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, 2003

                                       OR

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

              For the transition period from ___________ to ________


                         Commission File Number 0-18279
                         ------------------------------


                        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 by checkmark  whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes   No X
                                               ---  ---

     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, 2003 registrant had outstanding 756,636 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, 2003
       and December 31, 2002                                                   3

     Consolidated Statements of Income and Comprehensive Income -
       Three and Six Months Ended June 30, 2003 and 2002                       4

     Consolidated Statements of Cash Flows - Six Months
       Ended June 30, 2003 and 2002                                        5 - 6

     Notes to Consolidated Financial Statements                                7

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            15

Item 4 - Controls and Procedures                                              15

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                                    15

Item 2 - Changes in Securities and Use of Proceeds                            15

Item 3 - Default Upon Senior Securities                                       15

Item 4 - Submission of Matters to a Vote of Security Holders                  15

Item 5 - Other Information                                                    15

Item 6 - Exhibits and Reports on Form 8-K                                     16


SIGNATURES                                                                    17


                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS JUNE 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                   ASSETS
                                                                            June 30, 2003   December 31, 2002
<S>                                                                        <C>              <C>
Cash and due from banks                                                    $   6,157,579    $  10,356,932
Interest-bearing deposits with banks                                           8,419,298       15,179,851
Investment securities available for sale - at fair value                      67,456,170       41,826,113
Investment securities held to maturity - at amortized cost                     3,190,309        2,841,807
Stock in Federal Home Loan Bank and Federal Reserve Bank - at cost             3,127,650        2,736,750
Loans held for sale                                                            1,658,000        1,262,667
Loans receivable - net of allowance for loan losses
  of $2,377,707 and $2,314,074, respectively                                 195,239,291      197,449,282
Premises and equipment, net                                                    5,539,348        5,736,395
Foreclosed real estate                                                           706,014          716,014
Accrued interest receivable                                                    1,148,681        1,042,453
Other assets                                                                   8,550,133        3,025,431
                                                                           -------------    -------------

Total assets                                                               $ 301,192,473    $ 282,173,695
                                                                           =============    =============

                                    LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Noninterest-bearing deposits                                               $  30,507,800    $  33,045,310
Interest-bearing deposits                                                    182,732,778      169,979,802
                                                                           -------------    -------------
Total deposits                                                               213,240,578      203,025,112
Short-term borrowings                                                          5,919,120          752,298
Long-term debt                                                                53,066,740       48,170,000
Accrued expenses and other liabilities                                         2,000,253        3,353,520
                                                                           -------------    -------------

Total liabilities                                                            274,226,691      255,300,930
                                                                           -------------    -------------

STOCKHOLDERS' EQUITY:
Common stock - par value $.01; authorized - 15,000,000 shares;
issued - 752,054 and 759,778 shares, respectively                                  7,521            7,598
Additional Paid in Capital                                                     7,787,567        7,716,906
Retained earnings                                                             19,035,399       18,817,615
Accumulated other comprehensive income                                           245,438          493,691
Unearned ESOP shares                                                            (110,143)        (163,045)
                                                                           -------------    -------------

Total stockholders' equity                                                    26,965,782       26,872,765
                                                                           -------------    -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 301,192,473    $ 282,173,695
                                                                           =============    =============
</TABLE>

See notes to consolidated financial statements

                                       3
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                       JUNE 30,                     JUNE 30,
                                                             -------------------------    --------------------------
                                                                 2003         2002            2003          2002
INTEREST INCOME:
<S>                                                          <C>           <C>            <C>            <C>
   Interest and fees on loans                                $ 3,303,851   $ 3,577,700    $ 6,654,825    $ 7,067,360
   Taxable interest and dividends on investment securities       604,401       603,868      1,135,174      1,258,565
   Interest on bank deposits                                      15,544        25,578         52,181         48,820
                                                             -----------   -----------    -----------    -----------
        Total interest income                                  3,923,796     4,207,146      7,842,180      8,374,745
                                                             -----------   -----------    -----------    -----------

