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 June 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) 645-5601
            ---------------------------------------------------------
              (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 July 31, 2001  registrant  had  outstanding  765,182 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 - June 30, 2001
       and December 31, 2000                                                 2

     Consolidated Statements of Income and Comprehensive Income -
       Three and Six Months Ended June 30, 2001 and 2000                     3

     Consolidated Statements of Cash Flows - Six  Months
       Ended June 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 Disclosure About Market Risk       11

   Item 4 - Submission of Matters to Vote of Security Holders               12


PART II - OTHER INFORMATION                                                 12

   Item 4 - Submission of Matters to Vote of Security Holders               12

   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  JUNE 30, 2001 AND DECEMBER 31, 2000

                                                     ASSETS
<TABLE>
<CAPTION>
                                                                                   JUNE 30,       DECEMBER 31,
                                                                                     2001             2000

<S>                                                                                 <C>                <C>
Cash and due from banks                                                             $ 1,168,314     $    645,817
Interest-bearing deposits with banks                                                  6,105,148        5,975,314
Investment securities available for sale - at fair value                             50,434,118       56,860,996
Investment securities held to maturity - at amortized cost                            1,400,167        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                                                                     979,849          355,000
Loans receivable - net of allowance for loan losses
of $2,109,889 and $1,929,531, respectively                                          185,569,032      172,090,088
Premises and equipment, net                                                           4,628,832        4,495,431
Foreclosed real estate                                                                  176,626          176,626
Accrued interest receivable                                                           1,319,252        1,353,658
Other assets                                                                          1,991,437        1,636,609
                                                                                   ------------     ------------
                                                                                   $256,808,325     $248,339,456
                                                                                   ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Noninterest-bearing deposits                                                       $ 14,543,901     $ 12,537,649
Interest-bearing deposits                                                           163,543,901      155,268,350
                                                                                   ------------     ------------
Total deposits                                                                      178,356,231      167,805,999
Short-term borrowings                                                                 5,159,816       13,550,903
Long-term debt                                                                       46,650,000       41,400,000
Accrued expenses and other liabilities                                                2,176,626        2,152,732
                                                                                   ------------     ------------
Total liabilities                                                                   232,342,673      224,909,634
                                                                                   ------------     ------------
STOCKHOLDERS' EQUITY:
Common stock - par value $.01; authorized - 15,000,000 shares;
issued 766,956 and 777,680 shares, respectively                                           7,670            7,777
Surplus                                                                               7,545,603        7,500,865
Retained earnings                                                                    16,720,876       16,175,708
Accumulated other comprehensive income                                                  294,118         (114,929)
Unearned ESOP shares                                                                   (102,615)        (139,599)
                                                                                   ------------     ------------
Total stockholders' equity                                                           24,465,652       23,429,822
                                                                                   ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $256,808,325     $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 SIX MONTHS ENDED JUNE 30, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                              JUNE 30,                    JUNE 30,
                                                                     --------------------------   -------------------------
                                                                        2001             2000        2001          2000
<S>                                                                  <C>            <C>           <C>           <C>
INTEREST INCOME:
   Interest and fees on loans                                        $ 3,819,797    $ 3,426,817   $ 7,630,070   $ 6,691,722
   Taxable interest and dividends on investment securites                807,156      1,031,033     1,883,307     2,081,082
   Interest on bank deposits                                              22,333         29,625        44,130        49,919
                                                                     -----------    -----------   -----------   -----------
        Total interest revenues                                        4,649,286      4,487,475     9,557,507     8,822,723
                                                                     -----------    -----------   -----------   -----------

INTEREST EXPENSE:
   Interest on deposits                                                1,603,996      1,512,282     3,298,258     2,922,908
   Interest on long term debt                                            658,930        465,428     1,250,316       765,140
   Interest on other borrowings                                           53,775        311,654       255,346       649,437
                                                                     -----------    -----------   -----------   -----------
        Total interest expenses                                        2,316,701      2,289,364     4,803,920     4,337,485
                                                                     -----------    -----------   -----------   -----------

