UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ________________________

                                    FORM 10-Q

(MARK ONE)

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

                For the Quarterly Period Ended September 30, 2001

                                       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 0-18279
                         -------------------------------

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

        Maryland                                                52-1652138
-------------------------------                              ------------------
(State of other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

 3035 Leonardtown Road, Waldorf, Maryland                              20601
-------------------------------------------                         ------------
 (Address of principal executive offices)                           (Zip Code)

                                 (301) 843-0854
              ---------------------------------------------------
              (Registrant's telephone number, including area code)


              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate  by check mark  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 the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practical date.

     As of October 31, 2001 registrant had outstanding  755,523 shares of Common
Stock.
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
FORM 10-Q
INDEX
--------------------------------



PART I - FINANCIAL INFORMATION                                             PAGE

   Item 1 - Financial Statements (Unaudited)

     Consolidated Balance Sheets - September 30, 2001
       and December 31, 2000                                                2

     Consolidated Statements of Income and Comprehensive Income -
       Three and Nine Months Ended September 30, 2001 and 2000              3

     Consolidated Statements of Cash Flows - Nine Months
       Ended September 30, 2001 and 2000                                   4-5

     Notes to Consolidated Financial Statements                             6

Item 2 -  Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                           7-11

Item 3 - Quantitative and Qualitative Disclosures About Market Risk        11

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K                                  12



SIGNATURES                                                                 13


<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS  SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
<TABLE>
<CAPTION>
                                                     ASSETS
                                                                                   SEPTEMBER 30,    DECEMBER 31,
                                                                                       2001             2000
<S>                                                                                <C>              <C>
Cash and due from banks                                                            $  1,018,965     $    645,817
Interest-bearing deposits with banks                                                  5,683,925        5,975,314
Investment securities available for sale - at fair value                             42,539,932       56,860,996
Investment securities held to maturity - at amortized cost                            1,207,870        1,714,367
Stock in Federal Home Loan Bank and Federal Reserve Bank - at cost                    3,035,550        3,035,550
Loans held for sale                                                                     451,000          355,000
Loans receivable - net of allowance for loan losses
of $2,225,738 and $1,929,531, respectively                                          188,889,385      172,090,088
Premises and equipment, net                                                           5,105,402        4,495,431
Foreclosed real estate                                                                  182,323          176,626
Accrued interest receivable                                                           1,177,472        1,353,658
Other assets                                                                          3,437,082        1,636,609
                                                                                   ------------     ------------
                                                                                   $252,728,906     $248,339,456
                                                                                   ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Noninterest-bearing deposits                                                       $ 12,204,371     $ 12,537,649
Interest-bearing deposits                                                           165,311,170      155,268,350
                                                                                   ------------     ------------
Total deposits                                                                      177,515,541      167,805,999
Short-term borrowings                                                                   637,829       13,550,903
Long-term debt                                                                       46,650,000       41,400,000
Accrued expenses and other liabilities                                               $2,767,205        2,152,732
                                                                                   ------------     ------------
Total liabilities                                                                   227,570,575      224,909,634
                                                                                   ------------     ------------
STOCKHOLDERS' EQUITY:
Common stock - par value $.01; authorized - 15,000,000 shares;
issued 755,523 and 777,680 shares, respectively                                           7,555            7,777
Surplus                                                                               7,545,603        7,500,865
Retained earnings                                                                    17,060,310       16,175,708
Accumulated other comprehensive income                                                  745,443         (114,929)
Unearned ESOP shares                                                                   (200,580)        (139,599)
                                                                                   ------------     ------------
Total stockholders' equity                                                           25,158,331       23,429,822
                                                                                   ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $252,728,906     $248,339,456
                                                                                   ============     ============