INTEREST EXPENSE:
   Interest on deposits                                          722,708       865,181      1,470,135      1,774,904
   Interest on long-term debt                                    655,555       630,618      1,268,656      1,270,883
   Interest on other borrowings                                      481            --          1,247             --
                                                             -----------   -----------    -----------    -----------
        Total interest expense                                 1,378,744     1,495,799      2,740,038      3,045,787
                                                             -----------   -----------    -----------    -----------

NET INTEREST INCOME                                            2,545,052     2,711,347      5,102,142      5,328,958
PROVISION FOR LOAN LOSSES                                        108,941        30,000        114,327        100,000
                                                             -----------   -----------    -----------    -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES            2,436,111     2,681,347      4,987,815      5,228,958
                                                             -----------   -----------    -----------    -----------

NONINTEREST INCOME:
   Loan appraisal, credit, and miscellaneous charges             102,583        16,560        129,979         88,348
   Net gain on sale of loans held for sale                       237,595       105,224        364,690        207,982
   Service charges                                               110,489       267,027        338,824        485,369
   Other income                                                    3,126         9,248          8,254         13,709
                                                             -----------   -----------    -----------    -----------
        Total noninterest income                                 453,793       398,059        841,747        795,408
                                                             -----------   -----------    -----------    -----------

NONINTEREST EXPENSE:
     Salary and employee benefits                              1,095,727     1,035,309      2,225,053      2,098,178
     Occupancy expense                                           203,530       224,141        371,847        391,668
     Advertising                                                  71,192        90,422        134,926        162,966
     Data processing expense                                     108,728       234,933        194,033        338,456
     Depreciation of furniture, fixtures, and equipment          114,839       177,197        229,739        221,196
     Telephone communications                                     63,656       149,192        102,732        193,350
     ATM expenses                                                 67,989        73,127        126,469        123,638
     Office supplies                                              52,373        58,150         75,838         94,371
     Valuation allowance on foreclosed real estate                    --     1,044,070             --      1,044,070
     Office equipment expense                                     34,631        64,882         79,973        124,544
     Other                                                       312,829       305,639        533,431        593,919
                                                             -----------   -----------    -----------    -----------
       Total noninterest expense                               2,125,494     3,457,062      4,074,041      5,386,356
                                                             -----------   -----------    -----------    -----------


INCOME (LOSS) BEFORE INCOME TAXES                                764,410      (377,656)     1,755,521        638,010
INCOME TAX EXPENSE (BENEFIT)                                     255,215      (134,600)       605,215        230,000
                                                             -----------   -----------    -----------    -----------
NET INCOME (LOSS)                                                509,195      (243,056)     1,150,306        408,010

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
   Net unrealized holding gains (losses) arising
        during the period                                        110,800       135,220       (248,253)       (22,428)
                                                             -----------   -----------    -----------    -----------
COMPREHENSIVE INCOME (LOSS)                                  $   619,995   $  (107,836)   $   902,053    $   385,582
                                                             ===========   ===========    ===========    ===========

EARNINGS (LOSS) PER SHARE
   Basic                                                     $      0.68   $     (0.32)   $      1.53    $      0.54
   Diluted                                                          0.65         (0.32)          1.45           0.51
</TABLE>

See notes to consolidated financial statements


                                       4
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED
                                                                                   JUNE 30,
                                                                                   --------
                                                                           2003               2002
<S>                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                              $  1,150,306    $    408,010
Adjustments to reconcile net income to net
 cash used by operating activities:
  Valuation allowance on foreclosed real estate                                   --       1,044,070
  Provision for loan losses                                                  114,327         100,000
  Depreciation and amortization                                              300,600         246,092
  Loss on disposal of obsolete equipment                                          --          65,104
  Net amortization of premium/discount on investment securities              379,458           7,401
  Deferred income tax benefit                                                (29,000)        (90,000)
  Increase in accrued interest receivable                                   (106,228)       (129,818)
  (Increase) decrease in deferred loan fees                                  (20,485)         16,173
  Decrease in accounts payable, accrued expenses, and other liabilities   (1,353,267)        434,579
  Decrease (Increase) in other assets                                        345,004      (1,099,337)
  Origination of loans held for sale                                     (11,008,750)     (9,908,946)
  Gain on sales of loans held for sale                                      (364,690)       (207,982)
  Gain on disposal of premises and equipment                                      --          (4,458)
  Proceeds from sale of loans held for sale                               10,978,107       8,485,893
                                                                        ------------    ------------

