-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ka2huh4xk+6L5fyZA++Yg5XXxAVrzKaWsTZE+pbV8jWDbmJPejOb+1nBzdBpAHlS yqoWpNHjCOE1E1q4jwAl3w== 0000946275-03-000562.txt : 20030814 0000946275-03-000562.hdr.sgml : 20030814 20030814090933 ACCESSION NUMBER: 0000946275-03-000562 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TF FINANCIAL CORP CENTRAL INDEX KEY: 0000921051 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 742705050 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24168 FILM NUMBER: 03843506 BUSINESS ADDRESS: STREET 1: 3 PENNS TRAIL CITY: NEWTOWN STATE: PA ZIP: 18940 BUSINESS PHONE: 2155794000 MAIL ADDRESS: STREET 1: 3 PENNS TRAIL CITY: NEWTOWN STATE: PA ZIP: 18940 10-Q 1 f10q_063003-0084.txt 10Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM l0-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 -------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission file number 0-24168 ------- TF FINANCIAL CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 74-2705050 - ---------------------------------- ----------------------------------- (State or other jurisdiction (I.R.S. employer identification no.) of incorporation or organization) 3 Penns Trail, Newtown, Pennsylvania 18940 - ------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 215-579-4000 --------------- N/A - ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer as defined in Exchange Act Rule 12b-2. YES NO X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: August 1, 2003 -------------- Class Outstanding ---------------------------- ---------------- $.10 par value common stock 2,800,231 shares TF FINANCIAL CORPORATION AND SUBSIDIARIES FORM 1O-Q FOR THE QUARTER ENDED JUNE 30, 2003 INDEX Page Number ------ PART I - CONSOLIDATED FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 20 Item 4. Controls and Procedures 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings 23 Item 2. Changes in Securities and Use of Proceeds 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Other Information 23 Item 5. Exhibits and Reports on Form 8-K 23 SIGNATURES 24 EXHIBITS 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 2 TF FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands)
Unaudited Audited June 30, December 31, 2003 2002 ---- ---- Assets Cash and cash equivalents $ 37,589 $100,580 Certificates of deposit in other financial institutions 228 220 Investment securities available for sale - at fair value 88,446 27,243 Investment securities held to maturity (fair value of $13,359 and $15,187, 12,696 14,563 respectively) Mortgage-backed securities available for sale - at fair value 137,213 115,243 Mortgage-backed securities held to maturity (fair value of $37,491 and 35,755 54,592 $57,346, respectively) Loans receivable, net 359,208 370,092 Federal Home Loan Bank stock - at cost 11,250 11,424 Accrued interest receivable 3,184 3,576 Core deposit intangible, net of accumulated amortization of $2,367 and $2,271, respectively 457 553 Goodwill 4,324 4,324 Premises and equipment, net 6,659 6,742 Other assets 15,627 11,880 -------- -------- Total assets $712,636 $721,032 ======== ======== Liabilities and stockholders' equity Liabilities Deposits $448,139 $442,558 Advances from the Federal Home Loan Bank 192,359 207,359 Advances from borrowers for taxes and insurance 1,513 1,330 Accrued interest payable 2,949 2,897 Other liabilities 3,795 4,048 -------- -------- Total liabilities 648,755 658,192 -------- -------- Commitments and contingencies Stockholders' equity Preferred stock, no par value; 2,000,000 shares authorized and none issued. Common stock, $0.10 par value; 10,000,000 shares authorized, 5,290,000 issued; 2,566,352 and 2,482,586 shares outstanding at June 30, 2003 and December 31, 2002, net of treasury shares of 2,493,551 and 2,567,268, respectively. 529 529 Retained earnings 60,445 59,978 Additional paid-in capital 51,331 51,647 Unearned ESOP shares (2,302) (2,401) Treasury stock - at cost (47,410) (48,809) Accumulated other comprehensive income 1,288 1,896 -------- -------- Total stockholders' equity 63,881 62,840 -------- -------- Total liabilities and stockholders' equity $712,636 $721,032 ======== ========
3 TF FINANCIAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data)
