EXHIBIT 99.2
Report of Independent Certified Public Accountants
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Board of Directors
TF Financial Corporation
We have audited the accompanying statement of assets acquired and
liabilities assumed of the Branches of Cenlar Federal Savings Bank by Third
Federal Savings Bank (a wholly-owned subsidiary of TF Financial Corporation) as
of September 20, 1996. The statement of assets acquired and liabilities assumed
is the responsibility of Third Federal Savings Bank's management. Our
responsibility is to express an opinion on the statement of assets acquired and
liabilities assumed based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets acquired and
liabilities assumed is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of assets acquired and liabilities assumed. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit of the statement of assets acquired and liabilities
assumed provides a reasonable basis for our opinion.
The accompanying statement was prepared to present the assets acquired
and liabilities assumed of the Branches of Cenlar Federal Savings Bank by Third
Federal Savings Bank as of September 20, 1996, pursuant to the Branch Purchase
and Deposit Assumption Agreements described in note A1, and is not intended to
be a complete presentation of Cenlar Federal Savings Bank's assets and
liabilities.
In our opinion, the accompanying statement of assets acquired and
liabilities assumed presents fairly, in all material respects, the assets
acquired and liabilities assumed of the Branches of Cenlar Federal Savings Bank
by Third Federal Savings Bank as of September 20, 1996, pursuant to the Branch
Purchase and Deposit Assumption Agreements, in conformity with generally
accepted accounting principles.
Philadelphia, Pennsylvania
November 1, 1996
Branches of Cenlar Federal Savings Bank
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
September 20, 1996
(dollars in thousands)
ASSETS
Cash and due from banks $ 126,969
Loans 159
Premises and equipment, net 1,325
Other assets 27
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Total assets $ 128,480
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LIABILITIES AND EXCESS OF LIABILITIES OVER ASSETS ACQUIRED
LIABILITIES
Deposits
Non-interest bearing $ 26,421
Interest bearing (includes certificates of deposit in excess of $100
in the amount of $2,547) 111,315
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Total deposits 137,736
Interest accrued and unpaid on deposits 1
Expenses payable 219
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Total liabilities 137,956
EXCESS OF LIABILITIES ASSUMED OVER ASSETS ACQUIRED (9,476)
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Total liabilities and excess of liabilities over assets acquired $ 128,480
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The accompanying notes are an integral part of this statement.
Branches of Cenlar Federal Savings Bank
NOTES TO STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
September 20, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Acquisition of Branches
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On September 20, 1996, Third Federal Savings Bank (TF Bank), a wholly-owned
banking subsidiary of TF Financial Corporation, acquired three branches of
Cenlar Federal Savings Bank (CF Bank), a federally chartered savings
association, pursuant to Branch Purchase and Deposit Assumption Agreements
between TF Bank and CF Bank on June 7, 1996. Through the acquisition, TF
Bank assumed $137.9 million of liabilities, primarily consisting of
deposits, in exchange for cash of $127 million and other assets with a
deemed fair market value of $1.5 million. Subsequent to the acquisition, the
branch offices will be operated as TF Bank branch offices. The statement of
assets acquired and liabilities assumed presented herein includes the
accounts of the branches acquired on an historical cost basis as of
September 20, 1996 adjusted for the application of purchase accounting as
required by Accounting Principles Board Opinion No. 16, "Business
Combinations," and Statement of Financial Accounting Standards (SFAS) No.
72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions."
2. Financial Instruments
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SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires all entities to disclose the estimated fair value of their assets
and liabilities considered to be financial instruments. Financial
instruments requiring disclosure consist primarily of cash and due from
banks, loans and deposit liabilities.
NOTE B - LEASE COMMITMENTS
In connection with the acquisition of the CF Bank branches, TF Bank assumed
the lease of one facility. The lease is accounted for as an operating lease.