          Net cash used by operating activities                              385,382        (633,219)
                                                                        ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net decrease (increase) in interest-bearing deposits with banks          6,760,553        (612,007)
  Purchase of investment securities available for sale                   (63,958,171)    (26,341,167)
  Proceeds from sale, redemption or principal payments
   of investment securities available for sale                            37,559,698      24,565,938
  Purchase of investment securities held to maturity                      (1,188,207)     (1,201,212)
  Proceeds from maturities or principal payments
   of investment securities held to maturity                                 839,705         839,091
  Net purchase of FHLB and FRB stock                                        (390,900)             --
  Loans originated or acquired                                           (76,227,936)    (42,594,970)
  Principal collected on loans                                            78,344,085      42,829,415
  Proceeds from disposal of premises and equipment                                --          13,000
  Purchase of Bank owned life insurance policies                          (5,700,000)
  Purchase of premises and equipment                                        (103,553)     (1,023,999)
  Proceeds from foreclosed real estate                                        10,000         309,046
                                                                        ------------    ------------

       Net cash used in investing activities                             (24,054,726)     (3,216,865)
                                                                        ------------    ------------
</TABLE>

                                       5
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Continued)

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED
                                                                JUNE 30,
                                                                --------
                                                         2003             2002
<S>                                                  <C>             <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in deposits                $ 10,215,466    $ 10,469,086
  Proceeds from long-term borrowings                    5,000,000              --
  Payments of long-term borrowings                       (103,260)     (1,400,000)
  Net decrease in other borrowed funds                  5,166,822      (1,117,424)
  Exercise of stock options                                31,158          39,629
  Net change in unearned ESOP shares                       92,459          61,452
  Dividends paid                                         (422,361)       (385,129)
  Redemption of common stock                             (510,293)        (48,327)
                                                     ------------    ------------

      Net cash provided by financing activities        19,469,991       7,619,287
                                                     ------------    ------------

INCREASE IN CASH AND CASH EQUIVALENTS                  (4,199,353)      3,769,203

CASH AND CASH EQUIVALENTS - JANUARY 1                  10,356,932         693,439
                                                     ------------    ------------

CASH AND CASH EQUIVALENTS - JUNE 30                  $  6,157,579    $  4,462,642
                                                     ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest                                             $  2,721,647    $  3,241,936
                                                     ============    ============
Income taxes                                         $  1,130,369    $  1,040,000
                                                     ============    ============
</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.
     There have been no significant changes to the Company's Accounting Policies
     as disclosed in the 2002 Annual  Report.  The results of operations for the
     six  months  ended  June 30,  2003 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 2003
     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, 2002.

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 June 30, 2003 there were 7,916 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.

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 six months  ended June 30,  2003 and 2002.  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 six months ended June 30.




                                       7
<PAGE>


                                             2003          2002
                                             ----          ----
Net Income as reported                    $1,150,306   $  408,010

Less pro forma stock based compensation
 expense determined under the fair value
 method , net of related tax effects         173,261      109,390
                                          ----------   ----------
Pro forma net income                      $  977,045   $  298,620
                                          ==========   ==========

Net income  per share
 Basic - as reported                      $     1.53   $     0.54
 Basic - pro forma                        $     1.30   $     0.39
 Diluted - as reported                    $     1.45   $     0.51
 Diluted  - pro forma                     $     1.23   $     0.38


6.   EARNINGS PER SHARE

     Basic  and  diluted  earnings  per  share,  have  been  computed  based  on
     weighted-average   common  and  common  equivalent  shares  outstanding  as
     follows:

                   THREE MONTHS ENDED            SIX MONTHS ENDED
                        JUNE 30,                     JUNE 30,
                   ------------------          -------------------
                    2003        2002            2003         2002

Basic              745,267     762,721         752,690     760,760
Diluted            786,774     762,721         795,236     792,699


                                       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 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  assessment of 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 and in the
section  titled  "Critical  Accounting   Policies,"  as  well  as  the  relevant
discussions  in the Form 10-K and annual report for the year ended  December 31,
2002.

