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, 2004

                                       OR

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

                    For the transition period from to ______


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

                        Tri-County Financial Corporation
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

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

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


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

As of July 30, 2004,  the registrant  had  outstanding  773,762 shares of Common
Stock.

                                       1
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION

FORM 10-Q
INDEX
-----

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION                                                                                 Page
<S>                                                                                                             <C>
   Item 1 - Financial Statements (Unaudited)

     Consolidated Balance Sheets - June 30, 2004
       and December 31, 2003                                                                                    3

     Consolidated Statements of Income and Comprehensive Income -
       Three and Six Months Ended June 30, 2004 and 2003                                                        4-5

     Consolidated Statements of Cash Flows - Six Months
       Ended June 30, 2004 and 2003                                                                             6 -7

     Notes to Consolidated Financial Statements                                                                 8 -9

Item 2- Management's Discussion and Analysis of Financial Condition                                          10-17
       and Results of Operations
Item 3 - Quantitative and Qualitative Disclosure about Market Risk                                             17
Item 4 - Controls and Procedures                                                                               17

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                                                                     17
Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                      17
Item 3 - Defaults Upon Senior Securities                                                                       18
Item 4 - Submission of Matters to a Vote of Security Holders                                                   18
Item 5 - Other Information                                                                                     19
Item 6 - Exhibits and Reports on Form 8-K                                                                      19


SIGNATURES                                                                                                     20

</TABLE>


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS JUNE 30, 2004  AND DECEMBER 31, 2003 (Unaudited)
<TABLE>
<CAPTION>

                                                   ASSETS
                                                                            June 30, 2004  December 31, 2003
                                                                            -------------  -----------------
<S>                                                                             <C>             <C>
Cash and due from banks                                                    $   5,509,244    $   2,319,300
Interest-bearing deposits with banks                                           8,875,581        8,912,332
Federal Funds sold                                                               517,127          938,166
Investment securities available for sale - at fair value                      25,284,673       38,290,074
Investment securities held to maturity - at amortized cost                    76,626,553       61,605,175
Stock in Federal Home Loan Bank and Federal Reserve Bank - at cost             5,562,400        4,776,850
Loans held for sale                                                                   --          474,880
Loans receivable - net of allowance for loan losses
 of $2,665,110 and $2,572,799 respectively                                   256,172,187      217,740,153
Premises and equipment, net                                                    5,698,799        5,580,189
Foreclosed real estate                                                           534,561          706,764
Accrued interest receivable                                                    1,401,183        1,318,318
Investment in bank owned life insurance                                        6,069,240        5,921,544
Other assets                                                                   3,018,848        3,146,247
                                                                           -------------    -------------
Total assets                                                               $ 395,270,396    $ 351,729,992
                                                                           =============    =============

                                    LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Noninterest-bearing deposits                                               $  34,857,530    $  29,270,007
Interest-bearing deposits                                                    220,189,887      198,284,561
                                                                           -------------    -------------
Total deposits                                                               255,047,417      227,554,568
Short-term borrowings                                                         36,812,298       31,191,285
Long-term debt                                                                72,947,302       63,051,176
Accrued expenses and other liabilities                                         1,818,542        2,021,053
                                                                           -------------    -------------
Total liabilities                                                            366,625,559      323,818,082
                                                                           -------------    -------------

STOCKHOLDERS' EQUITY:
Common stock - par value $.01; authorized - 15,000,000 shares;
issued - 768,556 and 753,278 shares, respectively                                  7,685            7,533
Additional Paid in Capital                                                     8,210,710        7,975,036
Retained earnings                                                             21,021,934       20,071,630
Accumulated other comprehensive loss                                            (501,656)          (3,130)
Unearned ESOP shares                                                             (93,836)        (139,159)
                                                                           -------------    -------------
Total stockholders' equity                                                    28,644,837       27,911,910
                                                                           -------------    -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 395,270,396    $ 351,729,992
                                                                           =============    =============
</TABLE>