For Three Months For Six Months Ended June 30, Ended June 30, -------------- -------------- 2003 2002 2003 2002 ---- ---- ---- ---- Interest income Loans $5,625 $6,429 $11,676 $13,160 Mortgage-backed securities 1,845 3,188 3,697 6,248 Investment securities 518 565 1,026 1,152 Interest bearing deposits and other 168 271 414 480 ------ ------ ------ ------ Total interest income 8,156 10,453 16,813 21,040 ------ ------ ------ ------ Interest expense Deposits 1,824 2,707 3,868 5,537 Advances from the Federal Home Loan Bank and other borrowings 2,701 3,071 5,480 6,108 ------ ------ ------ ------ Total interest expense 4,525 5,778 9,348 11,645 ------ ------ ------ ------ Net interest income 3,631 4,675 7,465 9,395 Provision for loan losses 90 538 180 688 ------ ------ ------ ------ Net interest income after provision for loan losses 3,541 4,137 7,285 8,707 ------ ------ ------ ------ Non-interest income Service fees, charges and other operating income 440 329 885 736 Bank-owned life insurance 129 137 262 270 Gain on sale of investment and mortgage-backed securities available for sale 79 - 585 - ------ ------ ------ ------ Total non-interest income 648 466 1,732 1,006 ------ ------ ------ ------ Non-interest expense Compensation and benefits 2,036 1,916 4,060 3,845 Occupancy and equipment 602 576 1,230 1,154 Federal deposit insurance premium 18 19 37 38 Professional fees 158 105 318 185 Amortization of core deposit intangible 48 58 96 116 Advertising 138 110 275 220 Other operating 599 522 1,322 1,168 ------ ------ ------ ------ Total non-interest expense 3,599 3,306 7,338 6,726 ------ ------ ------ ------ Income before income taxes 590 1,297 1,679 2,987 Income taxes 154 302 464 707 ------ ------ ------ ------ Net income $ 436 $ 995 1,215 2,280 ====== ====== ====== ====== Basic earnings per share $0.17 $0.40 $0.49 $0.92 Diluted earnings per share $0.16 $0.37 $0.45 $0.86
See notes to consolidated financial statements 4 TF FINANCIAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the six months ended June 30, -------- 2003 2002 ---- ---- Cash flows from operating activities Net Income $ 1,215 $ 2,280 Adjustments to reconcile net income to net cash provided by operating activities: Mortgage loan servicing rights 7 7 Deferred loan origination fees (139) (99) Premiums and discounts on investment securities, net 26 68 Premiums and discounts on mortgage-backed securities and loans, net 1,179 (264) Amortization of core deposit intangible 96 116 Provision for loan losses 180 688 Depreciation of premises and equipment 502 507 Recognition of ESOP and MSBP expenses 267 140 Gain on sale of investment and mortgage-backed securities available for sale (585) - Gain on sale of real estate (12) (57) Increase in value of bank-owned life insurance (262) (262) (Increase) decrease in: Accrued interest receivable 392 (135) Other assets (219) (117) Increase (decrease) in: Accrued interest payable 52 (449) Other liabilities 59 (483) ------- ------- Net cash provided by operating activities 2,758 1,940 ------- ------- Cash flows from investing activities Loan originations (55,286) (17,821) Purchases of loans (21,927) (16,685) Loan principal payments 85,946 57,640 Proceeds from sale of mortgage-backed securities available for sale 15,075 - Purchases of mortgage-backed securities available for sale (65,873) (62,848) Purchase of investment securities held to maturity - (6,821) Purchase of investment securities available for sale (91,122) (6,000) Proceeds from maturities of investment securities held to maturity 1,830 1,055 Proceeds from maturities of investment securities available for sale 30,000 1,000 Principal repayments from mortgage-backed securities held to maturity 18,862 20,391 Principal repayments from mortgage-backed securities available for sale 27,472 16,511 Purchase of bank-owned life insurance (1,500) - Purchase of certificates of deposit in other financial institutions (8) - Purchases and redemptions of Federal Home Loan Bank stock, net 174 250 Proceeds from sales of real estate acquired through foreclosure 96 272 Purchase of premises and equipment (419) (62) ------- ------- Net cash used in investing activities (56,680) (13,118) ------- -------
See notes to consolidated financial statements 5 TF FINANCIAL CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands)
For the six months ended June 30, -------- 2003 2002 ---- ---- Cash flows from financing activities Net increase in deposits 5,581 15,451 Net decrease in advances from Federal Home Loan Bank (15,000) - Net decrease in advances from borrowers for taxes and insurance 183 59 Exercise of stock options 915 232 Purchase of treasury stock, net - (337) Common stock cash dividend (748) (739) -------- ------- Net cash provided by (used in) financing activities (9,069) 14,666 -------- ------- Net (decrease) increase in cash and cash equivalents (62,991) 3,488 Cash and cash equivalents at beginning of period 100,580 69,139 -------- ------- Cash and cash equivalents at end of period $ 37,589 $72,627 ======== ======= Supplemental disclosure of cash flow information Cash paid for Interest on deposits and advances $ 9,296 $12,098 Income taxes $ 250 $ 1,000 Non-cash transactions Transfers from loans to real estate acquired through foreclosure $ 1,857 $ 185