During the second  quarter of 2002,  the Bank recorded a valuation  allowance on
certain  foreclosed real estate.  In addition the Bank incurred certain expenses
related  to its core  data  system  conversion  during  the same  period.  These
expenses did not recur in 2003,which  had the effect of  decreasing  noninterest
expense in the current year when compared to the same period in 2002.

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.  Prospects for growth appear to be steady,  and
local employment remains strong. The Bank remains exposed to asset deterioration
should the local



                                       9
<PAGE>

economy  experience a prolonged  period of economic  decline.  In addition,  any
Federal  Reserve  action on  interest  rates may  affect  the  Bank's  financial
performance.

Residential  first  mortgage loan customers have reacted to lower interest rates
by continuing to refinance higher rate loans.  Because the Bank does not wish to
keep low  rate,  long  term,  fixed  rate  residential  first  mortgages  in its
portfolio,  these loans are then sold to third  parties with the Bank  retaining
servicing.  These  transactions  have led to a reduction  in  residential  first
mortgage  loan  balances.  The  Bank  continues  to  generate  a high  level  of
noninterest  income from these  transactions.  Other types of loans particularly
commercial real estate and commercial  lines of credit have increased.  The Bank
continues  to  generate a high  level of  non-interest  income  from the sale of
loans.

Although  the Bank's net interest  income had grown for several  quarters due to
increased assets and an increase in net interest margin, in the past quarter the
Bank's net interest margin narrowed.  This was caused by continuing decreases in
short term interest rates. These decreases in short term rates were reflected in
the Bank's interest rates on loans,  however,  because cost of funds has already
approached  a  historical  low point,  the Bank was unable to reduce its cost of
funds by an equal amount  resulting in a lower net interest  income.  Income tax
rates were comparable to the prior year.

It is  anticipated  that any further  reductions  in interest  rates will have a
significant  adverse  effect  on  earnings  as rates  paid on  interest  bearing
liabilities,  which  are as low as 0.10% on NOW  accounts,  cannot  continue  to
decline at the same rate as yields on loans and investments.

SELECTED FINANCIAL DATA

                                     SIX MONTHS ENDED
                                         JUNE 30,
                                 ------------------------
                                     2003         2002

Condensed Income Statement
Interest Income                  $7,842,180   $8,374,745
Interest Expense                  2,740,038    3,045,787
Net Interest Income               5,102,142    5,328,958
Provision for Loan Loss             114,327      100,000
Noninterest Income                  841,747      795,408
Noninterest Expense               4,074,041    5,386,356
Income Before Income Taxes        1,755,521      638,010
Income Taxes                        605,215      230,000
Net Income                        1,150,306      408,010


Per Common Share
Basic Earnings                   $     1.53   $     0.54
Diluted Earnings                       1.45         0.51
Book Value                            35.86        33.62

                                       10
<PAGE>

RESULTS OF OPERATIONS

Net  income for the six month  period  ended June 30,  2003  totaled  $1,150,306
($1.53  basic and $1.45  diluted  earnings per share)  compared  with a total of
$408,010 ($.54 basic and $.51 diluted earnings per share) for the same period in
the prior year. This increase of $742,296 or 181.9% was caused  primarily by the
reduction in  noninterest  expense and increases in  noninterest  income,  these
positive  changes were partially  offset by the decrease in net interest  income
and an increase in provision for loan losses.

For the six month  period  ended June 30,  2003,  interest  income  declined  by
$532,565 or 6.4% to $7,842,180. This decline was caused by the continued decline
in interest rates  particularly  the declines in the Prime Rate, and one, three,
and five year U.S.  Treasury rates. Many loan products are priced based on these
rates.  This decline in interest  rates was partially  offset by higher  average
asset balances.

Interest  expense also  decreased to  $2,740,038  in the six month period ending
June 30, 2003 as compared to  $3,045,787  in the same period in the prior year a
decrease of $305,749 or 10.0%.  This  decrease was a reflection of the declining
interest rate  environment  experienced  during the last year.  Interest expense
also  declined as a result of the Bank's  increase  in the  average  balances of
noninterest bearing deposit accounts in the current period compared to the prior
year.  The  Bank's  ability  to  cut  interest  expense  was  inhibited  by  the
historically  low  rates  paid on  deposits  prior to the  current  quarter.  As
interest  rates have  continued to fall on loans and  investments,  the Bank was
unable to reduce interest expense by the same amount as interest income fell.