See notes to consolidated financial statements

                                       3
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                      THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                           JUNE 30,                      JUNE 30,
                                                                  --------------------------    --------------------------
                                                                      2004          2003         2004          2003
<S>                                                                    <C>          <C>            <C>          <C>
INTEREST INCOME:
   Interest and fees on loans                                     $ 3,819,949    $ 3,303,851    $ 7,366,494   $ 6,654,825
   Taxable interest and dividends on investment securites             824,510        604,401      1,867,160     1,135,174
   Interest on bank deposits                                            4,159         15,544          8,775        52,181
                                                                  -----------    -----------    -----------   -----------
        Total interest income                                       4,648,618      3,923,796      9,242,429     7,842,180
                                                                  -----------    -----------    -----------   -----------
INTEREST EXPENSE:
   Interest on deposits                                               747,742        722,708      1,447,912     1,470,135
   Interest on long term debt                                         753,674        655,555      1,539,171     1,268,656
   Interest on short term borrowings                                  100,619            481        179,241         1,247
                                                                  -----------    -----------    -----------   -----------
        Total interest expense                                      1,602,035      1,378,744      3,166,324     2,740,038
                                                                  -----------    -----------    -----------   -----------
NET INTEREST INCOME                                                 3,046,583      2,545,052      6,076,105     5,102,142
PROVISION FOR LOAN LOSSES                                              13,772        108,941         83,974       114,327
                                                                  -----------    -----------    -----------   -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                 3,032,811      2,436,111      5,992,131     4,987,815
                                                                  -----------    -----------    -----------   -----------
NONINTEREST INCOME:
   Loan appraisal, credit, and miscellaneous charges                   81,748        102,583        147,952       129,979
   Net gain on sale of loans held for sale                                 --        237,595         21,404       364,690
   Income from bank owned life insurance                               73,848         53,247        147,696       127,095
   Service charges                                                    305,933         57,242        540,705       211,729
   Loss on the sale of available for sale investment securities       (27,504)                      (27,504)
   Other income                                                            --          3,126             --         8,254
                                                                  -----------    -----------    -----------   -----------
        Total noninterest income                                      434,025        453,793        830,253       841,747
                                                                  -----------    -----------    -----------   -----------
</TABLE>

See notes to consolidated financial statements




                                       4
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
continued
<TABLE>
<CAPTION>
                                                                      Three Months Ended           Six Months Ended
                                                                           June 30,                    June 30,
                                                                      ------------------         ----------------------
                                                                      2004          2003         2004           2003
<S>                                                                    <C>          <C>          <C>             <C>
NONINTEREST EXPENSE:
    Salary and employee benefits                                  1,317,544      1,095,727     2,615,924      2,225,053
    Occupancy expense                                               208,267        203,530       390,140        371,847
    Advertising                                                      97,691         71,192       240,230        134,926
    Data processing expense                                         137,222        108,728       289,220        194,033
    Depreciation of furniture, fixtures, and equipment               93,000        114,839       180,200        229,739
    Telephone communications                                         19,480         63,656        57,455        102,732
    ATM expenses                                                     83,775         67,989       163,873        126,469
    Office supplies                                                  22,346         52,373        61,765         75,838
    Valuation allowance on foreclosed real estate                    33,376             --       147,203             --
    Office equipment expense                                         19,294         34,631        45,685         79,973
    Other                                                           285,516        312,829       521,539        533,431
                                                                -----------    -----------   -----------    -----------
     Total noninterest expense                                    2,317,511      2,125,494     4,713,234      4,074,041
                                                                -----------    -----------   -----------    -----------

INCOME BEFORE INCOME TAXES                                        1,149,325        764,410     2,109,150      1,755,521
INCOME TAXES                                                        345,749        255,215       416,376        605,215
                                                                -----------    -----------   -----------    -----------
NET INCOME                                                          803,576        509,195     1,692,774      1,150,306
OTHER COMPREHENSIVE INCOME, NET OF TAX
     Net unrealized holding gains (losses) arising during the
      period                                                       (564,678)       110,800      (501,656)      (248,253)
                                                                -----------    -----------   -----------    -----------
COMPREHENSIVE INCOME                                            $   238,898    $   619,995   $ 1,191,118    $   902,053
                                                                ===========    ===========   ===========    ===========
EARNINGS PER SHARE
   Basic                                                        $      1.05    $      0.68   $      2.22    $      1.53
   Diluted                                                             1.01           0.65          2.12           1.45
</TABLE>