</TABLE>
See notes to consolidated financial statements

                                       2
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                             SEPTEMBER 30,               SEPTEMBER 30,
                                                                       -------------------------    --------------------------
                                                                         2001            2000         2001            2000
<S>                                                                    <C>            <C>           <C>            <C>
INTEREST INCOME:
   Interest and fees on loans                                          $3,863,424     $3,555,423    $11,493,494    $10,247,145
   Taxable interest and dividends on investment securites                 746,375      1,057,890      2,629,682      3,138,972
   Interest on bank deposits                                               20,561         24,126         64,691         74,045
                                                                       ----------     ----------    -----------    -----------
        Total interest revenues                                         4,630,360      4,637,439     14,187,867     13,460,162
                                                                       ----------     ----------    -----------    -----------
INTEREST EXPENSE:
   Interest on deposits                                                 1,484,060      1,666,387      4,782,318      4,589,295
   Interest on long term debt                                             646,736        523,235      1,897,052      1,288,375
   Interest on other borrowings                                             2,008        280,881        257,354        930,318
                                                                       ----------     ----------    -----------    -----------
        Total interest expenses                                         2,132,804      2,470,503      6,936,724      6,807,988
                                                                       ----------     ----------    -----------    -----------

NET INTEREST INCOME                                                     2,497,556      2,166,936      7,251,143      6,652,174
PROVISION FOR LOAN LOSSES                                                  90,000         90,000        270,000        270,000
                                                                       ----------     ----------    -----------    -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                     2,407,556      2,076,936      6,981,143      6,382,174
                                                                       ----------     ----------    -----------    -----------
NONINTEREST INCOME:
   Loan appraisal, credit, and miscellaneous charges                       64,193         23,888        161,092         63,016
   Net gain on sale of loans held for sale                                 43,158         20,661        127,893         79,209
   Service charges                                                        230,495        249,872        727,188        736,930
   Other                                                                    6,560          6,237         29,619         22,897
                                                                       ----------     ----------    -----------    -----------
        Total noninterest income                                          344,406        300,658      1,045,792        902,052
                                                                       ----------     ----------    -----------    -----------
NONINTEREST EXPENSE:
   Salary and employee benefits                                         1,001,742        885,926      2,841,474      2,690,305
   Occupancy expense                                                      232,963        173,475        537,769        477,407
   Deposit insurance and surety bond premiums                              22,087          7,940         81,556         23,865
   Data processing expense                                                 63,967         60,884        240,574        217,544
   Advertising                                                            110,758         65,075        223,638        196,047
   Depreciation                                                            53,301         53,301        169,987        161,318
   Other                                                                  378,086        307,377      1,058,759        984,947
                                                                       ----------     ----------    -----------    -----------
        Total noninterest expenses                                      1,862,904      1,553,978      5,153,757      4,751,433
                                                                       ----------     ----------    -----------    -----------

INCOME BEFORE INCOME TAXES                                                889,058        823,616      2,873,178      2,532,793
INCOME TAXES                                                              322,000        279,000      1,005,700        855,000
                                                                       ----------     ----------    -----------    -----------
NET INCOME                                                                567,058        544,616      1,867,478      1,677,793

OTHER COMPREHENSIVE INCOME, NET OF TAX
   Net unrealized holding gains (losses) arising during the period        451,325         41,344        860,372       (139,768)
                                                                       ----------     ----------    -----------    -----------
COMPREHENSIVE INCOME                                                   $1,018,383     $  585,960    $ 2,727,850    $ 1,538,025
                                                                       ==========     ==========    ===========    ===========
EARNINGS PER SHARE
   Basic                                                                    $0.71          $0.69          $2.42          $2.13
   Diluted                                                                  $0.68          $0.66          $2.33          $2.04
</TABLE>