See notes to consolidated financial statements 6 TF FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - RESTATEMENT OF INFORMATION FOR THE PERIOD ENDED JUNE 30, 2002 On October 1, 2002 the FASB issued SFAS No. 147,"Acquisitions of Certain Financial Institutions." Except for transactions between two or more mutual enterprises, SFAS No. 147 removed the acquisitions of financial institutions from the scope of both SFAS No. 72 and FASB Interpretation No. 9 and required that those transactions be accounted for in accordance with SFAS No. 141 and SFAS No. 142. Thus, the requirement of SFAS No. 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired ("SFAS 72 goodwill") as an unidentifiable intangible no longer applied to acquisitions within the scope of SFAS No. 147. Finally, SFAS No. 147 provided that branch acquisitions that meet the definition of a business should be accounted for as a business combination. SFAS No. 147 was effective October 1, 2002, although earlier application was permitted. The Company has elected to apply SFAS No. 147 as of January 1, 2002. In accordance with the provisions of SFAS No. 147 interim financial statements of the Company issued after January 1, 2002 have been restated to remove amortization expense associated with SFAS No. 72 goodwill. Such expense totaled $164,000, net of a tax benefit of $58,000 for the six months ended June 30, 2002. NOTE 2 - PRINCIPLES OF CONSOLIDATION The consolidated financial statements as of June 30, 2003 (unaudited) and December 31, 2002 and for the six-month periods ended June 30, 2003 and 2002 (unaudited) include the accounts of TF Financial Corporation (the "Company") and its wholly owned subsidiaries Third Federal Savings Bank (the "Bank"), TF Investments Corporation, Penns Trail Development Corporation and Teragon Financial Corporation. The Company's business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. NOTE 3 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all of the disclosures or footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for fair presentation of the consolidated financial statements have been included. The results of operations for the period ended June 30, 2003 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. For further information, refer to consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. NOTE 4 - CONTINGENCIES The Company, from time to time, is a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company's consolidated financial condition or results of operations. NOTE 5 - OTHER COMPREHENSIVE INCOME The Company's other comprehensive income consists of net unrealized gains on investment securities and mortgage-backed securities available for sale. Total comprehensive income for the three-month periods ended June 30, 2003 and 2002 was $425,000 and $2,932,000, net of applicable income tax of $148,000 and $1,299,000, respectively. Total comprehensive income for the six-month periods ended June 30, 2003 and 2002 was $607,000 and $3,734,000, net of applicable income tax of $151,000 and $1,455,000, respectively. 7 TF FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - EARNINGS PER SHARE
Three months ended June 30, 2003 -------------------------------- Weighted (000's) Average Income Shares Per share (numerator) (denominator) Amount ----------- ------------- --------- Basic earnings per share Income available to common stockholders $ 436 2,516,638 $ 0.17 Effect of dilutive securities Stock options - 208,264 (0.01) ------- --------- ------- Diluted earnings per share Income available to common stockholders plus effect of dilutive securities $ 436 2,724,902 $ 0.16 ======= ========= =======
Six months ended June 30, 2003 ------------------------------ Weighted (000's) Average Income Shares Per share (numerator) (denominator) Amount ----------- ------------- --------- Basic earnings per share Income available to common stockholders $ 1,215 2,502,600 $ 0.49 Effect of dilutive securities Stock options - 207,467 (0.04) ------- ---------- ------- Diluted earnings per share Income available to common stockholders plus effect of dilutive securities $ 1,215 2,710,067 $ 0.45 ======= ========== =======
There were options to purchase 34,900 shares of common stock at a range of $25.33 to $28.00 per share which were outstanding during the six-month period ended June 30, 2003 that were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. 8 TF FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - EARNINGS PER SHARE (continued)
Three months ended June 30, 2002 -------------------------------- Weighted (000's) Average Income Shares Per share (numerator) (denominator) Amount ----------- ------------- --------- Basic earnings per share Income available to common stockholders $ 995 2,470,258 $ 0.40 Effect of dilutive securities Stock options - 197,525 (0.03) ------- ---------- ------- Diluted earnings per share Income available to common stockholders plus effect of dilutive securities $ 995 2,667,783 $ 0.37 ======= ========== =======
There were options to purchase 5,000 shares of common stock at $28.00 per share which were outstanding during the three-month period ended June 30, 2002 that were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares.