Provision  for loan losses  increased  from prior year  levels to $114,327  from
$100,000 for the six month period  ending June 30, 2003 and 2002,  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,  which more than offset a slight decline in
total  loan  balances.  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 $841,747 for the six month period  ending June
30, 2003,  an increase of $46,339 or 5.8% over the prior year total of $795,408.
Loan  appraisal,  credit,  and  miscellaneous  charges  increased  by $41,631 to
$129,979.  Net gain on sale of loans also  increased to $364,690  from the prior
year total of $207,982,  an increase of $156,708 or 75.4%.  These increases were
caused  by the high  volume  of loan  originations,  caused  by  lower  mortgage
interest  rates.  Income from service  charges  declined  from the prior year to
$338,824  from the prior year total of  $485,369 a decline of $146,545 or 30.2%.
This decline was caused by a write off of certain originated  mortgage servicing
rights and by an increased rate of  amortization  of these rights in the current
year.  The write off and  higher  rate of  amortization  were the  result of the
effect  of  lower  mortgage  loan  interest  rates  on our  originated  mortgage
servicing right ("OMSR") balances.  The lower rates had the effect of shortening
the projected  lives of the servicing  assets,  reducing their fair value.  This
reduction  in fair  value was  recognized  through a $95,000  reduction  in OMSR
balances and a corresponding reduction in mortgage servicing income. In addition
average  lives for all OMSR's  were  reduced  resulting  in higher  amortization
expense related to these rights. The higher amortization is reflected in a lower
servicing income. Other noninterest income was comparable from year to year.

Noninterest expense for the six month period decreased by $1,312,315 or 24.4% to
$4,074,041  from  $5,386,356  in the same period for the prior year.  Salary and
employee  benefits  expense  increased by 6.1% or 126,875,  to  $2,225,053  from
$2,098,178 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 decreased  slightly from $391,668,  to $371,847,  a
decrease  of  5.1%  attributable  to  certain  nonrecurring  expenses  in  2002.
Advertising  declined to $134,926 from $162,966,  a decline of $28,040 or 17.2%.
Advertising declined due to a reduction in certain sales efforts in anticipation
of being increased in the third and fourth  quarters.  Data  processing  expense
also  declined  to  $194,033  from a prior year  total of  $338,456 a decline of
$144,423 or 42.7%.  In 2002,  additional  expenses were incurred  related to the
systems conversion in May 2002. Depreciation of furniture fixtures and equipment
increased  to  $229,739  from the prior year total of  $221,196  an  increase of
$8,543 or 3.9%.  This increase was due to large  investments in equipment  added
during the prior year,  mostly  related to the  addition of new branches and new
equipment added for the 2002 system conversion. Telephone communications expense
declined

                                       11
<PAGE>

to $102,732 from  $193,380 in the prior year, a decline of $90,648 or 46.9%.  In
2002,  extensive testing of the systems for conversion required the use of phone
lines increasing costs. Also in 2003 cost control and efficiency  efforts by the
Bank helped to reduce costs.  Office supplies expense  decreased to $75,838 from
the prior year amount of $94,371,  a decline of $18,533 or 19.6%.  This  decline
was caused by  additional  supplies  expenses  incurred  in 2002  related to the
systems  conversion.  The provision for valuation  allowances on foreclosed real
estate  declined  from  $1,044,070  as of  June  30,  2003 to zero in 2003 as no
further  increases  to the  valuation  allowance  were  necessary.  ATM  related
expenses increased by $2,831 to $126,469 for the period ending June 30, 2003, an
increase  of 2.3% due to  higher  levels  of  activity  and  additional  offsite
machines.  Office equipment  expenses  decreased to $79,973 from 2002's level of
$124,544,  a  decrease  of  $44,571 or 35.8%.  This  decrease  was caused by the
retirement  of certain  equipment due to the systems  conversion in 2002.  Other
expenses declined to $533,431 from $593,919 a decline of $60,488 or 10.2%. These
expenses were lower based on certain cost control measures in 2003. Income taxes
increased to $605,215 or 34.5% of pretax  income in the current year compared to
$230,000 or 42.7% of pretax  income in the prior year.  The  decrease in the tax
rate was primarily attributable to an increase in certain tax exempt interest.