See notes to consolidated financial statements


                                       3
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                   -----------------------------
                                                                                       2001             2000
<S>                                                                                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                         $  1,867,478     $  1,677,793
Adjustments to reconcile net income to net
   cash provided by operating activities:
   Provision for loan losses                                                            270,000          270,000
   Depreciation and amortization                                                        242,650          234,300
   Net amortization of premium/discount on
   investment securities                                                                 51,054          (86,055)
   Deferred income tax benefit                                                         (110,000)         (70,000)
   Decrease (increase) in accrued interest receivable                                   176,186         (158,325)
   Decrease in deferred loan fees                                                         9,585          (65,682)
   Increase in accounts payable, accrued expenses,
   and other liabilities                                                                614,473          366,063
  (Increase) Decrease in other assets                                                  (864,271)         283,729
   Gain on disposal of premises and equipment                                            (8,386)              --
   Origination of loans held for sale                                                (7,812,412)      (1,611,775)
   Gain on sales of loans held for sale                                                (127,893)         (79,209)
   Proceeds from sale of loans held for sale                                          8,036,305        2,240,082
                                                                                   ------------     ------------
          Net cash provided by operating activities                                   2,344,770        3,000,921
                                                                                   ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net increase (decrease) in interest-bearing deposits with banks                      291,389       (1,191,908)
   Purchase of investment securities available for sale                             (20,961,399)     (14,991,734)
   Proceeds from sale, redemption or principal payments
    of investment securities available for sale                                      36,538,900       14,139,816
   Purchase of investment securities held to maturity                                  (100,000)        (200,000)
   Proceeds from maturities or principal payments
    of investment securities held to maturity                                           606,497          936,584
   Loans originated or acquired                                                     (69,123,620)     (50,091,738)
   Principal collected on loans                                                      50,579,419       31,818,648
   Proceeds from disposal of premises and equipment                                       8,963               --
   Purchase of premises and equipment                                                  (853,200)        (270,844)
   Acquisition of foreclosed real estate                                                 (5,697)              --
   Purchase of FHLB and Federal Reserve stock                                                --         (391,550)
                                                                                   ------------     ------------
       Net cash used in investing activities                                         (3,018,749)     (20,242,726)
                                                                                   ------------     ------------
</TABLE>
See notes to consolidated financial statements.

                                       4
<PAGE>


TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (CONTINUED)
<TABLE>
<CAPTION>
                                                                                          NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                   -----------------------------
                                                                                        2001             2000
<S>                                                                                 <C>              <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net increase in deposits                                                        $  9,709,542     $  7,677,615
   Proceeds from long-term borrowings                                                10,250,000               --
   Payments of long-term borrowings                                                  (5,000,000)     (15,000,000)
   Net (decrease) increase in other borrowed funds                                  (12,913,074)      21,946,483
   Exercise of stock options                                                             31,817           40,711
   Net change in unearned ESOP shares                                                   (47,998)          36,984
   Dividends paid                                                                      (309,204)        (236,595)
   Redemption of common stock                                                          (673,956)        (329,901)
                                                                                   ------------     ------------
      Net cash provided by financing activities                                       1,047,127       14,135,297
                                                                                   ------------     ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        373,148       (3,106,508)

CASH AND CASH EQUIVALENTS - JANUARY 1                                                   645,817        3,469,304
                                                                                   ------------     ------------
CASH AND CASH EQUIVALENTS -SEPTEMBER  30                                           $  1,018,965     $    362,796
                                                                                   ============     ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the nine months for:
Interest                                                                           $  6,959,887     $  6,413,408
                                                                                   ============     ============
Income taxes                                                                       $  1,017,000     $    725,000
                                                                                   ============     ============
Noncash transfer from loans to other assets                                        $  1,273,320     $         --
                                                                                   ============     ============

</TABLE>
See notes to consolidated financial statements.


                                       5
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL
--------------------------------------------------------------------------------
STATEMENTS

1.   BASIS OF PRESENTATION

     General - The  consolidated  financial  statements of Tri-County  Financial
     Corporation (the "Company") and its wholly owned subsidiary, Community Bank
     of Tri-County  (the "Bank")  included herein are unaudited;  however,  they
     reflect all adjustments  consisting only of normal recurring accruals that,
     in the opinion of  Management,  are necessary to present fairly the results
     for  the  periods  presented.  Certain  information  and  note  disclosures
     normally  included in  financial  statements  prepared in  accordance  with
     accounting  principles  generally  accepted in the United  States have been
     condensed  or  omitted  pursuant  to  the  rules  and  regulations  of  the
     Securities  and  Exchange   Commission.   The  Company  believes  that  the
     disclosures are adequate to make the information  presented not misleading.
     The results of operations for the nine months ended  September 30, 2001 are
     not necessarily  indicative of the results of operations to be expected for
     the remainder of the year.  Certain  previously  reported amounts have been
     restated to conform to the 2001 presentation.

