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 March 31, 2004

                                       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)


                                      N/A
                      --------------------------------------
                     (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 April 28, 2004, registrant had outstanding 771,946 shares of Common Stock.


                                       1
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION

FORM 10-Q                                                               INDEX
                                                                        -----


PART I - FINANCIAL INFORMATION                                          Page

   Item 1 - Financial Statements (Unaudited)

     Consolidated Balance Sheets - March 31, 2004
       and December 31, 2003 (Audited)                                 3

     Consolidated Statements of Income and Comprehensive Income -
       Three Months Ended March 31, 2004 and 2003                      4

     Consolidated Statements of Cash Flows - Three Months
       Ended March 31, 2004 and 2003                                   5 - 6

     Notes to Consolidated Financial Statements                        7 - 8

Item 2- Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                       9 - 13

Item 3 - Quantitative and Qualitative Disclosure about Market Risk     14
Item 4 - Controls and Procedures                                       14

PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in Securities, Use of Proceeds
         and Issuer Purchases of Equity Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of
         Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K                              14 - 15


SIGNATURES                                                             16







                                       2

<PAGE>

PART I FINANCIAL STATEMENTS
ITEM I. FINANCIAL STATEMENTS
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS MARCH 31, 2004 AND DECEMBER 31, 2003
<TABLE>
<CAPTION>

                             ASSETS
                                                                    March 31, 2004   December 31, 2003
                                                                    --------------   -----------------
                                                                     (Unaudited)         (Audited)
<S>                                                                     <C>                 <C>
Cash and due from banks                                            $   2,738,727     $    2,319,300
Interest-bearing deposits with banks                                   6,913,642          8,912,332
Federal Funds sold                                                       228,166            938,166
Investment securities available for sale - at fair value              36,791,090         38,290,074
Investment securities held to maturity - at amortized cost            65,646,806         61,605,175
Stock in Federal Home Loan Bank and Federal Reserve
 Bank - at cost                                                        5,097,050          4,776,850
Loans held for sale                                                           --            474,880
Loans receivable - net of allowance for loan losses
of $2,650,924 and $2,572,799, respectively                           237,508,100        217,740,153
Premises and equipment, net                                            5,657,023          5,580,189
Foreclosed real estate                                                   567,937            706,764
Accrued interest receivable                                            1,337,871          1,318,318
Investment in bank owned life insurance                                5,939,427          5,921,544
Other assets                                                           2,839,812          3,146,247
                                                                   -------------     --------------

   TOTAL ASSETS                                                    $ 371,265,651     $  351,729,992
                                                                   =============     ==============

             LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Noninterest-bearing deposits                                       $  32,504,104     $   29,270,007
Interest-bearing deposits                                            207,587,722        198,284,561
                                                                   -------------     --------------
Total deposits                                                       240,091,826        227,554,568
Short-term borrowings                                                 27,620,302         31,191,285
Long-term debt                                                        72,955,278         63,051,176
Accrued expenses and other liabilities                                 1,612,378          2,021,053
                                                                   -------------     --------------
   Total liabilities                                                 342,279,784        323,818,082
                                                                   -------------     --------------
STOCKHOLDERS' EQUITY:
Common stock - par value $.01; authorized - 15,000,000
 shares; issued 769,332 and 753,278 shares, respectively                   7,693              7,533
Additional paid in capital                                             8,200,682          7,975,036
Retained earnings                                                     20,808,307         20,071,630
Accumulated other comprehensive income (loss)                             63,021             (3,130)
Unearned ESOP shares                                                     (93,836)          (139,159)
                                                                   -------------     --------------
           Total stockholders' equity                                 28,985,867         27,911,910
                                                                   -------------     --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 371,265,651     $  351,729,992
                                                                   =============     ==============
</TABLE>


See notes to consolidated financial statements

                                       3
<PAGE>



TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                             2004                2003
                                                                             ----                ----
<S>                                                                           <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                                            $3,546,545          $ 3,350,974
   Taxable interest and dividends on investment securities                1,042,650              530,773
   Interest on deposits with banks                                            4,616               36,637
                                                                         ----------          -----------
        Total interest income                                             4,593,811            3,918,384
                                                                         ----------          -----------

INTEREST EXPENSE:
   Interest on deposits                                                     700,170              747,427
   Interest on short term borrowings                                         78,622                  766
   Interest on long term debt                                               785,497              613,101
                                                                         ----------          -----------
        Total interest expenses                                           1,564,289            1,361,294
                                                                         ----------          -----------