RESULTS OF OPERATIONS - SECOND QUARTER

The  Company  recorded  net income for the  second  quarter of 2003 of  $509,195
compared to a net loss for the same period in 2003 of $243,656. The increase was
the result of the factors  noted above  especially  the  provision for valuation
allowance in the prior year as well as certain data processing  conversion costs
in the prior year. In addition, noninterest income increased to $453,793 in 2003
an  increase  of $55,734 or 14.0% from the prior year total of  $398,059.  These
items were partially  offset by a decrease in net interest  income to $2,545,052
in 2003,  from  $2,711,347,  a decrease of $245,236 or 9.2%,  and an increase in
provision for loan losses to $108,941 from $30,000 an increase of 263.1%.

Net interest  income declined by 6.1% to $2,545,052 in 2003 from $2,711,347 as a
result of the continued decline in interest rates noted above. The provision for
loan  losses  increased  by 263.1% to  $108,941  in 2003  from  $30,000  in 2002
primarily  because of the  continued  concentration  of lending in higher credit
risk products. Loan appraisal,  credit and miscellaneous charges and net gain on
sale of loans held for sale  increased  by 519.5% and 125.8%,  to  $102,583  and
$237,595  respectively as a result of the lower interest rate environment  noted
earlier.  Service  charges  declined to  $110,489  from  $267,027,  a decline of
$156,538 or 58.6%, as a result of the write off and higher amortization  related
to the lower interest  rates and shorter lives of the servicing  assets as noted
above. Other income amounts were comparable.

Salary and employee expense increased to $1,095,727 from $1,035,309, an increase
of  $60,418  or 5.8% due to an  increased  average  salary  per  employee  and a
slightly higher number of employees.  Occupancy  expense  declined by $20,611 to
$203,530  from the prior  year's  total of $224,141 a decline of 9.2% due to the
nonrecurring  costs of 2002 noted above.  Advertising  expenses also declined by
$19,230 or 21.3% to $71,192,  this  decline  was the result of delaying  certain
advertising  expenses in 2003. Data processing expense decreased to $108,728,  a
decrease  of  $126,205  or 53.7%  over the prior year  total of  $234,933.  This
decrease reflects conversion and other expenses in the prior year.  Depreciation
of furniture,  fixtures and equipment also declined as many equipment items were
written off in the prior year.  These  expenses  decreased  by $63,358 or 35.2%.
Telephone  communications  also decreased to $63,656 or by 57.3% under the prior
year total of $149,192 due to expenses in testing and  installing  the core data
system in 2002.  ATM  expenses  decreased  by $5,138 or 7.0% to  $67,989  in the
current year due changes in ATM operations. Office supplies expense decreased to
$52,331  from $58,150 a decrease of $5,777 or 9.9% as prior year  expenses  were
increased  by the need to change some  supplies  prior to  conversion.  As noted
above,  in 2002 the Bank  established a valuation  allowance on foreclosed  real
estate,  no provision for this allowance was recorded in 2003.  Office equipment
expense was  similarly  reduced by the absence of  conversion  related  items in
2003. Other expense amounts were comparable.

FINANCIAL CONDITION

Assets

Total assets as of June 30, 2003 increased by $19,018,778 to  $301,192,473  from
the December 31, 2002 level of  $282,173,695.  Cash and due from banks decreased
by  $4,199,353,  or 40.6%  from  December  31,  2002's  total.

                                       12
<PAGE>

Interest-bearing deposits with banks decreased by $6,760,553 or 44.5% during the
period to $8,419,298 at June 30, 2003. Investment securities, including both the
available for sale and held to maturity  portfolios,  increased from $44,667,920
to $70,646,479 an increase of $25,978,559 or 58.2%. Increases were primarily the
result  of  additional  purchases  of  investments  using the  proceeds  of loan
prepayments,  additional short and long term  borrowings,  and the conversion of
interest bearing deposits to investments.