     It is suggested  that these  consolidated  financial  statements be read in
     conjunction  with the consolidated  financial  statements and notes thereto
     included in the  Company's  Annual  Report for the year ended  December 31,
     2000.

2.   EARNINGS PER SHARE

     Basic  and  diluted  earnings  per  share,  have  been  computed  based  on
     weighted-average   common  and  common  equivalent  shares  outstanding  as
     follows:
<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED
                                                              SEPTEMBER 30,
                                                        ------------------------
                                                         2001             2000
                       <S>                              <C>             <C>
                       Basic                            770,519         786,397
                       Diluted                          803,099         824,072
</TABLE>

                                       6
<PAGE>


ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION

This  document  contains  forward-looking  statements  within the meaning of the
Private  Securities  Litigation  Reform Act of 1995,  including  discussions  of
Tri-County  Financial  Corporation's  (the  "Company's")  goals,  strategies and
expected  outcomes;  estimates of risks and future costs; and assessments of the
Company's   ability  to  achieve   its   financial   and  other   goals.   These
forward-looking  statements are subject to  significant  known and unknown risks
and  uncertainties  because  they are based  upon  future  economic  conditions,
particularly  interest  rates,   competition  within  and  without  the  banking
industry,  changes in laws and regulations applicable to the Company and various
other matters.  Because of these  uncertainties,  there can be no assurance that
actual  results,  performance  or  achievements  of the Company  will not differ
materially  from any future results,  performance or  achievements  expressed or
implied by these forward-looking statements.

GENERAL

The Company is a bank  holding  company  organized in 1989 under the laws of the
State of Maryland. It presently owns all the outstanding shares of capital stock
of  the  Community  Bank  of  Tri-County  (the  "Bank"),  a   Maryland-chartered
commercial  bank.  The Company  engages in no  significant  activity  other than
holding  the  stock  of the  Bank  and  operating  the  business  of  the  Bank.
Accordingly,  the  information  set forth in this  report,  including  financial
statements and related data, relates primarily to the Bank and its subsidiaries.

The Bank serves the  southern  Maryland  area  through its main office and eight
branches located in Waldorf,  Bryans Road, Dunkirk,  Leonardtown,  La Plata, and
California,  Maryland.  The Bank is engaged in the commercial and retail banking
business  as  authorized  by the banking  statutes of the State of Maryland  and
applicable  Federal  regulations,  including  the  acceptance of demand and time
deposits,   and  the   origination  of  loans  to   individuals,   associations,
partnerships  and  corporations.  The Bank's real estate  financing  consists of
residential  first and second  mortgage  loans,  home equity lines of credit and
commercial  mortgage  loans.  Commercial  lending  consists of both  secured and
unsecured  loans.  The Bank is a member of the Federal  Reserve and Federal Home
Loan Bank ("FHLB") Systems.  The Savings Association  Insurance Fund ("SAIF") of
the Federal Deposit  Insurance  Corporation  ("FDIC") provides deposit insurance
coverage up to applicable limits.

Since its conversion to a state chartered  commercial bank in 1997, the Bank has
sought to increase its commercial,  commercial real estate, construction, second
mortgage,  home equity,  and consumer  lending  business as well as the level of
transactional  deposits to levels  consistent  with similarly  sized  commercial
banks. As a result of this emphasis, the Bank's percentage of assets invested in
either residential first mortgage lending or investment  securities has declined
since 1997.  Conversely,  targeted loan types have increased.  The Bank has also
seen an increase in transactional deposit accounts while the percentage of total
liabilities  represented by  certificates  of deposits has declined.  Management
believes that these changes will enhance the Bank's overall long-term  financial
performance.

Management recognizes that the shift in composition of the Bank's loan portfolio
will tend to increase its exposure to credit  losses.  The Bank has continued to
evaluate  its  allowance  for  loan  losses  and  the  associated  provision  to
compensate  for the  increased  risk.  Any  evaluation of the allowance for loan
losses is inherently inexact and reflects management's expectations as to future
economic  conditions  in the  Southern  Maryland  area  as  well  as  individual
borrower's circumstances.  Management reviews certain loans individually as well
as assesses the overall trends and payment  patterns of certain groups of loans.
Based upon this review,  management  believes that its allowance for loan losses
is adequate.