NET INTEREST INCOME                                                       3,029,522            2,557,090

PROVISION FOR LOAN LOSSES                                                    70,202                5,386
                                                                         ----------          -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                       2,959,320            2,551,704
                                                                         ----------          -----------

NONINTEREST INCOME:
Loan appraisal, credit, and miscellaneous charges                            66,204               27,396
Net gain on sale of loans held for sale                                      21,404              127,095
Income from bank owned life insurance                                        73,848                   --
Service charges                                                             234,772              228,335
Other                                                                            --                5,128
                                                                         ----------          -----------
        Total noninterest income                                            396,228              387,954
                                                                         ----------          -----------

NONINTEREST EXPENSE:
 Salary and employee benefits                                             1,298,380            1,129,326
 Occupancy expense                                                          181,873              168,317
 Advertising                                                                142,539               63,734
 Data processing expense                                                    151,998               85,305
 Depreciation of furniture, fixtures, and equipment                          87,200              114,900
 Telephone communications                                                    37,975               39,076
 Valuation allowance on foreclosed real estate                              113,827                   --
 ATM expenses                                                                80,098               68,513
 Office supplies                                                             39,419               23,465
 Office equipment expenses                                                   26,391               35,309
 Other                                                                      236,023              220,602
                                                                         ----------          -----------
        Total noninterest expenses                                        2,395,723            1,948,547
                                                                         ----------          -----------

INCOME BEFORE INCOME TAXES                                                  959,825              991,111
Income tax expense                                                           70,627              350,000
                                                                         ----------          -----------
NET INCOME                                                                  889,198              641,111

OTHER COMPREHENSIVE INCOME NET OF TAX
Net unrealized holding gains (losses) arising during period.                 66,152             (359,053)
                                                                         ----------          -----------
COMPREHENSIVE INCOME                                                     $  955,350          $   282,058
                                                                         ==========          ===========

INCOME PER COMMON SHARE
   Basic                                                                      $1.18                $0.84
   Diluted                                                                     1.12                 0.80
</TABLE>

See notes to consolidated financial statements

                                       4
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                      March 31,
                                                                               ----------------------
                                                                               2004              2003
                                                                               ----              ----
<S>                                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                  $ 889,198       $   641,111
Adjustments to reconcile net income to net
   cash provided (used) by operating activities:
   Provision for loan losses                                                   70,202             5,386
   Depreciation and amortization                                              143,049           150,300
   Net amortization of premium/discount on investment securities               19,478            55,599
   Decrease (Increase) in federal funds sold                                  710,000          (664,813)
   Deferred income tax benefit                                                     --           (29,000)
   Increase in accrued interest receivable                                    (19,553)          (16,354)
   Decrease in deferred loan fees                                             (36,970)          (58,237)
   Decrease in accounts payable, accrued expenses, other liabilities         (408,674)       (1,090,740)
   Decrease in other assets                                                   254,476            21,094
   Origination of loans held for sale                                              --        (5,980,350)
   Gain on sales of loans held for sale                                       (21,404)         (127,095)
   Proceeds from sale of loans held for sale                                  496,284         4,686,432
                                                                            ---------       -----------

          Net cash provided (used) by operating activities                  2,196,086        (2,406,667)
                                                                            ---------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net  decrease (increase) in interest-bearing deposits with banks         1,998,690        (4,685,540)
   Purchase of investment securities available for sale                    (7,503,838)      (19,288,524)
   Proceeds from sale, redemption or principal payments
    of investment securities available for sale                             8,857,505        13,570,852
   Purchase of investment securities held to maturity                      (7,969,601)               --
   Proceeds from maturities or principal payments
    of investment securities held to maturity                               4,054,035           393,600
   Net purchase of FHLB and federal Reserve stock                            (320,200)               --
   Loans originated or acquired                                           (44,183,877)      (27,514,040)
   Principal collected on loans                                            24,382,698        34,055,115
   Purchase of premises and equipment                                        (219,883)           (4,028)
   Purchase of Bank owned life insurance                                           --        (5,700,000)
   Valuation allowance on foreclosed real estate                              113,827                --
Proceeds from foreclosed real estate                                           25,000            10,000
                                                                          -----------       -----------

          Net cash used in investing activities                           (20,765,644)       (9,162,565)
                                                                          -----------       -----------
</TABLE>