See notes to consolidated financial statements



                                       5

<PAGE>



TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         JUNE 30,
                                                                 --------------------------
                                                                   2004            2003
<S>                                                                 <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                       1,692,772       1,150,306
Adjustments to reconcile net income to net
  cash used by operating activities:
  Provision for loan losses                                         83,974         114,327
  Depreciation and amortization                                    293,898         300,600
  Net amortization of premium/discount on investment
   securities                                                      459,221         379,458
  Decrease in federal funds sold                                   421,039              --
  Deferred income tax benefit                                     (135,000)        (29,000)
  Increase in accrued interest receivable                          (82,865)       (106,228)
  Increase (decrease) in deferred loan fees                         28,617         (20,485)
  Decrease in accounts payable, accrued expenses, and other
   liabilities                                                    (202,511)     (1,353,267)
  Increase in other assets                                         371,520         345,004
  Origination of loans held for sale                                    --     (11,008,750)
  Gain on sales of loans held for sale                             (21,404)       (364,690)
  Valuation allowance on foreclosed real estate                    147,203        (103,553)
  Proceeds from sale of loans held for sale                        496,284      10,978,107
                                                              ------------    ------------
          Net cash provided by operating activities              3,552,748         281,829
                                                              ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net decrease in interest-bearing deposits with banks              36,751       6,760,553
  Purchase of investment securities available for sale         (23,764,267)    (63,958,171)
  Proceeds from sale, redemption or principal payments
    of investment securities available for sale                 35,625,436      37,559,698
  Purchase of investment securities held to maturity           (31,876,050)     (1,188,207)
  Gain/loss on investments                                          27,507              --
  Proceeds from maturities or principal payments
    of investment securities held to maturity                   16,756,831         839,705
  Net purchase of FHLB and FRB stock                              (785,550)       (390,900)
  Loans originated or acquired                                (100,578,289)    (76,227,936)
  Principal collected on loans                                  62,033,664      78,344,085
  Purchase of Bank owned life insurance policies                                (5,700,000)
  Purchase of premises and equipment                              (412,508)             --
  Proceeds from foreclosed real estate                              25,000          10,000
                                                              ------------    ------------
      Net cash (used) provided in investing activities         (42,911,475)    (23,951,173)
                                                              ------------    ------------
</TABLE>



                                       6
<PAGE>

TRI-COUNTY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
continued
<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED
                                                                   JUNE 30,
                                                                   --------
                                                             2004           2003
<S>                                                           <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in deposits                                27,492,849     10,215,466
  Proceeds from long-term borrowings                      20,000,000      5,000,000
  Payments of long-term borrowings                       (10,103,874)      (103,260)
  Net increase in other borrowed funds                     5,621,013      5,166,822
  Exercise of stock options                                  207,186         31,158
  Net change in unearned ESOP shares                          74,011         92,459
  Dividends paid                                            (541,633)      (422,361)
  Redemption of common stock                                (200,881)      (510,293)
                                                         -----------    -----------
      Net cash provided (used) by financing activities    42,548,671     19,469,991
                                                         -----------    -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           3,189,944     (4,199,353)
CASH AND CASH EQUIVALENTS - JANUARY 1                      2,319,300     10,356,932
                                                         -----------    -----------
CASH AND CASH EQUIVALENTS - JUNE 30                        5,509,244      6,157,579
                                                         ===========    ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the six months for:
Interest                                                   3,282,864      2,721,647
                                                         ===========    ===========
Income taxes                                                 367,500      1,130,369
                                                         ===========    ===========