During the first nine months of 2001, due to changes in local zoning  ordinances
severely restraining building permits, one borrower could not meet the financial
obligations of his $1.2 million loan. The Bank negotiated with this borrower and
agreed to accept a deed in lieu of  foreclosure  on July 12, 2001.  The property
was  transferred  to a wholly owned  subsidiary  of the Bank on this date. As of
September 30, 2001,  this asset is reflected in the assets of the Bank under the
"other  assets"  category.  Management  has  reviewed  the value of the property
received and related costs and accrued interest, approximately $1.3 million, and
has concluded that no write down of the property value is required. The value of
the property will be reviewed  periodically,  and any necessary reduction in the
carrying  value of the property will be reflected in the results of  operations.
Management  intends to aggressively  pursue its rights with regard to this asset
including  possible  legal  action.  Other  than the loan  mentioned  above,  no
significant  deterioration in the timeliness of payments received from borrowers
has been noted.

Economic  growth has slowed  significantly  in the last several months on both a
regional  and a national  basis.  This  slowing  was readily  apparent  prior to
September 11, 2001.  The terrorist  attack and its related  effects on the local
economy  have


                                       7
<PAGE>

tended to further stifle economic activity regionally and nationally.  While the
economy  is  not  yet  technically  in  a  recession  (usually  defined  as  two
consecutive  quarters of negative growth),  there is a consensus of opinion that
we are in the beginning of a recession.  These economic conditions are likely to
affect   certain  of  the  Bank's   customers   negatively  and  could  lead  to
deterioration in the Bank's loan quality. In addition,  the continued cutting of
certain  short term  interest  rates by the  Federal  Reserve in response to the
slowing  economy  may have a  negative  impact on the  Bank's  interest  income,
particularly on the Bank's prime based lending products.

The Bank has also sought to increase its sources of  noninterest  income through
fees gathered on  transactional  accounts as well as by the sale of  non-deposit
products including investments.  These fees have continued to grow over the last
several quarters.  The Bank also originates and sells  residential  mortgages to
earn fee income,  although this source of fee income varies as the interest rate
environment changes.  Management believes that the Bank's strong local focus and
responsiveness to customers will enable it to increase its fee income over time.

The Bank currently operates eight full service branch offices in its market area
consisting of Charles,  St. Mary's,  and Calvert counties in Maryland.  The Bank
has closed one micro  branch  and  opened one full  service  branch in the third
quarter of 2001. The full service branch has opened in temporary  quarters while
the branch's permanent  building is being  constructed.  The addition of the new
branch will require  additional  personnel and other resources which will result
in  increased  expenses.  The  closure of the  micro-branch  is not  expected to
significantly affect expenses.  In addition to these changes, the Bank is moving
an existing branch from a rented building to a newly constructed  facility.  The
new building is owned by the Bank. This facility will open in the fourth quarter
of 2001,  at the same time the old branch is closed.  The Bank will  continue to
seek opportunities to expand its branch network.


SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED
                                                 SEPTEMBER 30,
                                                 -------------
                                              2001            2000
<S>                                       <C>             <C>
Condensed Income Statement
Interest Income                           $14,187,867     $13,460,162
Interest Expense                            6,936,724       6,807,988
Net Interest Income                         7,251,143       6,652,174
Provision for Loan Losses                     270,000         270,000
Noninterest Income                          1,045,792         902,052
Noninterest Expenses                        5,153,757       4,751,433
Income Before Income Taxes                  2,873,178       2,523,793
Income Tax Expense                          1,005,700         855,000
Net Income                                  1,867,478       1,677,793


Per Common Share
Basic Earnings                                  $2.42           $2.13
Diluted Earnings                                 2.33            2.04
Book Value                                      33.30           28.13
</TABLE>

RESULTS OF OPERATIONS - YEAR TO DATE

Net income for the nine month period ended September 30, 2001 totaled $1,867,478
($2.42 basic and $2.33 fully diluted  earnings per share)  compared with a total
of $1,677,793  ($2.13 basic and $2.04 fully diluted  earnings per share) for the
same  period in the prior  year.  This  increase  of $190  thousand or 11.3% was
caused by several factors.  Net income was positively  affected by the growth in
the  Bank's net  interest  income,  as well as growth in the Bank's  noninterest
income;  this was partially  offset by an increase in  noninterest  expenses and
income tax expense.