                                       5
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                   ----------------------
                                                                                   2004              2003
<S>                                                                                <C>               <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net increase in deposits                                                     12,537,258          8,115,947
   Proceeds from long-term borrowings                                           20,000,000          5,000,000
   Payments of long-term borrowings                                            (10,095,898)           (95,592)
   Net decrease in short term borrowings                                        (3,570,983)          (596,651)
   Exercise of stock options                                                       197,155             31,158
   Net change in unearned ESOP shares                                               74,011             92,459
   Redemption of common stock                                                     (152,558)          (108,593)
                                                                              ------------        -----------

      Net cash provided by financing activities                                 18,988,985         12,438,728
                                                                              ------------        -----------

INCREASE IN CASH AND CASH EQUIVALENTS                                              419,427            869,496

CASH AND CASH EQUIVALENTS - JANUARY 1                                            2,319,300          9,993,426
                                                                              ------------        -----------
CASH AND CASH EQUIVALENTS - MARCH 31                                             2,738,727         10,862,922
                                                                              ============        ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest                                                                      $  1,669,753        $ 1,376,832
                                                                              ============        ===========
Income taxes                                                                            --            387,869
                                                                              ============        ===========

</TABLE>


See notes to consolidated financial statements

                                       6
<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 of America
     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  balances  as of  December  31,  2003 have been  derived  from  audited
     financial  statements.  There  have  been  no  significant  changes  to the
     Company's  accounting  policies as disclosed in the 2003 Annual Report. The
     results of  operations  for the three  months  ended March 31, 2004 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 2004 presentation.

     It is suggested  that these  consolidated  financial  statements be read in
     conjunction with the consolidated  financial  statements and notes included
     in the Company's Annual Report for the year ended December 31, 2003.

2.   NATURE OF BUSINESS

     The  Company,  through its bank  subsidiary,  provides  domestic  financial
     services  primarily in southern  Maryland.  The primary financial  services
     include  real  estate,   commercial  and  consumer  lending,   as  well  as
     traditional demand deposits and savings products.

3.   INCOME TAXES

     The Company uses the  liability  method of  accounting  for income taxes as
     required  by SFAS  No.  109,  "Accounting  for  Income  Taxes."  Under  the
     liability method,  deferred-tax assets and liabilities are determined based
     on differences between the financial statement carrying amounts and the tax
     bases of existing assets and liabilities (i.e.,  temporary differences) and
     are  measured  at the  enacted  rates  that  will be in effect  when  these
     differences reverse.

4.   EARNINGS PER SHARE

     Earnings  per  common  share are  computed  by  dividing  net income by the
     weighted  average  number of common shares  outstanding  during the period.
     Diluted net income per common  share is computed by dividing  net income by
     the weighted average number of common shares outstanding during the period,
     including any potential dilutive common shares outstanding, such as options
     and warrants.  As of March 31, 2004, there were no shares excluded from the
     diluted net income per share computation  because the option price exceeded
     the  average   market   price  and   therefore,   their   effect  would  be
     anti-dilutive.  Basic and diluted  earnings per share,  have been  computed
     based on  weighted-average  common and common equivalent shares outstanding
     as follows:


                                            Three Months Ended
                                                 March 31,
                                         --------------------------
                                             2004         2003

      Basic                                 756,378      758,954
      Diluted                               794,664      802,348


                                       7
<PAGE>
5.   STOCK-BASED COMPENSATION

     The  Company has adopted  the  disclosure-only  provisions  of SFAS No. 123
     "Accounting for Stock-Based  Compensation" and SFAS No. 148 "Accounting for
     Stock-Based Compensation-Transition and Disclosure", but applies Accounting
     Principles Board Opinion No. 25 and related  interpretations  in accounting
     for its Plan.  No  compensation  expense  related to the Plan was  recorded
     during the three months  ended March 31, 2004 and 2003.  If the Company had
     elected  to  recognize  compensation  cost based on fair value at the grant
     dates for awards under the Plan  consistent  with the method  prescribed by
     SFAS No. 123,  net income and earnings per share would have been changed to
     the pro forma amounts as follows for the three months ended March 31.