Six months ended June 30, 2002 ------------------------------ Weighted (000's) Average Income Shares Per share (numerator) (denominator) Amount ----------- ------------- --------- Basic earnings per share Income available to common stockholders $ 2,280 2,466,561 $ 0.92 Effect of dilutive securities Stock options - 189,937 (0.06) ------- --------- ------- Diluted earnings per share Income available to common stockholders plus effect of dilutive securities $ 2,280 2,656,498 $ 0.86 ======= ========= =======
There were options to purchase 5,000 shares of common stock at $28.00 per share which were outstanding during the six-month period ended June 30, 2002 that were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. 9 TF FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 7- STOCK BASED COMPENSATION The Company has several fixed stock option plans. The Company's employee stock option plans are accounted for using the intrinsic value method under APB Opinion No. 25, as permitted by SFAS No. 123. No stock-based compensation expense is reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. Had compensation cost for the plans been determined based on the fair value of options at the grant dates consistent with the method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):
Three months ended June 30, 2003 2002 ---------------------------- ---- ---- Net income As reported $ 436 $ 995 Deduct: stock-based compensation expense determinded using the fair value method, net of related tax effects 11 14 ------ ------ Pro forma $ 425 $ 981 ====== ====== Basic earnings per share As reported $ 0.17 $ 0.40 Pro forma $ 0.17 $ 0.40 Diluted earnings per share As reported $ 0.16 $ 0.37 Pro forma $ 0.16 $ 0.37
Stock-based compensation expense included in net income is related to stock grants in lieu of salary and the Company's employee stock ownership plan. Such expense totaled $131,000 and $53,000 for the three-month periods ended June 30, 2003 and 2002, respectively. 10 TF FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 7- STOCK BASED COMPENSATION (continued)
Six months ended June 30, 2003 2002 -------------------------- ---- ---- Net income As reported $ 1,215 $ 2,280 Deduct: stock-based compensation expense determined using the fair value method, net of related tax effects 22 31 ------- ------- Pro forma $ 1,193 $ 2,249 ======= ======= Basic earnings per share As reported $ 0.49 $ 0.92 Pro forma $ 0.48 $ 0.92 Diluted earnings per share As reported $ 0.45 $ 0.86 Pro forma $ 0.45 $ 0.85
Stock-based compensation expense included in net income is related to stock grants in lieu of salary and the Company's employee stock ownership plan. Such expense totaled $227,000 and $101,000 for the six-month periods ended June 30, 2003 and 2002, respectively. NOTE 8- RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current period presentation. 11 TF FINANCIAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company may from time to time make written or oral "forward-looking statements", including statements contained in the Company's filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits thereto), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing. The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company. Financial Condition The Company's total assets at June 30, 2003 and December 31, 2002 were $712.6 million and $721.0 million, respectively, a decrease of $8.4 million, or 1.2%, during the six-month period. Cash and cash equivalents decreased by $62.9 million. Investment securities available for sale increased by $61.2 million, the net effect of the purchase of $91.2 million less the calls and maturities of $30.0 million of such securities. Investment securities held to maturity decreased by $1.8 million due to calls and maturities of such securities. Mortgage-backed securities available for sale increased by $21.9 million as $65.8 million in purchases of such securities more than off-set the $1.0 million decrease in unrealized gains plus the sale of $14.4 million and the principal pay-downs of $27.4 million received from these securities. Mortgage-backed securities held to maturity decreased by $18.8 million due to the high rate of prepayments of the mortgages underlying these pass-through securities. Similarly, high prepayments of existing mortgages in the loans receivable portfolio caused a decrease of $85.9 million in loans receivable. Offsetting this reduction in existing loans receivable was the origination of $55.2 million in predominately consumer and single-family residential mortgage loans, and the purchase of $21.9 million in newly originated, single-family residential mortgage loans. 