                                       8
<PAGE>

Interest  income  increased to $14.2 million in the current  period  compared to
$13.5  million  for the same  period in the prior  year.  This  increase of $728
thousand or 5.4% was caused  primarily  by an increase in loans  receivable  and
other  interest  earning  assets over the same  period in the prior  year.  This
increase  in  interest  earning  assets was  partially  offset by a decrease  in
interest yields on interest earning assets.

Interest  expense  increased to $6.9 million in the period ending  September 30,
2001 as  compared  to $6.8  million  for the same  period in the  prior  year an
increase of $129 thousand or 1.9%.  This increase was due to higher  balances of
deposits and long and short- term borrowings  partially  offset by a decrease in
average rates paid on these balances.  Net interest income before  provision for
credit losses increased by $599 thousand or 9.0% due to the factors noted above.
The Bank's interest rate spread decreased  slightly to 3.64% for the nine months
ended  September  30,  2001  compared  to 3.69% for the prior year  period.  Net
interest margin declined slightly to 3.94% from 3.98% between the periods.

Provision  for loan  losses  was  comparable  to the prior  year with  provision
expense of $270  thousand for the periods  ending  September  30, 2001 and 2000.
Management  will continue to  periodically  review its allowance for loan losses
and the  related  provision.  This  review  will  include a review  of  economic
conditions  nationally  and locally,  as well as a review of the  performance of
significant major loans and the overall portfolio.

Noninterest  income  increased to $1.0 million for the nine month period  ending
September  30, 2001,  an increase of $144  thousand or 15.9% over the prior year
total of $902  thousand.  A slight  decrease  in service  charges  was offset by
increases  in loan  service  fees and gains on sales of loans.  Gain on sales of
mortgage loans and loan appraisal,  credit, and miscellaneous  charges increased
because a decrease in mortgage  interest rates has led to a more active mortgage
refinance  market  as well as  increased  production  of fixed  rate  mortgages.
Generally  the Bank  prefers to sell fixed rate  mortgages  to generate  current
income rather than holding them in its loan portfolio. The volume of refinancing
activity  is driven by the  direction  and  level of  interest  rates and may be
expected to decline if interest rates stabilize or increase.

Noninterest expense for the nine month period increased by $402 thousand or 8.5%
to $5.2 million from $4.8 million in the same period for the prior year. Expense
increases were primarily in personnel,  data processing,  and other expenses and
were  needed  to  support  increased  levels  of loans  and  deposits.  The Bank
anticipates  that the new branch will  increase its  noninterest  expense in the
fourth quarter.

Income taxes increased to $1 million or 35% of pretax income in the current year
compared  to $855  thousand  or 33.8% of pretax  income in the prior  year.  The
increase in the tax rate was primarily  attributable to an increase in the state
income tax burden. In the prior year, taxes were  substantially  reduced because
income earned on investment securities held by the Bank's investment corporation
subsidiary,  Tri-County  Investment  Corporation ("TCIC") was not subject to the
state income tax. In the current year, reductions in the assets invested in TCIC
have reduced the amount of income  sheltered  from state income tax,  increasing
the effective tax rate.

Earnings Per Share

Primary  earnings  per share for the nine  months  were  $2.42 per share or $.29
higher than for the  corresponding  period in 2000.  This is  reflective  of the
changes in net  income and the  retirement  of  certain  shares as noted  below.
Diluted  earnings  per share for the  period was $2.33 as  compared  to $2.04 an
increase of $.29, which is reflective of the factors noted above.