<TABLE>
<CAPTION>

                                                                        2004                   2003
                                                                        ----                   ----
                   <S>                                                  <C>                    <C>
           Net Income as reported                                    $ 889,198            $ 641,111

           Less pro forma stock based compensation expense
            determined under the fair value method, net of tax
            effects.                                                    60,000                    0
                                                                     ---------            ---------
           Pro forma net income                                      $ 829,198            $ 641,111
                                                                     =========            =========

           Net income per share

            Basic - as reported                                        $ 1.18                $  .84

            Basic - pro forma                                          $ 1.10                $  .84

            Diluted - as reported                                      $ 1.12                $  .80

            Diluted - pro forma                                        $ 1.04                $  .80
</TABLE>


6.   NEW ACCOUNTING STANDARDS

     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
     Variable  Interest  Entities"  ("Interpretation  No. 46"),  which  explains
     identification  of variable interest entities and the assessment of whether
     to consolidate  those  entities.  Interpretation  No. 46 requires  existing
     unconsolidated  variable  interest  entities  to be  consolidated  by their
     primary  beneficiaries  if the entities do not  effectively  disperse risks
     among the involved  parties.  The provisions of  Interpretation  No. 46 are
     effective for all financial  statements  issued after January 1, 2003.  The
     Company holds no significant  variable interest entities that would require
     disclosure or consolidation.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial  Instruments with Characteristics of Both Liabilities and Equity"
     ("SFAS No.  150"),  effective  for  financial  instruments  entered into or
     modified  after May 31, 2003.  This  statement  established  standards  for
     classifying   and   measuring    certain    financial    instruments   with
     characteristics  of both liabilities and equity. It requires that an issuer
     classify a financial  instrument  that is within the scope of the statement
     as a  liability  rather  than  as an  equity,  such as  obligations  that a
     reporting entity can or must settle by issuing its own equity shares.  SFAS
     No.  150 did not  have  an  impact  on the  Company's  earnings,  financial
     condition or equity.

                                       8

<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  reports 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,
Charlotte Hall, 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. The Bank accepts demand and time
deposits,  and originates loans to individuals,  associations,  partnerships and
corporations.  The Bank makes real estate loans including  residential first and
second  mortgage  loans,  home equity  lines of credit and  commercial  mortgage
loans. The Bank makes  commercial  loans including  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
residential first mortgage lending and 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  also  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 believes that its allowance for loan losses
is adequate. For further information on the Bank's allowance for loan losses see
the discussion in the financial  condition  section of this form, as well as the
relevant  discussions  in the Form 10-K and  annual  report  for the year  ended
December 31, 2003.

In the last several quarters, the national economy has recovered fitfully from a
mild  recession  while our local economy has remained  strong in relation to the
national and statewide economy. In the current quarter, this recovery is gaining
strength and appears to be solidly under way.  Locally,  the housing  market has
appreciated  strongly in the last several months in reaction to continued  lower
interest  rates and a strong local job market.  National job markets also appear
to be  strengthening.  The  improvement  in the economy has led to some concerns
about  interest  rates.  In  the  last  several  months  rates  have  increased,
particularly  mid and long term  rates.  The  Federal  Reserve has not moved the
discount rate but has signaled a possibility of an increase.  A sustained period
of sharply  higher  interest rates would have an adverse effect on the Company's
performance.   This  effect  would  be  exacerbated   if  the  increased   rates
substantially affected the housing market.

During the last two years,  loan  customers have reacted to lower interest rates
by  continuing  to  refinance  higher rate loans.  This  refinance  activity has
decreased the interest  rates earned on loans.  In the last quarter  longer term
rates  have  increased  slightly.  These  increases  will  have  the  effect  of
decreasing refinance activity.  If rates continue to rise, the Bank may also see
an increase in the popularity of adjustable  rate  mortgages in the  residential
housing market.  Loan growth in the current quarter continues to be concentrated
in the  commercial  real estate and commercial  areas.  The increase in our loan
portfolio  was  reflected  in higher  provision  expense in the current  period.
Higher rates will also decrease prepayments from our investment

                                       9
<PAGE>

portfolio. The Bank has been able to increase net interest income from the prior
year through growth in its balance sheet which offset a lower  interest  margin.
Noninterest  income  increased  slightly  during the period,  primarily  through
income  from Bank Owned Life  Insurance.  Noninterest  expenses  also  increased
primarily  from  increases  in the Bank's  size.  An increase  in the  valuation
allowance  on  foreclosed  real estate also  increased  expenses.  Finally,  the
effective tax rate paid by the Company  decreased due to the donation of certain
foreclosed property.

SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                   March 31,
                                                                         -------------------------------
                                                                              2004            2003
                                                                              ----            ----
<S>                                                                            <C>             <C>
Condensed Income Statement
Interest Income                                                           $  4,593,811    $  3,918,384
Interest Expense                                                             1,564,289       1,361,294
Net Interest Income                                                          3,029,522       2,557,090
Provision for Loan Loss                                                         70,202           5,386
Noninterest Income                                                             396,228         387,954
Noninterest Expense                                                          2,395,723       1,948,547
Income Before Income Taxes                                                     959,825         991,111
Income Taxes                                                                    70,627         350,000
Net Income                                                                     889,198         641,111

Per Common Share
Basic Earnings                                                                $   1.18         $  0.84
Diluted Earnings                                                                  1.12            0.80
Book Value                                                                       37.68           37.05
</TABLE>

RESULTS OF OPERATIONS

Net income for the three month  period  ended March 31,  2004  totaled  $889,198
($1.18  basic and $1.12  diluted  earnings per share)  compared  with a total of
$641,111 ($.84 basic and $.80 diluted earnings per share) for the same period in
the prior year.  This increase of $248,087 or 38.7% was caused by an increase in
net interest  income,  and a reduction in income tax expense,  both of which was
partially offset by an increase in the provision for loan losses.  For the three
month  period  ended March 31, 2004,  interest  income  increased by $675,427 or
17.2% to  $4,593,811.  The increase was due to higher average  interest  earning
asset balances,  including  investments and loans which was partially  offset by
lower average rates on loans.  Interest  expense also increased to $1,564,289 in
the three month period  ending March 31, 2004 as compared to  $1,361,294  in the
same period in the prior year an increase of $202,995 or 14.9%. The increase was
the result of higher average balances which more than offset lower average rates
paid on  advances  and  deposits.  The  changes in  interest  income and expense
reflected the declining  interest rate environment  experienced  during the last
year.

Provision  for loan  losses  increased  from prior year  levels to $70,202  from
$5,386 for the three month period ending March 31, 2004 and 2003,  respectively.
The increase in provision  expense was caused by a continuing  concentration  of
the Bank's loan portfolio in commercial  loan categories that have higher levels
of risk than  residential  mortgages.  Management  will continue to periodically
review its  allowance  for loan losses and the related  provision  and adjust as
deemed  necessary.  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 $396,228 for the three month period ending March
31,  2004,  an increase of $8,274 or 2.1% over the prior year total of $387,954.
Loan  appraisal,  credit,  and  miscellaneous  charges  increased  by $38,808 to
$66,204.  This  increase  was offset by a decrease in gains from  selling  loans
which decreased to $21,404 from $127,095,  a decrease of $105,691 or 83.2%. This
change  reflects the Bank's  preference to keep a higher  proportion of loans in
its  portfolio.  The Bank also  recorded  $73,848 in income from Bank Owned Life
Insurance  during the period due to the purchase of Bank Owned Life Insurance at
the end of the first  quarter  of 2003.  Other  noninterest  income  items  were
comparable from year to year.

Noninterest expense for the three month period increased by $447,176 or 22.9% to
$2,395,723 from $1,948,547 in the same period

                                       10
<PAGE>

for the prior year. Salary and employee benefits  increased by 15% to $1,298,380
from  $1,129,326  for the same  period  in the  prior  year.  The  increase  was
attributable  to an increase in employees  and to  increases  in average  salary
costs per employee.  Occupancy expense  increased from $168,317 to $181,873,  an
increase of 8.1% due to  additional  locations  and  increased  costs at certain
locations.  Advertising  increased  to  $142,539  from  $63,734,  an increase of
$78,805 or 123.6%.  Advertising  increased  due to an increase in certain  sales
efforts.  Data processing  expense increased to $151,998 from a prior year total
of $85,305 an increase  of $66,693 or 78.2%.  This  increase  was due to certain
nonrecurring   expenses.   Depreciation  of  furniture  fixtures  and  equipment
decreased to $87,200 from the prior year total of $114,900 a decrease of $27,700
or 24.1%. This decrease was the result of certain assets being fully depreciated
at the end of 2003. Telephone  communications  declined slightly to $37,975 from
$39,076 in the prior year, a decline of $1,101 or 2.8%. This decline reflected a
change in service  providers  which  offset  higher  usage.  The  provision  for
valuation allowances on foreclosed real estate increased to $113,827 as of March
31, 2004 from nothing in 2003 as further  increases to the  valuation  allowance
were considered necessary.  ATM related expenses increased by $11,585 to $80,098
for the period ending March 31, 2004, an increase of 16.91% due to higher levels
of activity,  more ATM's, and certain price increases by ATM service  providers.
Office  supplies  expense  increased  to $39,419  from the prior year  amount of
$23,465,  an increase of $15,954 or 68%.  These  expenses  related to  increased
marketing  efforts in the current year. Office equipment  expenses  decreased to
$26,391  from  2003's  level of  $35,309,  a decrease  of $8,918 or 25.3%.  This
decrease  was caused by the  retirement  of certain  equipment.  Other  expenses
increased to $236,023 from  $220,602 an increase of $15,421 or 7.0%,  reflecting
larger asset size and increased  activity.  Income taxes decreased to $70,627 or
7.36% of pretax  income in the  current  year  compared  to $350,000 or 35.3% of
pretax  income in the prior year.  The  decrease  in the tax rate was  primarily
attributable to the  contribution of a foreclosed  property to an  environmental
organization which generated a current income tax deduction.