12 Total liabilities decreased by $9.4 million. Deposit growth during the first six months of 2003 was $5.6 million. Non-interest bearing demand deposits grew by $2.3 million while savings, money market, and interest-bearing checking accounts increased by a combined $7.6 million. Certificates of deposit decreased by $4.3 million. Advances from the Federal Home Loan Bank decreased by $15.0 million due to scheduled maturity of advances. Total consolidated stockholders' equity of the Company was $63.9 million or 8.96% of assets at June 30, 2003. During the first half of 2003 the Company did not repurchase any shares of its common stock and issued 72,717 shares pursuant to the exercise of stock options. As of June 30, 2003, there were approximately 114,000 shares available for repurchase under the previously announced share repurchase plan, and the Company will continue to repurchase shares as share availability and market conditions permit. Asset Quality During the first half of 2003 the Company completed foreclosure proceedings on two related parcels of commercial real estate with a combined loan balance of $1.7 million. These loans were non-performing at December 31, 2002. These parcels have been recorded as real estate owned at the lower of the recorded investment in the loan or estimated fair value in the amount of $1.7 million and are included in other assets in the statement of financial condition at June 30, 2003. Management of the Company believes that there has not been any significant deterioration in its asset quality during the first half of 2003. The following table sets forth information regarding the Company's asset quality (dollars in thousands):
June 30, December 31, June 30, -------- ------------ -------- 2003 2002 2002 ---- ---- ---- Non-performing loans $2,231 $3,822 $3,925 Ratio of non-performing loans to gross loans 0.62% 1.03% 1.10% Ratio of non-performing loans to total assets 0.31% 0.53% 0.54% Foreclosed property $1,857 $ 84 - Foreclosed property to total assets 0.26% 0.01% 0.00% Ratio of total non-performing assets to total assets 0.57% 0.54% 0.54%
Management maintains an allowance for loan and lease losses at levels that are believed to be adequate; however, there can be no assurances that further additions will not be necessary or that losses inherent in the existing loan and lease portfolios will not exceed the allowance. The following table sets forth the activity in the allowance for loan and lease losses during the periods indicated (in thousands): 2003 2002 ---- ---- Beginning balance, January 1, $2,047 $1,972 Provision 180 688 Less: charge-off's (recoveries), net 304 765 ------ ------ Ending balance, June 30, $1,923 $1,895 ====== ====== 13 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 Net Income. The Company recorded net income of $436,000, or $0.16 per diluted share, for the three months ended June 30, 2003 as compared to $995,000, or $0.37 per diluted share, for the three months ended June 30, 2002. Average Balance Sheet The following table sets forth information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Yield and cost are computed by dividing income or expense by the average daily balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods indicated.
Three months ended June 30, 2003 2002 ---------------------------------- --------------------------------- Average Average Average Average Balance Interest Yld/Cost Balance Interest Yld/Cost ------- -------- -------- ------- -------- -------- (dollars in thousands) Assets: Interest-earning assets: Loans receivable (1)....................... $363,906 $5,625 6.20% $360,448 $ 6,429 7.15% Mortgage-backed securities................. 172,259 1,845 4.30% 212,146 3,188 6.03% Investment securities...................... 76,608 518 2.71% 49,845 565 4.55% Other interest-earning assets(2)........... 64,376 168 1.05% 64,617 271 1.68% -------- ------ -------- ------- Total interest-earning assets............ 677,149 8,156 4.83% 687,056 10,453 6.10% ------ ------- Non interest-earning assets.................... 35,748 34,628 -------- -------- Total assets............................. $712,897 $721,684 ======== ======== Liabilities and stockholders' equity: Interest-bearing liabilities Deposits................................... $446,212 1,824 1.64% $432,918 2,707 2.51% Advances from the FHLB and other Borrowings...................... 197,249 2,701 5.49% 222,359 3,071 5.54% -------- ------ -------- ------- Total interest-bearing liabilities....... 643,461 4,525 2.82% 655,277 5,778 3.54% ------ ------- Non interest-bearing liabilities............... 6,266 7,879 -------- -------- Total liabilities........................ 649,727 663,156 Stockholders' equity........................... 63,170 58,528 -------- -------- Total liabilities and stockholders' equity.................. $712,897 $721,684 ======== ======== Net interest income............................ $3,631 $ 4,675 ====== ======= Interest rate spread (3)....................... 2.01% 2.56% Net yield on interest-earning assets (4)....... 2.15% 2.73% Ratio of average interest-earning assets to average interest bearing liabilities......... 105% 105%
(1) Nonaccrual loans have been included in the appropriate average loan balance category, but interest on nonaccrual loans has not been included for purposes of determining interest income. (2) Includes interest-bearing deposits in other banks. (3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (4) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. 14 Rate/Volume Analysis The following table presents, for the periods indicated, the change in interest income and interest expense (in thousands) attributed to (i) changes in volume (changes in the weighted average balance of the total interest earning asset and interest bearing liability portfolios multiplied by the prior year rate), and (ii) changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on the absolute value of changes due to volume and changes due to rate.