RESULTS OF OPERATIONS -- THIRD QUARTER

The  Company's  net income for the third quarter of 2001 as compared to the same
period for the prior year  increased to $567 thousand from $545 thousand for the
third quarter of 2000, an increase of 4.0%.  This increase was the result of the
same  factors  noted in the  change for the  results  of the first nine  months,
continued  increases  in  net  interest  income  caused  by  higher  assets  and
increasing  noninterest income related to residential first mortgage  production
and higher  deposit  balances.  These  increases in income were offset by higher
levels of noninterest expenses.  Interest income decreased by $7 thousand or .2%
from the same  quarter  in the prior  year.  During  the same  period,  interest
expense  decreased by $338 thousand or 13.7%.  Net interest income  increased by
$331 thousand or 15.9%. Noninterest income increased by $44 thousand or 14.6% in
the third quarter of 2001,  compared to the third quarter of 2000. This increase
was the result of increases in gains on selling  residential  mortgage  loans as
well as loan  charges  which  were  offset by  declines  in  service  charges on
customer accounts. Total noninterest expense increased by $309 thousand or 19.9%
for the third quarter  compared to the same period last year primarily due to an
increase in certain  personnel  related  costs  including  accruals for

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<PAGE>

benefits  costs.  Advertising  expenses  also  increased  due to an  increase in
activity in the period.  Other  expenses  increased  based upon the increases in
asset  size,  branch  networks,  level of  deposits,  and other  factors.  Basic
earnings  per share  increased  from $.69 to $.71  based on the lower  number of
shares  outstanding  and  higher  earnings.  Fully  diluted  earnings  per share
increased from .66 to .68 based on the same factors.

FINANCIAL CONDITION

Assets

Total  assets as of  September  30,  2001 grew  $4.4  million  or 1.8% to $252.7
million  from the  December  31, 2000 level of $248.3  million.  The Bank's loan
portfolio  grew by $16.8  million or 9.8%  during the nine month  period  ending
September 30, 2001. The bulk of the increase was  attributable to the commercial
real estate loan portfolio  which grew $14.7 million,  or 37.5% during the year.
The growth in the loan  portfolio was  partially  offset by decreases in certain
other asset types (primarily  investments) during the same period. The allowance
for loan losses was  maintained at a level believed by management to be adequate
to absorb  losses  consistent  with the risk profile of the loan  portfolio.  At
September  30, 2001 the Bank's  allowance for loan losses totals $2.2 million or
1.16% of loan  balances as compared to $1.9 million or 1.12% of loan balances at
December 31, 2000.  Management's  determination of the adequacy of the allowance
is based on a periodic  evaluation of the portfolio with consideration  given to
the overall loss experience;  current economic  conditions;  volume,  growth and
composition of the loan  portfolio;  financial  condition of the borrowers;  and
other relevant factors that, in management's  judgment,  warrant  recognition in
providing  an adequate  allowance.  Management  believes  that the  allowance is
adequate.

Investment  securities,  including  both  the  available  for  sale  and held to
maturity portfolios, decreased from $58.6 million to $43.7 million a decrease of
$14.8 million or 25.3%.  Reductions in the  investment  portfolio were primarily
the result of certain  callable bonds being redeemed as well as increases in the
rate of  principal  repayment  on  certain  mortgage  backed  securities.  These
reductions in principal were partially offset by an increase in the market value
of certain available for sale securities.  In general, the cash generated by the
principal  reductions  of the  investment  portfolio  has been used to fund loan
growth.  Cash and due from  banks  increased  by $373  thousand,  or 57.8%  from
December 31, 2000's  total.  Interest-bearing  deposits with banks  increased by
$291  thousand or 4.9% during the quarter to $5.7 million at September 30, 2001.
The level of property and equipment  balances  increased $610 thousand primarily
due  to  upgrades  of  computer  equipment  and  premises,  the  opening  of the
additional branch, and the movement of one branch to a company owned facility as
noted above.

Liabilities

Deposit  balances  increased  by $9.7  million or 5.8% for the nine months ended
September  30,  2001.  The Bank  continues  to  aggressively  market its deposit
products in the Southern  Maryland area. The recent declines in certain segments
of the equities  markets as well as the apparent slowing of the economy may also
have contributed to the deposit increase as alternative  investments became less
attractive. Funding demands in excess of deposit growth have been met by the use
of other borrowed funds. Long and short term borrowings  decreased by a total of
$7.7  million or 14.0% from  December  2000  balances.  Other  liabilities  also
increased by $614 thousand or 28.5%.