FINANCIAL CONDITION

Assets

Total assets as of March 31, 2004 increased by $19,535,659 to $371,265,651  from
the December 31, 2003 level of  $351,729,992.  Cash and due from banks increased
by $419,427 or 18.1% from December 31, 2003's total.  Interest-bearing  deposits
with banks  decreased by  $1,998,690 or 22.4% during the period to $6,913,642 at
March 31, 2004. Investment securities, including both the available for sale and
held to maturity  portfolios,  increased  from  $99,895,249 to  $102,437,896  an
increase  of  $2,542,647  or  2.5%.  Increases  were  primarily  the  result  of
additional  purchases of  investments  and the  conversion  of interest  bearing
deposits to investments.

The Bank's loan  portfolio  increased  by  $19,767,947  or 9.1% during the three
months period ending March 31, 2004 to  $237,508,100  from December 2003's total
of  $217,740,153.  The increase was  primarily  the result of an increase in its
portfolio of  commercial  real estate  loans.  The increase in  commercial  real
estate lending is a reflection of the strong local economy and continuing  sales
efforts by the Bank in this area.  At March 31,  2004 the Bank's  allowance  for
loan  losses  totals  $2,650,924  or  1.10%  of loan  balances  as  compared  to
$2,572,799  or  1.16%  of loan  balances  at  December  31,  2003.  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.  Loans held for
sale  decreased  to zero from  $474,880 at December 31,  2003.  Additional  loan
information  for prior  years is  presented  in the Form 10-K for the year ended
December 31, 2003:
<TABLE>
<CAPTION>

LOAN PORTFOLIO                                          March 31,                                 December 31,
                                                           2004                                       2003
                                           -------------------------------------       --------------------------------
                                                     Amount               %                   Amount            %
                                                     ------              ---                  ------           ---
 <S>                                                 <C>                 <C>                   <C>             <C>
Real Estate Loans
 Commercial                                      $104,551,947            43.42%           $  94,425,451        42.5%

 Residential first mortgage                        45,987,010            19.10%              43,445,956        19.6%

 Construction and land evelopment                  20,908,895             8.68%              19,601,874         8.8%

 Home equity and second mortgage                   21,080,568             8.76%              19,561,772         8.8%

Commercial loans                                   44,128,332            18.33%              40,901,589        18.4%

Consumer loans                                      4,115,058             1.71%               4,094,234         1.8%
                                                 ------------           ------             ------------      ------
Total loans                                       240,771,810           100.00%             222,030,876      100.00%
 Less:  Deferred loan fees                            612,787             0.25%                 649,756         0.3%
   Allowance for loan losses                        2,650,924             1.10%               2,572,799        1.16%
                                                 ------------           ------             ------------      ------
  Loans receivable net                           $237,508,099                              $218,808,321
                                                 ------------                              ------------
</TABLE>

                                       11
<PAGE>
<TABLE>
<CAPTION>

LOAN LOSS ALLOWANCE
                                                3 Months Ended                3 Months Ended
                                                March 31, 2004                March 31, 2003
                                                --------------                --------------
<S>                                                  <C>                           <C>
Beginning Balance                               $    2,572,799               $      2,314,074
Charge Offs                                                 --                             --
Recoveries                                               7,923                             --
                                                --------------               ----------------
Net Charge offs                                          7,923                             --
Additions charged to operations                         70,202                          5,386
                                                --------------               ----------------
Balance at end of period                        $    2,650,924               $      2,319,460
                                                ==============               ================

Ratio of net charge-offs during the period to
loans                                                     0.00%                          0.00%
                                                ==============               ================
</TABLE>


<TABLE>
<CAPTION>
                                                 Balances as of         Balances as of
                                                 March 31, 2004        December 31, 2003
<S>                                                     <C>                  <C>

Restructured Loans                               $         --          $         --
                                                 ------------          ------------


Accruing loans which are contractually
past due 90 days or more:                        $         --          $         --
                                                 ------------          ------------

Loans accounted for on a nonaccrual basis        $    517,601          $    379,544
                                                 ------------          ------------

Total non-performing loans                       $    517,601          $    379,544

Non-performing loans to total loans                      0.22%                 0.17%
                                                 ============          ============

Allowance for loan losses to non-performing
loans                                                  512.16%               677.87%
                                                 ============          ============
</TABLE>


Premises and  equipment  increased  due to the  renovation  of parts of the home
office  building  these  improvements  were  partially  offset by  depreciation.
Foreclosed  real estate  declined to $567,937 at March 31, 2004 from $706,764 at
December  31, 2003 due to the  donation of one  property  and an increase in the
valuation  allowance.  Other assets  decreased to $3,079,239  from $3,146,247 at
December 31, 2003.