</TABLE>

See notes to consolidated financial statements





                                       7


<PAGE>

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

1.   BASIS OF PRESENTATION

     General - The  consolidated  financial  statements of Tri-County  Financial
     Corporation (the "Company") and its wholly owned subsidiary, Community Bank
     of Tri-County  (the "Bank")  included herein are unaudited;  however,  they
     reflect all adjustments  consisting only of normal recurring accruals that,
     in the opinion of  Management,  are necessary to present fairly the results
     for  the  periods  presented.  Certain  information  and  note  disclosures
     normally  included in  financial  statements  prepared in  accordance  with
     accounting  principles  generally  accepted in the United States of America
     have been condensed or omitted pursuant to the rules and regulations of the
     Securities  and  Exchange   Commission.   The  Company  believes  that  the
     disclosures are adequate to make the information  presented not misleading.
     The  balances  as of  December  31,  2003 have been  derived  from  audited
     financial  statements.  There  have  been  no  significant  changes  to the
     Company's  accounting  policies as disclosed in the 2003 Annual Report. The
     results of operations  for the three and six months ended June 30, 2004 are
     not necessarily  indicative of the results of operations to be expected for
     the remainder of the year.  Certain  previously  reported amounts have been
     restated to conform to the 2004 presentation.

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

2.   NATURE OF BUSINESS

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


3.   INCOME TAXES

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


4.   EARNINGS PER SHARE

     Earnings  per  common  share are  computed  by  dividing  net income by the
     weighted  average  number of common shares  outstanding  during the period.
     Diluted net income per common  share is computed by dividing  net income by
     the weighted average number of common shares outstanding during the period,
     including any potential dilutive common shares outstanding, such as options
     and warrants.  As of June 30, 2004,  there were 6,300 shares  excluded from
     the  diluted  net income per share  computation  because  the option  price
     exceeded  the average  market  price and  therefore,  their effect would be
     anti-dilutive.  Basic and diluted  earnings per share,  have been  computed
     based on  weighted-average  common and common equivalent shares outstanding
     as follows:
<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                                    JUNE 30,                     JUNE 30,
                                            --------------------------    ------------------------
                                                 2004         2003             2004        2003
       <S>                                        <C>          <C>              <C>         <C>
       Basic                                   768,807        745,267        762,593      752,690
       Diluted                                 797,996        786,774        797,455      795,236
</TABLE>

                                       8
<PAGE>

5.   STOCK-BASED COMPENSATION

     The  Company has adopted  the  disclosure-only  provisions  of SFAS No. 123
     "Accounting for Stock-Based  Compensation" and SFAS No. 148 "Accounting for
     Stock-Based Compensation-Transition and Disclosure", but applies Accounting
     Principles Board Opinion No. 25 and related  interpretations  in accounting
     for its Plan. No compensation expense related to stock options was recorded
     during  the three  and six  months  ended  June 30,  2004 and 2003.  If the
     Company had elected to recognize  compensation  cost based on fair value at
     the grant dates for awards under the its stock option plans consistent with
     the method  prescribed  by SFAS No. 123,  net income and earnings per share
     would have been  changed to the pro forma  amounts as follows for the three
     and six months ended June 30.
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                     JUNE 30,                           JUNE 30,
                                                             --------------------------         -------------------------
                                                                2004            2003                2004           2003
                                                                ----            ----                ----           ----
       <S>                                                      <C>              <C>                 <C>            <C>
      Net Income as reported                                 $ 803,576        $509,195          $1,692,774     $1,150,306

      Less pro forma stock based compensation
      Expense determined under the fair
      value method, net of tax effects.                         163,579         173,261             223,579        173,261
                                                              ---------        --------         -----------      ---------
      Pro forma net income                                    $ 639,997        $335,934         $ 1,469,195      $ 977,045
                                                              =========        ========         ===========      ========
      Net Income per share
           Basic - as reported                                 $  1.05          $ 0.68             $  2.22         $ 1.53
           Basic - pro forma                                   $  0.83          $ 0.45             $  1.91         $ 1.30
           Diluted - as reported                               $  1.01          $ 0.65             $  2.12         $ 1.45
           Diluted - pro forma                                 $  0.80          $ 0.43             $  1.84         $ 1.23
</TABLE>