Future obligations for minimum rentals under a noncancellable lease with
initial or remaining terms in excess of one year at September 20, 1996 are
as follows (in thousands):
Minimum
Year ending September 20, rentals
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1997 $ 42
1998 45
1999 45
2000 38
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$ 170
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Branches of Cenlar Federal Savings Bank
NOTES TO STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED - CONTINUED
September 20, 1996
NOTE C - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate
that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates are subjective in nature and
cannot be substantiated by comparison to independent markets and, in many
cases, could not be realized in immediate settlement of the instrument. SFAS
No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented herein represent previously negotiated amounts,
and therefore, may not necessarily represent the underlying fair value of
the assets acquired and the liabilities assumed from CF Bank at the
transaction date.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Assets and liabilities acquired from
CF Bank that are not considered financial assets or liabilities include
premises and equipment.
1. Cash and Due From Banks
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The fair value of cash and due from banks is equal to their carrying amount
due to the nature of the financial instruments.
2. Deposits
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Under SFAS No. 107, the fair value of deposits with no stated maturity, such
as non-interest bearing demand deposits, interest checking, and money market
and savings accounts, is equal to the amount payable on demand at September
20, 1996. The fair value of time deposits is based on the discounted values
of contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities. The
contractual interest rates of the time deposits acquired from CF Bank are
not significantly different from current market interest rates; therefore,
the fair value for these financial instruments is considered to approximate
the carrying value in all material respects.
BRANCHES OF CENLAR FEDERAL SAVINGS BANK
Management's Discussion and Analysis of Financial Condition September 20, 1996
On September 20, 1996, Third Federal Savings Bank (the "Bank"), the wholly-owned
subsidiary of TF Financial Corporation (the "Registrant"), acquired certain
assets and assumed certain liabilities of three branch offices of Cenlar Federal
Savings Bank, Trenton, New Jersey ("Cenlar"). In this purchase and assumption
transaction, the Bank assumed approximately $138 million in deposits (including
accrued interest), and acquired certain assets consisting principally of owned
real estate (branches), banking equipment, and deposit-related loans in the
principal amount of approximately $159,000. The Bank assumed the real estate
leases for the leased branch. Cenlar paid cash to the Bank equal to the amount
of the deposits (including accrued interest) assumed, net of a $9.3 million
deposit premium. Additionally, the Bank paid approximately $1.3 million to
Cenlar for the owned real estate, banking equipment, and other assets purchased.
The Bank's source of funds was cash on hand. The purchase price was determined
through negotiation with Cenlar. The acquisition was accounted for under the
purchase method of accounting. Subsequent to the acquisition, the acquired
branches are being operated by the Bank as branch banking offices used in its
banking business.
The following discussion is intended to complement the audited statement of
assets acquired and liabilities assumed and footnotes and should be read in
conjunction therewith. Due to the unavailability of statements of income and
statements of cash flow of the branches and the lack of continuity of the
acquired operations of the branches prior to and after the acquisition including
the lending and investment activities of the acquired branches, this discussion
will not include an analysis of the results of operations of the branches prior
to the acquisition.
Securities Act Guide 3: Statistical Disclosure by Savings and Loan Holding
Companies
DEPOSITS
Average balances and the average rate paid on deposits which are in excess of
10% of the total deposits is not available as the acquisition consists of three
branches of Cenlar, and such data required under Guide 3 is not calculable from
Cenlar's financial records.
Deposits totalled approximately $138 million at September 20, 1996 and included
certificates of deposits and savings, money market, and demand deposit accounts.
At September 20, 1996, time certificates of deposit in amounts of $100,000 or
more were approximately $2.5 million. The following is a remaining maturity
schedule of these deposits:
Over 6 months
Three months or Over 3 months through 12
less through 6 months months Over 12 months Total
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(In Thousands)
$929 $207 $1,109 $302 $2,547
Other Guide 3 Information
All other information required by Guide 3, Statistical Disclosure by Savings and
Loan Holding Companies, is either inapplicable (no investment securities were
acquired, and no loans were acquired other than an immaterial amount of
deposit-related loans) or not calculable from Cenlar's financial records (due to
the acquisition consisting of certain branches).