Liabilities

Deposit  balances  increased by  $12,537,258 or 5.51% for the three months ended
March 31, 2004.  This  increase  was  primarily  in interest  bearing  deposits.
Management believes that ongoing stock market volatility combined with questions
about certain Mutual Fund  operations has made bank deposits more  attractive to
the  general  public.  The Bank has also  increased  marketing  efforts  for all
deposit  products in the current  quarter.  Short term  borrowings  decreased to
$27,620,302,  a decrease of  $3,570,983,  in part due to the Bank's  decision to
convert certain short term borrowings  into longer term  liabilities.  Long term
debt increased to $72,955,278  at March 31, 2004,  from  $63,051,176 at December
31, 2003, due to the extension of certain short term  borrowings as noted above.
Management  has  increased  long term  borrowing  because  additional  long term
borrowing  would help to stabilize  interest  expense if interest  rates were to
increase  dramatically.  Other liabilities  decreased to $1,612,378 at March 31,
2004, from $2,021,053 at December 31, 2003, a decrease of 20.2%.

                                       12
<PAGE>

Stockholders' Equity

Stockholders'  equity increased  $1,073,957 or 3.85% to $28,985,867 at March 31,
2004 compared to $27,911,910 at December 31, 2003.  This reflects the net income
of $889,198 for the three months period.  Other changes in equity  occurred as a
result of using $152,558 to purchase  shares in the open market and retire them,
the  exercise of stock  options of $197,155,  and  activity  related to the ESOP
shares of $74,011. Book value on a per share basis, $37.68 at March 31, 2004, as
compared to $37.05 at December 31, 2003, reflects a 1.7% increase, with a slight
increase in outstanding shares, partially offsetting the gains noted previously.

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 of credit
available from the FHLB. As of March 31, 2004, the maximum  available under this
line would be $129 million,  while  current  outstanding  advances  totaled $101
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 second 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 March 31, 2004,
the Bank's tangible,  leverage and risk-based capital ratios were 7.55%,  10.19%
and 11.17%, respectively.  These levels are well in excess of the required 4.0%,
4.0% and 8.0% ratios required by the Federal Reserve Board.

CRITICAL ACCOUNTING POLICIES

The Company's  financial  statements are prepared in accordance  with accounting
principles  generally  accepted  in the  United  States of America  (GAAP).  The
financial  information  contained  within  the  financial  statements  is,  to a
significant extent, financial information that is based on measures of financial
effects of  transactions  and events that have  already  occurred.  A variety of
factors could affect the ultimate value that is obtained when earning of income,
recognizing  an expense,  recovering  an asset or relieving a liability.  We use
historical  loss factors as one in  determining  the  inherent  loss that may be
present in our loan portfolio. Actual losses could differ significantly from the
historical  factors  that we use.  In  addition  GAAP itself may change from one
previously  acceptable  method to another method.  Although the economics of our
transactions  would be the same,  the  timing of events  that  would  impact our
transactions could change.

The Company considers the allowance for loan losses to be a critical  accounting
policy.  The  allowance for loan losses is an estimate of the losses that may be
sustained in our loan portfolio.  The allowance is based on two basic principles
of accounting : (1) SFAS 5, "Accounting for Contingencies",  which requires that
losses be accrued when they are probable of occurring and estimable and (2) SFAS
114,  "Accounting  by Creditors for  Impairment of a Loan",  which requires that
losses be accrued  based on the  differences  between  the value of  collateral,
present  value of  future  cash  flows or  values  that  are  observable  in the
secondary market and the loan balance.