NET INTEREST INCOME                                                    2,332,585      2,198,111     4,753,587     4,485,238
PROVISION FOR LOAN LOSSES                                                 90,000         90,000       180,000       180,000
                                                                     -----------    -----------   -----------   -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                    2,242,585      2,108,111     4,573,587     4,305,238
                                                                     -----------    -----------   -----------   -----------
NONINTEREST INCOME:
   Loan appraisal, credit, and miscellaneous charges                      61,940         23,436        96,899        39,128
   Net gain on sale of loans held for sale                                60,867         19,406        84,735        58,548
   Service charges                                                       224,540        258,116       496,693       487,058
   Other                                                                   6,511          8,317        23,059        16,660
                                                                     -----------    -----------   -----------   -----------
        Total noninterest income                                         353,858        309,275       701,386       601,394
                                                                     -----------    -----------   -----------   -----------
NONINTEREST EXPENSE:
   Salary and employee benefits                                          879,437        916,539     1,839,732     1,804,379
   Occupancy expense                                                     160,430        145,259       304,806       303,932
   Deposit insurance and surety bond premiums                             23,586         25,596        59,469        48,318
   Data processing expense                                                70,623         65,276       176,607       156,660
   Advertising                                                            65,718         87,220       112,880       130,972
   Depreciation                                                           63,301         54,562       116,686       108,017
   Other                                                                 346,009        337,539       680,673       645,177
                                                                     -----------    -----------   -----------   -----------
        Total noninterest expenses                                     1,609,104      1,631,991     3,290,853     3,197,455
                                                                     -----------    -----------   -----------   -----------

INCOME BEFORE INCOME TAXES                                               987,339        785,395     1,984,120     1,709,177
INCOME TAXES                                                             335,700        276,000       683,700       576,000
                                                                     -----------    -----------   -----------   -----------
NET INCOME                                                               651,639        509,395     1,300,420     1,133,177

OTHER COMPREHENSIVE INCOME, NET OF TAX
   Net unrealized holding gains (losses) arising during the period       (42,181)        22,021       409,047      (181,112)
                                                                     -----------    -----------   -----------   -----------
COMPREHENSIVE INCOME                                                 $   609,458    $   531,416   $ 1,709,467   $   952,065
                                                                     ===========    ===========   ===========   ===========
EARNINGS PER SHARE
   Basic                                                                     .84            .65          1.68          1.44
   Diluted                                                                   .81            .62          1.61          1.38
</TABLE>

See notes to consolidated financial statements


                                       3
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                       SIX MONTHS ENDED
                                                                                            JUNE 30,
                                                                                    ----------------------------
                                                                                       2001             2000
<S>                                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                          $ 1,300,420      $ 1,133,177
Adjustments to reconcile net income to net
   cash provided by operating activities:
   Provision for loan losses                                                            180,000          180,000
   Depreciation and amortization                                                        165,100          156,750
   Net amortization of premium/discount on
   investment securities                                                                 24,553          (12,409)
   Deferred income tax benefit                                                         (109,000)         (49,000)
   Decrease (increase) in accrued interest receivable                                    34,406         (133,060)
   Decrease in deferred loan fees                                                       (22,498)         (58,241)
   Increase in accounts payable, accrued expenses,
   and other liabilities                                                                 23,894           14,948
   Decrease (Increase) in other assets                                                 (457,134)         164,264
   Gain on disposal of premises and equipment                                            (8,386)               -
   Origination of loans held for sale                                                (4,582,681)      (1,605,274)
   Gain on sales of loans held for sale                                                 (84,735)         (58,548)
   Proceeds from sale of loans held for sale                                          5,292,265        2,219,421
                                                                                    -----------      -----------
          Net cash provided by operating activities                                   1,756,204        1,952,028
                                                                                    -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net increase in interest-bearing deposits with banks                                (129,834)      (2,212,094)
   Purchase of investment securities available for sale                             (11,504,288)      (8,586,841)
   Proceeds from sale, redemption or principal payments
    of investment securities available for sale                                      18,526,965        8,807,902
   Purchase of investment securities held to maturity                                  (100,000)        (200,000)
   Proceeds from maturities or principal payments
    of investment securities held to maturity                                           414,200          726,269
   Loans originated or acquired                                                     (43,938,943)     (33,736,415)
   Principal collected on loans                                                      29,052,799       19,266,682
   Proceeds from disposal of premises and equipment                                       8,963
   Purchase of premises and equipment                                                  (299,077)        (160,364)
   Acquisition of foreclosed real estate                                                      -          (55,777)
   Purchase of FHLB and Federal Reserve stock                                                 -         (391,550)
                                                                                    -----------      -----------
       Net cash used in investing activities                                         (7,969,215)     (16,542,188)
                                                                                    -----------      -----------
</TABLE>
See notes to consolidated financial statements.

