposits  decreased from $459.1 million at June 30,
1997 to $447.4 million at June 30, 1998. The average rate paid on borrowed money
decreased  from 5.99% at June 30,  1997 to 5.51% at June 30,  1998.  The average
rate paid on savings  deposits  decreased from 4.06% in the June 30, 1997 period
to 3.90% in the June 30, 1998 period. As a result of the decrease in the average
balance and average rate paid on savings deposits,  coupled with the increase in
the average  balance of borrowed  money,  the portion of total interest  expense
attributable to savings deposits  decreased to $4.4 million from $4.7 million at
June  30,   1998  and  1997   respectively.   The   average   balance  of  total
interest-bearing  liabilities  increased to $609.1 million at June 30, 1998 from
$557.5  million at June 30,  1997  primarily  as a result of increase in Federal
Home Loan Bank advances which were used to fund asset growth.

Total interest  expense  remained level at $12.3 million six month periods ended
June 30, 1998 and June 30, 1997  respectively.  The average  balance of borrowed
money  increased  from $99.2 million at June 30, 1997 to $130.0  million at June
30, 1998. The average balance of savings deposits  decreased from $460.8 million
at June 30, 1997 to $449.2  million at June 30,  1998.  The average rate paid on
borrowed  money  decreased from 5.91% at June 30, 1997 to 5.50 at June 30, 1998.
The average rate paid on savings  deposits  decreased from 4.04% in the June 30,
1997 period to 3.86% in the June 30, 1998 period. As a result of the decrease in
the average balance and average rate paid on savings deposits,  coupled with the
increase in the average balance of borrowed money, the portion of total interest
expense  attributable  to savings  deposits  decreased to $8.7 million from $9.3
million at June 30, 1998 and 1997  respectively.  The  average  balance of total
interest-bearing  liabilities  increased to $579.2 million at June 30, 1998 from
$560.0  million at June 30,  1997  primarily  as a result of increase in Federal
Home Loan Bank advances which were used to fund asset growth.

Net Interest  Income.  Net interest income for the three month period ended June
30, 1998 decreased by $600,000,  or 12.0%, to $4.4 million from $5.0 million for
the same period in 1997.  The decrease was  primarily the result of the decrease
in total  interest  income in  conjunction  with the increase in total  interest
expense.  The average balance of total  interest-earning  assets increased $32.2
million, or 5.2%, to $648.2 million at June 30, 1998 from $616.0 million at June
30, 1997.  During these same periods,  the average balances on  interest-bearing
liabilities  increased  to  $609.1  million  from  $557.5  million.  The cost of
interest-bearing  liabilities  decreased  from 4.40% to 4.33% while the yield on
interest-earning  assets  decreased  from  7.21% to 6.79%  for the  three  month
periods ended June 30, 1997 and 1998  respectively.  The increase in the average
balance  of  interest  earning  assets  and  interest  earning  liabilities  was
primarily  the result of the  increase in Federal Home Loan  Borrowings  and the
subsequent  reinvestment of the cash proceeds into  Mortgage-backed  securities.
Net interest  income for the six month  period ended June 30, 1998  decreased by
$1.1 million,  or 11.0%,  to $8.9 million from 

                                       14
<PAGE>

$10.0 million for the same period in 1997. The decrease was primarily the result
of the decrease in total  interest  income in  conjunction  with the increase in
total interest  expense.  The average balance of total  interest-earning  assets
remained flat at $618.0 million and $618.4 million at June 30, 1998 and June 30,
1997  respectively.   During  these  same  periods,   the  average  balances  on
interest-bearing  liabilities  increased to $579.2 million from $560.0  million.
The cost of interest-bearing liabilities decreased from 4.37% to 4.23% while the
yield on interest-earning assets decreased from 7.21% to 6.84% for the six month
periods ended June 30, 1997 and 1998 respectively.


Allowance for Loan Losses.  The allowance for loan losses  increased at June 30,
1998 to $2.1 million from $2.0 million at June 30, 1997.  Such totals  correlate
to  non-performing  loans of $1.7  million at June 30, 1998 and $2.0  million at
June 30, 1997. The increase in the allowance for loan losses of $80,000 resulted
from the addition of $247,000 to the provision for loan losses and the deduction
of $167,000 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
June 30, 1998.  At June 30, 1998,  the  allowance  for loan losses was 118.1% of
non-performing  loans as compared to 102.6% of non-performing  loans at June 30,
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 $686,000 for the
three months ended June 30, 1998 from $488,000 for the same period in 1997. This
increase of $198,000 can be primarily  attributable  to the increase in the gain
on sale of investment  securities of $230,000 and the increase of $25,000 to the
gain on sale of real estate acquired  through  foreclosure,  partially offset by
the decrease of $34,000 to service fees, charges and other operating income, and
the decrease of $23,000 to the gain on sale of loans.