Management has  significant  discretion in making the judgments  inherent in the
determination  of the  provision  and  allowance  for loan losses,  including in
connection  with  the  valuation  of  collateral,   a  borrower's  prospects  of
repayment,  and in establishing allowance factors on the formula allowance.  The
establishment  of  allowance  factors  is  a  continuing   exercise,   based  on
management's  continuing assessment of the global factors such as delinquencies,
loss  history,  trends  in the  volume

                                       13
<PAGE>

and term of loans, national and local economic trends,  concentration of credit,
loan classification, and other factors. Changes in allowance factors will have a
direct impact on the amount of the provision and a  corresponding  effect on net
income.  Errors in management's  perception and assessment of the global factors
and their  impact on the  portfolio  could  result  in the  allowance  not being
adequate  to  cover  losses  in the  portfolio,  and may  result  in  additional
provisions or chargeoffs.


ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable. The Company qualifies as a "small business issuer."

ITEM 4 CONTROLS AND PROCEDURES

As of the end of the period  covered by this report,  management  of the Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's  principal  executive officer and principal  financial officer, of
the effectiveness of the Company's disclosure controls and procedures.  Based on
this  evaluation,  the  Company's  principal  executive  officer  and  principal
financial  officer  concluded  that  the  Company's   disclosure   controls  and
procedures are effective in ensuring that  information  required to be disclosed
by the Company in reports that it files or submits under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms. It should be noted that the design of the Company's  disclosure  controls
and procedures is based in part upon certain  reasonable  assumptions  about the
likelihood of future events,  and there can be no reasonable  assurance that any
design of  disclosure  controls and  procedures  will  succeed in achieving  its
stated goals under all potential  future  conditions,  regardless of how remote,
but the Company's principal executive and financial officers have concluded that
the Company's  disclosure  controls and procedures are, in fact,  effective at a
reasonable assurance level.

In addition,  there have been no changes in the Company's  internal control over
financial  reporting  (to the extent  that  elements of  internal  control  over
financial  reporting are subsumed  within  disclosure  controls and  procedures)
identified in connection  with the evaluation  described in the above  paragraph
that occurred  during the Company's  last fiscal  quarter,  that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.


                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1 - Legal Proceedings -- None

Item 2 - Change in Securities,  Use of Proceeds and Issuer Purchases of Equity
         Securities

         (a) Not applicable

         (b) Not applicable

         (c) Not applicable

         (d) Not applicable

                                       14
<PAGE>

     (e) The  following  table sets forth  information  regarding  the Company's
repurchases of its Common Stock during the quarter ended March 31, 2004.

<TABLE>
<CAPTION>
                                                                            (c)
                                                                        Total Number
                                                                         of Shares              (d)
                                                                         Purchased            Maximum
                                       (a)                               as Part of       Number of Shares
                                      Total               (b)             Publicly        that May Yet Be
                                    Number of           Average       Announced Plans     Purchased Under
                                      Shares           Price Paid            or             the Plans or
              Period                Purchased          per Share          Programs            Programs
              ------                ---------          ----------         --------            --------
       <S>                              <C>              <C>                <C>                 <C>
   January 2004
   Beginning Date: January 4
   Ending Date: January 20             883             $ 42.74               883                8,584

   February 2004
   Beginning Date: February 11
   Ending Date: February 26          2,672               41.98             2,672                5,912

   March 2004
   Beginning Date: March 25
   Ending Date: March 25                63               42.00                63                5,849
                                     -----             -------             -----                -----

   Total                             3,618             $ 42.17             3,618                5,849
                                     =====             =======             ======               =====
</TABLE>


In an 8-K dated July 25, 2002,  and in a press release dated July 23, 2002;  the
Company  announced a plan to buy up to 38,000  shares of its stock  through open
market  purchases.  This offer was contingent upon market  conditions and had no
time limit. There were 8,236 shares purchased under this plan in 2002 and 20,297
in 2003. The Company intends to continue to purchase shares under this plan.

Item 3 - Default Upon Senior Securities -- None

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

Item 5 - Other Information -- None

Item 6 - Exhibits and Reports on Form 8-K


     (a)Exhibits - The following exhibits are being filed with this Form 10-Q:

           Exhibit 31.1  Rule 13a-14(a) Certification of Chief Executive Officer

           Exhibit 31.2  Rule 13a-14(a) Certification of Chief Financial Officer

           Exhibit 32    Section 1350 Certifications

     (b)The  registrant  filed a report on Form 8-K with the SEC on February 25,
2004 announcing an annual cash dividend.




                                       15
<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: May 12, 2004                      By: /s/ Michael L. Middleton
                                            ----------------------------------
                                            Michael L. Middleton, President
                                            and Chairman of the Board





Date: May 12, 2004                      By: /s/ William J. Pasenelli
                                            ----------------------------------
                                            William J. Pasenelli, Executive
                                            Vice President and Chief
                                             Financial Officer