Loans held for sale  increased to  $1,658,000  from  $1,262,667  at December 31,
2001.  Additional loan information for prior years is presented in the Form 10-K
for the year ended  December 31, 2002.  The Bank's loan  portfolio  decreased by
$2,209,991  or  1.1%  during  the six  month  period  ending  June  30,  2003 to
$195,239,291  from  December  2002's  total of  $197,449,282.  The  decrease was
primarily the result of large amounts of loan prepayments on the Bank's existing
residential  first  mortgage  portfolio.  The Bank did increase its portfolio of
commercial  real estate loans in the six month period ending June 30, 2003,  but
these  increases  were  smaller  than the  decreases  in other parts of the loan
portfolio.  At June 30,  2003  the  Bank's  allowance  for  loan  losses  totals
$2,377,707  or 1.19% of loan balances as compared to $2,314,074 or 1.15% of loan
balances at December 31, 2002. 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.

Premises and equipment  decreased due to  depreciation  in the current  quarter.
Foreclosed  real estate  declined to $706,014 at June 30, 2003 from  $716,014 at
December  31,  2002 due to partial  settlement  of one  property.  Other  assets
increased to $8,550,133  from $3,025,431 at December 31, 2002. This increase was
primarily the result of the Bank investing  $5,000,000 in certain life insurance
instruments which will provide  supplemental  benefits to certain key executives
and provide additional interest income to the Bank.

Liabilities

Deposit balances  increased by $10,215,466 or 5.0% for the six months ended June
30, 2003. This increase was primarily in interest bearing  deposits.  Management
believes  that  ongoing  stock market  volatility  has made bank  deposits  more
attractive to the general public. Short term borrowings increased to $5,919,120,
an increase of $5,166,822,  while long term borrowings  increased by $4,896,740.
Proceeds of these borrowings were used to purchase investment securities.

Stockholders' Equity

Stockholders'  equity increased  $93,017 or .35% to $26,965,782 at June 30, 2003
compared to  $26,872,765  at December 31, 2002.  This reflects the net income of
$1,150,305 for the six month period  partially offset by the $248,253 decline in
accumulated other  comprehensive  income, and $422,361 in cash dividends.  Other
changes in equity  occurred as a result of using  $510,293  for the purchase and
retirement  of shares,  the exercise of stock  options of $31,158,  and activity
related to the ESOP shares of $92,459.  Book value on a per share basis,  $35.86
at June 30, 2003,  as compared to $35.37 at December  31,  2002,  reflects a .8%
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

                                       13
<PAGE>

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 45% of  consolidated  Bank  assets on a line of credit
available from the FHLB. As of June 30, 2003, the maximum  available  under this
line would be $136  million,  while  current  outstanding  advances  totaled $53
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 June 30, 2003, the
Bank's tangible,  leverage and risk-based  capital ratios were 8.49%,  8.48% and
12.84%, 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  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.

                                       14
<PAGE>

ITEM 3 Quantitative and qualitative Disclosure about Market Risk

Not applicable.

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 - CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 7, 2003,  the Company held its Annual Meeting of  Shareholders.  The only
matter  voted on was the  election  of two  directors.  Set forth  below are the
results of the voting in the election of directors.

  Nominee                          For                             Against
  -------                          ---                             -------
  Herbert N. Redmond             504,046                           27,704
  Joseph Slater                  524,761                            6,989

There were no broker non-votes.  The terms of directors Michael L. Middleton, C.
Marie  Brown,  Louis P.  Jenkins,  Jr. and H. Beaman Smith  continued  after the
meeting.

ITEM 5 - OTHER INFORMATION

Not applicable.

                                       15
<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits- The following exhibits are being filed with this Form 10-Q
   Exhibit 31  Certifications pursuant to Rule 13a-14(a) of the
                  Exchange Act
   Exhibit 32  Certifications pursuant to Section 1350

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

                                       16
<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 12, 2003                  By:/s/ Michael L. Middleton
                                           -------------------------------------
                                           Michael L. Middleton, President
                                           and Chairman of the Board





Date:  August 12, 2003                 By: /s/ William J. Pasenelli
                                           -------------------------------------
                                           William J. Pasenelli, Executive
                                           Vice President and Chief
                                           Financial Officer





                                       17