Three months ended June 30, 2003 vs. 2002 ------------------------------------------- Increase (decrease) due to ------------------------------------------- Volume Rate Net ------------------------------------------- Interest income: Loans receivable, net $ 408 $(1,212) $ (804) Mortgage-backed securities (531) (812) (1,343) Investment securities 1,017 (1,064) (47) Other interest-earning assets (1) (102) (103) ------------------------------------------- Total interest-earning assets 893 (3,190) (2,297) =========================================== Interest expense: Deposits 541 (1,424) (883) Advances from the FHLB and other borrowings (344) (26) (370) ------------------------------------------- Total interest-bearing liabilities 197 (1,450) (1,253) =========================================== Net change in net interest income (696) $(1,740) $(1,044) ===========================================
Total Interest Income. Total interest income decreased by $2.3 million or 22.0% to $8.1 million for the three months ended June 30, 2003 compared with the second quarter of 2002 primarily because of the consequences of record low market interest rates. As a result, during the past year the Bank's callable investment securities were called, higher coupon mortgage-related securities were paid down at an accelerated rate, and loans were refinanced by borrowers at lower rates, or away from the Bank, resulting in large pay-downs of higher yielding loans. In addition, the interest rates on the Bank's adjustable rate loans adjusted downward. Furthermore, the rate earned on Company's cash and cash equivalents were substantially lower during the 2003 period. Total Interest Expense. Total interest expense decreased by $1.3 million to $4.5 million for the three-month period ended June 30, 2003. The increase in the average balance of deposits was more than offset by lower market interest rates during the period and the lower rates paid on the Bank's renewing certificates of deposit that had been originated when market interest rates were higher. In addition, the Bank lowered the interest rates paid on several of its other deposit products in order to keep them in line with short term market interest rates and the Bank's competitors. Non-interest income. Total non-interest income was $648,000 for the three-month period ended June 30, 2003 compared with $466,000 for the same period in 2002. The increase is primarily due to $79,000 in gains on sales of mortgage-backed securities available for sale during the second quarter of 2003 while there were no such sales during the 2002 period. In addition, retail banking fees were $103,000 higher due in large part to a $70,000 increase in commercial loan prepayment fees and a $33,000 increase in overdraft fees. 15 Non-interest expense. Total non-interest expense increased by $293,000 to $3.5 million for the three months ended June 30, 2003 compared to the same period in 2002. The increase in operating expense was associated with the opening of a new branch location in Philadelphia during the early part of 2003. Benefits expenses also were higher by $78,000 due to the cost of the Corporation's employee stock ownership plan where the cost of shares released is impacted by the higher share price during the second quarter of 2003 compared with 2002. In addition, the Corporation's loan origination expense were $33,000 higher during the second quarter of 2003, corresponding to an increase in loans originated to $31.3 million compared with $7.8 million during the second quarter of 2002. 16 RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 Net Income. The Company recorded net income of $1,215,000, or $0.45 per diluted share, for the six months ended June 30, 2003 as compared to $2,280,000, or $0.86 per diluted share, for the six months ended June 30, 2002. Average Balance Sheet The following table sets forth information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Yield and cost are computed by dividing income or expense by the average daily balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods indicated.
Six months ended June 30, 2003 2002 ---------------------------------- ---------------------------------- Average Average Average Average Balance Interest Yld/Cost Balance Interest Yld/Cost ------- -------- -------- ------- -------- -------- (dollars in thousands) Assets: Interest-earning assets: Loans receivable (1)....................... $365,226 $11,676 6.45% $366,435 $13,160 7.24% Mortgage-backed securities................. 167,985 3,697 4.44% 206,999 6,248 6.09% Investment securities...................... 66,670 1,026 3.10% 48,921 1,152 4.75% Other interest-earning assets(2)........... 79,297 414 1.05% 59,225 480 1.63% -------- ------- -------- ------- Total interest-earning assets............ 679,179 16,813 4.99% 681,580 21,040 6.23% ------- ------- Non interest-earning assets.................... 35,355 35,084 -------- -------- Total assets............................. $714,534 $716,664 ======== ======== Liabilities and stockholders' equity: Interest-bearing liabilities Deposits................................... $444,459 3,868 1.75% $428,105 5,537 2.61% Advances from the FHLB and other Borrowings...................... 200,619 5,480 5.51% 222,359 6,108 5.54% -------- ------- -------- ------- Total interest-bearing liabilities....... 645,078 9,348 2.92% 650,464 11,645 3.61% ------- ------- Non interest-bearing liabilities............... 6,344 7,844 -------- -------- Total liabilities........................ 651,422 658,308 Stockholders' equity........................... 63,112 58,356 -------- -------- Total liabilities and stockholders' equity................... $714,534 $716,664 ======== ======== Net interest income............................ $ 7,465 $ 9,395 ======= ======= Interest rate spread (3)....................... 2.07% 2.62% Net yield on interest-earning assets (4)....... 2.22% 2.78% Ratio of average interest-earning assets to average interest bearing liabilities........... 105% 105%
(1) Nonaccrual loans have been included in the appropriate average loan balance category, but interest on nonaccrual loans has not been included for purposes of determining interest income. (2) Includes interest-bearing deposits in other banks. (3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (4) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. 17 Rate/Volume Analysis The following table presents, for the periods indicated, the change in interest income and interest expense (in thousands) attributed to (i) changes in volume (changes in the weighted average balance of the total interest earning asset and interest bearing liability portfolios multiplied by the prior year rate), and (ii) changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on the absolute value of changes due to volume and changes due to rate.