Stockholders' Equity

Stockholders'  equity  increased  $1.7  million  or 7.4%  to  $25.2  million  at
September 30, 2001 compared to $23.4 million at December 31, 2000. This reflects
the net income of $1.9  million  for the nine month  period and a $860  thousand
increase  in  accumulated  other  comprehensive  income.  Reductions  in  equity
occurred  as a result of using  $674  thousand  to  purchase  shares in the open
market and retire them.  Dividends paid during the first nine months of the year
totaled $309 thousand also reduced equity.  Other reductions  included a loan to
finance the ESOP's purchase of additional  shares which increased  unearned ESOP
shares.  Book value on a per share  basis,  $33.30 at  September  30,  2001,  as
compared to $30.13 at December 31, 2000,  reflects a 8.9%  increase.  Book value
was  increased  by the  increase  in  equity  value as well as by the  Company's
purchase and retirement of outstanding shares for amounts less than book value.

As part of its  capital  management  strategy,  the Board has  approved  certain
purchases, for retirement,  of shares offered for sale by its stockholders.  For
the nine months ended  September 30, 2001, the Company  purchased  24,804 shares
for  $674  thousand.  Additional  stock  acquisitions  and  retirements  may  be
considered in the future. The Company has $200 thousand of cash available at the
holding  company level  available for such  purchases or for other cash needs of
the holding company.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company  currently has no business  other than that of the Bank and does not
currently have any material funding commitments. The Company's principal sources
of liquidity are cash on hand and dividends  received from the Bank. The Bank is
subject to various regulatory restrictions on the payment of dividends.

The Bank's  principal  sources of funds for  investments  and operations are net
income,  deposits from its primary market area,  principal and interest payments
on loans,  interest received on investment securities and proceeds from maturing
investment securities. Its principal funding commitments are for the origination
or  purchase  of loans  and the  payment  of  maturing  deposits.  Deposits  are
considered  a  primary  source  of  funds  supporting  the  Bank's  lending  and
investment activities.

The Bank's most liquid assets are cash and cash  equivalents,  which are cash on
hand,  amounts due from  financial  institutions,  federal funds sold, and money
market  mutual  funds.  The levels of such  assets are  dependent  on the Bank's
operating financing and investment  activities at any given time. The variations
in levels of cash and cash  equivalents  are  influenced  by  deposit  flows and
anticipated future deposit flows.

The Bank may borrow up to 35% of  consolidated  Bank assets on a line  available
from the FHLB. As of September 30, 2001, the maximum  available  under this line
would be $88 million,  while current outstanding advances totaled $46.7 million.
In  order  to draw on this  line  the  Bank  must  have  sufficient  collateral.
Qualifying  collateral  includes  residential  1-4 family first mortgage  loans,
certain  commercial  real  estate  loans,  and  various  investment  securities.

REGULATORY MATTERS

The Bank is subject to Federal  Reserve  Board capital  requirements  as well as
statutory  capital  requirements  imposed  under  Maryland law. At September 30,
2001, the Bank's  tangible,  leverage and risk-based  capital ratios were 9.47%,
9.47% and  14.14%,  respectively.  These  levels are well in excess of the 4.0%,
4.0% and 8.0% ratios required by the Federal Reserve Board.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.


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<PAGE>

                        TRI-COUNTY FINANCIAL CORPORATION


                           PART II - OTHER INFORMATION


Item 4 - Submission of Matters to a Vote of Security Holders -- None

Item 6 - Exhibits and Reports on Form 8-K

         A.       Exhibits - Not Applicable

         B.       During the  quarter  for which this Form 10-Q is being  filed,
                  the registrant did not file any current reports on Form 8-K.

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<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.




                                        Tri-County Financial Corporation:



Date:  November 7, 2001                 By:/s/ Michael L. Middleton
                                           -------------------------------------
                                           Michael L. Middleton, President
                                           and Chairman of the Board





Date:  November 7, 2001                 By:/s/ William J. Pasenelli
                                           -------------------------------------
                                           William J. Pasenelli
                                           Chief Financial Officer


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