                                       4

<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED
                                                                                             JUNE 30,
                                                                                    ----------------------------
                                                                                       2001             2000
<S>                                                                                 <C>              <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net increase in deposits                                                         $10,550,232      $ 4,125,304
   Proceeds from long-term borrowings                                                10,250,000                -
   Payments of long-term borrowings                                                  (5,000,000)     (15,000,000)
   Net increase (decrease) in other borrowed funds                                   (8,391,087)      22,764,319
   Exercise of stock options                                                             31,817           36,402
   Net change in unearned ESOP shares                                                    49,967           36,984
   Dividends paid                                                                      (309,204)        (236,595)
   Redemption of common stock                                                          (446,217)        (144,122)
                                                                                    -----------      -----------
      Net cash provided by financing activities                                       6,735,508       11,582,292
                                                                                    -----------      -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                        522,497       (3,007,868)

CASH AND CASH EQUIVALENTS - JANUARY 1                                                   645,817        3,469,304
                                                                                    -----------      -----------
CASH AND CASH EQUIVALENTS - JUNE 30                                                 $ 1,168,314      $   461,436
                                                                                    ===========      ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest                                                                            $ 4,827,084      $ 4,185,240
                                                                                    ===========      ===========
Income taxes                                                                        $   896,000      $   475,000
                                                                                    ===========      ===========
</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 six months  ended June 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>
                                                   SIX MONTHS ENDED
                                                       JUNE 30,
                                               ---------------------------
                                                 2001               2000
             <S>                               <C>                <C>
             Basic                             775,317            787,597
             Diluted                           806,309            822,707
</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  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, 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 six 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 Community Mortgage Corporation of Tri-County, (a wholly owned
subsidiary of the Bank) on this date. As of June 30, 2001, the loan is reflected
in the assets of the Bank as a loan.  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. Other than the loan mentioned above, no significant deterioration
in the timeliness of payments received from borrowers has been noted.

In the last several months,  growth in the national and local economy has slowed
dramatically.  While the local economy  remains  strong,  any sustained  further
slowing of economic activity or a local or national recession would be likely to
have an impact on the Bank's operations.  In addition,  the continued cutting of
certain  short term  interest  rates by the  Federal


                                       7
<PAGE>


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 non-interest  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 and one micro branch offices in
its market area  consisting  of Charles,  St.  Mary's,  and Calvert  counties in
Maryland.  The Bank  intends to close one micro branch and open one full service
branch in the  third  quarter  of 2001 . The full  service  branch  will open 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 Bank will  continue to
seek opportunities to expand its branch network.


SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                               SIX MONTHS ENDED
                                                   JUNE 30,
                                           ------------------------
                                              2001           2000
<S>                                        <C>           <C>
Condensed Income Statement
Interest Income                            $9,557,507    $8,822,723
Interest Expense                            4,803,920     4,337,485
Net Interest Income                         4,753,587     4,485,238
Provision for Loan Losses                     180,000       180,000
Non-interest Income                           701,386       601,394
Non-interest Expenses                       3,290,853     3,197,455
Income Before Income Taxes                  1,984,120     1,709,177
Income Tax Expense                            683,700       576,000
Net Income                                  1,300,420     1,133,177


Per Common Share
Basic Earnings                                  $1.68         $1.44
Diluted Earnings                                 1.61          1.38
Book Value                                      31.90         27.61
</TABLE>

RESULTS OF OPERATIONS

Net  income for the six month  period  ended June 30,  2001  totaled  $1,300,420
($1.68 basic and $1.61 fully diluted  earnings per share)  compared with a total
of $1,133,177  ($1.44 basic and $1.38 fully diluted  earnings per share) for the
same  period in the prior  year.  This  increase  of $167  thousand or 14.8% 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  non-interest
income;  this was partially  offset by an increase in non-interest  expenses and
income tax expense.

Interest income increased to $9.6 million in the current period compared to $8.8
million for the same period in the prior year. This increase of $735 thousand or
8.3% 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 slight  decrease in interest yields on
interest earning assets.

Interest expense increased to $4.8 million in the period ending June 30, 2001 as
compared  to $4.3  million  for the same period in the prior year an increase of
$466 thousand or 10.8%. This increase was due to higher balances of deposits and


                                       8
<PAGE>


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 $268 thousand or 6.0% due to the factors  noted above.  As a result
of these changes,  the Bank's interest rate spread narrowed to 3.58% for the six
months  ended June 30,  2001  compared to 3.80% for the prior year  period.  Net
interest margin fell to 3.88% from 4.08% between the periods

Provision  for loan  losses  was  comparable  to the prior  year with  provision
expense  of $180  thousand  for the  periods  ending  June 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.

Non-interest  income  increased to $701 thousand for the six month period ending
June 30, 2001,  an increase of $100  thousand or 16.6% over the prior year total
of $601 thousand.  Increases in service charges on deposit  accounts and certain
loan service fees were  supplemented  by an increase in gains on sales of loans.
Service charges  increased  because growth in deposits has been  concentrated in
demand deposit type accounts which tend to generate  higher fees.  Gain on sales
of mortgage loansand 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.

Non-interest  expense for the six month period increased by $93 thousand or 2.9%
to $3.3 million from $3.2 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  non-interest  expense inthe
third quarter.

Income taxes increased to $684 thousand or 34.5% of pretax income in the current
year compared to $576 thousand or 33.7% 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 six  months  were  $1.68 per share or $.24
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 $1.61 as  compared  to $1.38 an
increase of $.23, which is reflective of the factors noted above.


RESULTS OF OPERATIONS -- SECOND QUARTER

The Company's net income for the second  quarter of 2001 as compared to the same
period for the prior year  increased to $652 thousand from $509 thousand for the
second  quarter of 2000,  an increase of 27.9%.  This increase was the result of
the same  factors  noted in the change for the  results of the first six months,
continued  increases in net interest  income caused by higher  assets,  a slight
decrease in non-interest expense, and increasing  non-interest income related to
residential  first mortgage  production and higher  deposit  balances.  Interest
income  increased  by $162  thousand or 3.6% from the same  quarter in the prior
year.  During the same  period,  interest  expense  increased by $27 thousand or
1.2%.  Net  interest  income  increased  slightly  by  $134  thousand  or  6.1%.
Non-interest  income increased by $45 thousand or 14.4% in the second quarter of
2001,  compared to the second  quarter of 2000.  This increase was the result of
increases in income from loan service  charges as well as by increased  gains on
selling residential  mortgage loans was offset by declines in service charges on
customer accounts.  Total non-interest expense decreased by $23 thousand or 1.4%
for the second quarter  compared to the same period lastyear  primarily due to a
decrease in certain  personnel  related  costs  including  accruals for benefits
costs.  Advertising  expenses also decreased due to a lower level of advertising
activity in the second quarter.  Management  expects that advertising costs will
increase in the third  quarter to levels  comparable  to the prior  year.  Other
expenses  increased  based upon the  increases in asset size,  branch  networks,
level of deposits,  and other factors.  Basic earnings per share  increased from
$.65 to $.84  based  on the  lower  number  of  shares  outstanding  and  higher
earnings.  Fully diluted earnings per share increased from $.65 to $.81 based on
the same factors.