Six months ended June 30, 2003 vs. 2002 ------------------------------------------------------ Increase (decrease) due to ----------------------------------------------- Volume Rate Net ----------------------------------------------- Interest income: Loans receivable, net $ (43) $ (1,441) $ (1,484) Mortgage-backed securities (1,047) (1,504) (2,551) Investment securities 759 (885) (126) Other interest-earning assets 304 (370) (66) ----------------------------------------------- Total interest-earning assets (27) (4,200) (4,227) =============================================== Interest expense: Deposits 589 (2,258) (1,669) Advances from the FHLB and other borrowings (594) (34) (628) ----------------------------------------------- Total interest-bearing liabilities (5) (2,292) (2,297) =============================================== Net change in net interest income $ (22) $ (1,908) $ (1,930) ===============================================
Total Interest Income. Total interest income decreased by $4.2 million or 20.0% to $16.8 million for the six months ended June 30, 2003 compared with the first half of 2002 primarily because of the consequences of record low market interest rates. As a result, during the past year the Bank's callable investment securities were called, higher coupon mortgage-related securities were paid down at an accelerated rate, and loans were refinanced by borrowers at lower rates, or away from the Bank, resulting in large pay-downs of higher yielding loans. In addition, the interest rates on the Bank's adjustable rate loans adjusted downward. Furthermore, the rate earned on Company's cash and cash equivalents were substantially lower during the 2003 period. Total Interest Expense. Total interest expense decreased by $2.3 million to $9.3 million for the six-month period ended June 30, 2003. The interest expense increase due to an increase in the average balance of deposits was more than offset by lower market interest rates during the period and the lower rates paid on the Bank's renewing certificates of deposit that had been originated when market interest rates were higher. In addition, the Bank lowered the interest rates paid on several of its other deposit products in order to keep them in line with short-term market interest rates and the Bank's competitors. Non-interest income. Total non-interest income was $1,732,000 for the six-month period ended June 30, 2003 compared with $1,006,000 for the same period in 2002. The increase is primarily due to $585,000 in gains on sales of mortgage-backed securities available for sale during the second quarter of 2003 while there were no such sales during the 2002 period. In addition, retail banking fees were $134,000 higher due in large part to a $94,000 increase in commercial loan prepayment fees and a $52,000 increase in overdraft fees. 18 Non-interest expense. Total non-interest expense increased by $612,000 to $7.3 million for the six months ended June 30, 2003 compared to the same period in 2002. Compensation and benefits expense was higher during the 2003 period due to a $93,000 one time reduction in pension expense during the first quarter of 2002 caused by participants who had very high balances leaving the plan. Benefits expenses also were higher by $126,000 due to the cost of the Corporation's employee stock ownership plan where the cost of shares released is impacted by the higher share price during the first half of 2003 compared with 2002. Occupancy and equipment expense increased in part because maintenance expenses were unusually high during the first quarter of 2003 due to inclement weather. In addition, the Corporation's loan origination expense were $64,000 higher during the first six months of 2003, corresponding to an increase in loans originated to $55.3 million compared with $17.8 million during the same period of 2002. 19 LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company's liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Company's short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new deposits, broker deposits, other borrowings, and new advances from the Federal Home Loan Bank. There has been no material adverse change during six-month period ended June 30, 2003 in the ability of the Company and its subsidiaries to fund their operations. At June 30, 2003, the Company had commitments outstanding under letters of credit of $1 million, commitments to originate loans of $30.0 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit of $31.2 million. There has been no material change during the six months ended June 30, 2003 in any of the Company's other contractual obligations or commitments to make future payments. Capital Requirements The Bank is in compliance with all of its capital requirements as of June 30, 2003. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Asset and Liability Management The Company's market risk exposure is predominately caused by interest rate risk, which is defined as the sensitivity of the Company's current and future earnings, the values of its assets and liabilities, and the value of its capital to changes in the level of market interest rates. Management of the Company believes that there has not been a material adverse change in market risk during the six months ended June 30, 2003. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Based on their evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), the Company's principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Changes in Internal Controls over Financial Reporting During the quarter under report, there was no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 20 NEW ACCOUNTING PRONOUNCEMENTS In January 2003 the FASB issued FIN Number 46, "Consolidation of Variable Interest Entities." This Interpretation of ARB No. 51, "Consolidated Financial Statements," was issued to address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance-sheet entities, but the guidance applies to a larger population of entities. FIN 46 provides guidance for identifying the party with a controlling financial interest resulting from arrangements or financial interests rather than from voting interests. FIN 46 defines the term "variable interest entity" (VIE) and is based on the premise that if a business enterprise has a controlling financial interest in a VIE, the assets, liabilities, and