Total  non-interest  income  increased  to $1.1 million for the six months ended
June 30,  1998 from  $878,000  for the same  period in 1997.  This  increase  of
$228,000  can be primarily  attributable  to the increase in the gain on sale of
investment  securities of $157,000,  the increase of $52,000 to the gain on sale
of  loans,  and the  increase  of  $24,000  to the  gain on sale of real  estate
acquired  through  foreclosure,  partially  offset by the  decrease of $5,000 to
service fees, charges and other operating.

Non-interest  Expense.  Total  non-interest  expense increased  $200,000 to $3.5
million for the three months  ended June 30, 1998 as compared  with $3.3 million
for the similar  period in 1997.  Employee  compensation  and benefits  remained
level at $1.6 million for the compared  periods,  while  occupancy and equipment
increased by $25,000,  data  processing  increased by $108,000,  other operating
costs  increased  by  $27,000,  and  other  intangibles  decreased  by  $19,000.
Advertising,  professional  fees  and  federal  deposit  insurance  expense  all
remained  relatively  level for the  period.  The  increases  to  occupancy  and
equipment and data processing  expenses were a result of Technology  investments
related to a data processing system conversion.

Total non-interest expense increased $100,000 to $6.8 million for the six months
ended June 30, 1998 as  compared  with $6.7  million  for the similar  period in
1997. Employee  compensation and benefits remained level at $3.3 million for the
compared  periods,  while  occupancy  and equipment  increased by $19,000,  data
processing  increased by $103,000,  other  operating costs increased by $45,000,
and other intangibles decreased by $38,000.  Advertising,  professional fees and
federal deposit insurance expense all remained  relatively level for the period.
The increases to occupancy and  equipment  and data  processing  expenses were a
result of Technology investments related to a data processing system conversion.

Income Tax Expense. Income taxes decreased by $163,000 to $637,000 for the three
month period ended June 30, 1998,  from $800,000 for the three months ended June
30, 1997.  The primary  reason for this  decrease was the decrease in net income
before  taxes to $1.6  million at June 30,  1998,  from $2.1 million at June 30,
1997.

Income Tax Expense.  Income taxes  decreased by $421,000 to $1.2 million for the
six month period ended June 30, 1998, from $1.6 million for the six months ended
June 30,  1997.  The primary  reason for this  decrease  was the decrease in net
income before taxes to $3.1 million at June 30, 1998,  from $4.0 million at June
30, 1997.

                                       15
<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 June 30, 1998, the Savings Bank was in compliance  with its three  regulatory
capital requirements as follows:

                                             Amount             Percent
                                             ------             -------
                                    (dollars in thousands)
Tangible capital                            $43,335               6.3%
Tangible capital requirement                 10,289               1.5
                                             ------               ---
Excess over requirement                     $33,046               4.8%
                                            =======               === 

Core capital                                $43,335               6.3%
Core capital requirement                     27,438               4.0
                                             ------               ---
Excess over requirement                     $15,897               2.3%
                                            =======               === 

Risk based capital                          $45,398              17.0%
Risk based capital requirement               21,362               8.0
                                             ------               ---
Excess over requirement                     $24,036               9.0%
                                            =======               === 


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 June 30, 1998,  such
borrowed funds total $178.4  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 17.6% and 14.5% at
June 30, 1998 and 1997, respectively,  and its short-term liquidity was 7.9% and
6.5%, at such dates, respectively.

The amount of  certificate  accounts,  which are  scheduled to mature during the
twelve months  ending June 30, 1999, is  approximately  $158.4  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.

                                       16
<PAGE>

At June 30, 1998,  the Savings  Bank had  outstanding  commitments  to originate
loans of $ 3.7 million, to purchase mortgage-backed  securities of $3.9 million,
and to purchase investment securities of $260,000.  Funds required to fill these
commitments  are derived  primarily  from current  excess  liquidity or loan and
security  repayments.  At June  30,  1998,  the  Savings  Bank  had  outstanding
commitments to sell loans of $101,000.


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 reprogrammed. 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.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes to the information  provided for the period ended
December 31, 1997.

                                       17


<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 August 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

                                       18



<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:      August 14, 1998           John R. Stranford
                                     President and CEO
                                     (Principal Executive Officer)

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



                                       19