                                        9
<PAGE>


FINANCIAL CONDITION

Assets

Total  assets as of June 30,  2001 grew $8.5  million or 3.4% to $256.8  million
from the December 31, 2000 level of $248.3  million.  The Bank's loan  portfolio
grew by $13.5  million or 7.8% during the six month period ending June 30, 2001.
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 June
30, 2001 the Bank's  allowance  for loan losses  totals $2.1 million or 1.15% 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 $51.8 million a decrease of
$6.8 million or 11.6%. 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 $522 thousand,  or 81% from December 31, 2000's
total.  Interest-bearing  deposits with banks increased by $130 thousand or 2.2%
during the quarter to $6.1 million at June 30,  2001.  The level of property and
equipment balances increased $133 thousand primarily due to upgrades of computer
equipment and premises.

Liabilities

Deposit  balances  increased  by $10.6  million or 6.3% for the six months ended
June 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
$3.1  million  or 5.7% from  December  2000  balances.  Other  liabilities  also
increased by $24 thousand or 1.1%.

Stockholders' Equity

Stockholders' equity increased $1.0 million or 4.4% to $24.5 million at June 30,
2001  compared to $23.4  million at December  31,  2000.  This  reflects the net
income of $1.3 million for the six month period and a $409 thousand  increase in
accumulated  other  comprehensive  income.  Reductions  in equity  occurred as a
result of using $446  thousand to purchase  shares in the open market and retire
them.  Dividends  paid  during  the first six  months of the year  totaled  $309
thousand also reduced  equity.  Book value on a per share basis,  $31.90 at June
30, 2001, as compared to $30.13 at December 31, 2000,  reflects a 5.9% 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 six months ended June 30, 2001, the Company purchased 16,871 shares for $446
thousand. Additional stock acquisitions and retirements may be considered in the
future.  The Company has $600 thousand of cash available at the holding  company
level  available  for such  purchases  or for other  cash  needs of the  holding
company.

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


                                       10
<PAGE>

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 Federal  Home Loan Bank of Atlanta.  As of June 30,  2001,  the maximum
available  under  this line  would be $90  million,  while  current  outstanding
advances totaled $50.7 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 June 30, 2001, the
Bank's tangible,  leverage and risk-based  capital ratios were 8.99%,  8.91% and
14.03%, respectively. These levels are well in excess of the required 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.


                                       11
<PAGE>

                        TRI-COUNTY FINANCIAL CORPORATION


                           PART II - OTHER INFORMATION


Item 4 - Submission of Matters to a Vote of Security Holders

On May 9, 2001,  the Company held its Annual Meeting of  Stockholders.  The only
matter  voted on was the  election  of four  directors.  Set forth below are the
results of the voting in the election of directors.

        Nominee                             For                       Withheld

        Catherine A. Askey                  503,134                     2,788
        Michael L. Middleton                479,486                    26,436
        C. Marie Brown                      503,134                     2,788
        Louis P. Jenkins, Jr.               503,134                     2,788

There were no broker non-votes.  The terms of directors W. Edelen Gough, Jr., H.
Beaman Smith and Herbert N. Redmond, Jr. continued after the meeting.


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.



                                       12
<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:  August 9, 2001                   By: /s/ Michael L. Middleton
                                            ------------------------------------
                                            Michael L. Middleton, President
                                            and Chairman of the Board





Date:  August 9, 2001                   By: /s/ William J. Pasenelli
                                            ------------------------------------
                                            William J. Pasenelli
                                            Chief Financial Officer


                                       13