results of the activities of the VIE should be included in the consolidated financial statements of the business enterprise. An enterprise that consolidates a VIE is the primary beneficiary of the VIE. The primary beneficiary is the party whose variable interest(s) absorbs a majority of the entity's expected losses, receives a majority of its expected residual returns, or both. FIN 46 requires the primary beneficiary of a VIE, as well as other enterprises that hold a significant variable interest in a VIE, to provide certain financial statement disclosures. Some disclosures are required in all financial statements issued after January 31, 2003 if it is reasonably possible that an enterprise will consolidate or disclose information about a VIE when FIN 46 becomes effective. FIN 46 applies immediately to VIEs created after January 31, 2003 and to VIEs in which an enterprise obtains an interest after that date. For variable interests in VIEs created before February 1, 2003, FIN 46 applies to public enterprises no later than the beginning of the first interim or annual period beginning after June 15, 2003. The adoption of the provisions of FIN 46 by the Company has not and will not have a material impact on the Company's financial condition or results of operations. On April 30, 2003 the Financial Accounting Standards Board (FASB) issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. The new guidance amends Statement 133 for decisions made: as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, in connection with other Board projects dealing with financial instruments, and regarding implementation issues raised in relation to the application of the definition of a derivative, particularly regarding the meaning of an "underlying" and the characteristics of a derivative that contains financing components. This Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in Statement 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. Statement 149 amends certain other existing pronouncements. This Statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. The guidance should be applied prospectively. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, certain provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to existing contracts as well as new contracts entered into after June 30, 2003. The Company is presently evaluating this new standard but does not expect the adoption of SFAS No. 149 to have a material effect on the Company's financial condition or results of operations. 21 NEW ACCOUNTING PRONOUNCEMENTS (continued) On May 15, 2003 the Financial Accounting Standards Board (FASB) issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The Statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new Statement requires that those instruments be classified as liabilities in statements of financial position. Statement 150 affects three types of freestanding financial instruments: (1) mandatorily redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets; (2) instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets, including put options and forward purchase contracts; and (3) obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuer's shares. Statement 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the guidance in Statement 150 is effective for all financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not expect Statement 150 to have a material effect on the Company's consolidated financial position, results of operations or cash flows. 22 TF FINANCIAL CORPORATION AND SUBSIDIARIES PART II ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. OTHER INFORMATION None ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31. Certification pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32. Certification pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On July 24, 2003 the Company filed a Form 8-K wherein the Company included the press release announcing the Company's earnings for the second quarter of 2003. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. TF FINANCIAL CORPORATION /s/ Kent C. Lufkin ------------------ Date: August 13, 2003 Kent C. Lufkin --------------- President and CEO (Principal Executive Officer) /s/ Dennis R. Stewart --------------------- Date: August 13, 2003 Dennis R. Stewart --------------- Executive Vice President and Chief Financial Officer (Principal Financial & Accounting Officer) 24 EX-31 3 ex31.txt EX31 CERTIFICATION CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kent C. Lufkin, President and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TF Financial Corporation (Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the Registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)), to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Kent C. Lufkin ---------------------------------------- Date: August 13, 2003 Kent C. Lufkin --------------- President and Chief Executive Officer (Principal Executive Officer) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Dennis R. Stewart, Executive Vice President and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TF Financial Corporation (Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the Registrant and we have: a) designed such disclosure controls and procedures , or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)), to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Dennis R. Stewart --------------------- Date: August 13, 2003 Dennis R. Stewart --------------- Executive Vice President and Chief Financial Officer (Principal Financial & Accounting Officer) EX-32 4 ex32.txt EX32 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (the "Report") of TF Financial Corporation (the "Company") as filed with the Securities and Exchange Commission on the date hereof, we, Kent C. Lufkin, President and Chief Executive Officer, and Dennis R. Stewart, Executive Vice President and Chief Financial Officer (Principal Accounting Officer), hereby certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Kent C. Lufkin ------------------ Date: August 13, 2003 Kent C. Lufkin --------------- President and CEO (Principal Executive Officer) /s/ Dennis R. Stewart --------------------- Date: August 13, 2003 Dennis R. Stewart --------------- Executive Vice President and Chief Financial Officer (Principal Financial & Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----