6.   NEW ACCOUNTING STANDARDS


     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
     Variable  Interest  Entities"  ("Interpretation  No. 46"),  which  explains
     identification  of variable interest entities and the assessment of whether
     to consolidate  those  entities.  Interpretation  No. 46 requires  existing
     unconsolidated  variable  interest  entities  to be  consolidated  by their
     primary  beneficiaries  if the entities do not  effectively  disperse risks
     among the involved  parties.  The provisions of  Interpretation  No. 46 are
     effective  for all  financial  statements  issued after January 1, 2003. As
     noted in its discussion of operations and financial conditions, the Company
     completed an offering of trust preferred  securities on July 22, 2004. This
     offering  would  fall  under the  provisions  of this  interpretation.  The
     Company is evaluating its accounting treatment for this entity.

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

                                       9
<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.

The Company does not undertake - and specifically  disclaims any obligation - to
publicly  release  the result of any  revisions  that may be made to any forward
looking  statement  to reflect  events or  circumstances  after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.

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 seven
branches  located in  Waldorf,  Bryans  Road,  Dunkirk,  Leonardtown,  La Plata,
Charlotte  Hall,  and  California,  Maryland.  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, construction, and commercial
mortgage loans. The Bank makes commercial loans including  secured and unsecured
loans.  The Bank is a member of the Federal  Reserve and Federal  Home Loan Bank
("FHLB") Systems. The Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC") provides deposit insurance coverage up to
applicable limits.

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

Management recognizes that the shift in composition of the Bank's loan portfolio
will tend to increase its exposure to credit  losses.  The Bank has continued to
evaluate  its  allowance  for  loan  losses  and  the  associated  provision  to
compensate  for the  increased  risk.  Any  evaluation of the allowance for loan
losses is inherently inexact and reflects management's expectations as to future
economic  conditions  in the  Southern  Maryland  area  as  well  as  individual
borrower's circumstances. Management believes that its allowance for loan losses
is adequate. For further information on the Bank's allowance for loan losses see
the discussion in the financial  condition  section of this 10-Q, as well as the
relevant  discussions  in the Form 10-K and  annual  report  for the year  ended
December 31, 2003.

                                       10
<PAGE>

In the last several quarters, the national economy has recovered fitfully from a
mild  recession.  Our local  economy  has  remained  strong in  relation  to the
national and statewide economy. In the current quarter, this recovery is gaining
strength and appears to be solidly under way.  Locally,  the housing  market has
appreciated strongly in the last several quarters in reaction to continued lower
interest  rates and a strong local job market.  National job markets also appear
to be  strengthening.  These economic  factors have led to an overall  consensus
that the  recovery is now solid and that the Federal  Reserve  will likely raise
rates again during the next several  quarters.  The Federal  Reserve  raised the
discount  rate on June 30, 2004 and this change was reflected in a change to the
prime rate in July of 2004. A series of sharp rate  increases  could  negatively
impact the Bank's  financial  performance.  This would be  particularly  true if
these  rate  increases  were more  rapid and  sustained  than the  corresponding
increases in the Bank's  yield on assets.  Other  negative  effects of a sharply
higher interest rate  environment  could include a drop in real estate values. A
large  sustained drop in real estate values would  negatively  impact the Bank's
collateral on many of our loans and could lead to asset quality problems.

During the last two years,  loan  customers have reacted to lower interest rates
by  continuing  to  refinance  higher rate loans.  This  refinance  activity has
decreased the interest  rates earned on loans.  In the last quarter  longer term
rates  have  increased  slightly.  These  increases  will  have  the  effect  of
decreasing refinance activity.  If rates continue to rise, the Bank may also see
an increase in the popularity of adjustable  rate  mortgages in the  residential
housing market.  Higher rates will also decrease prepayments from our investment
portfolio. The Bank has been able to increase net interest income from the prior
year through growth in its balance sheet which offset a lower  interest  margin.
Noninterest income decreased slightly during the period, lower gains on the sale
of loans and  losses on the sale of  investments  were  mostly  offset by higher
service  charge,  loan fee, and Bank Owned Life  Insurance  income.  Noninterest
expense  increased  primarily  from increases in the Bank's size. An increase in
the  valuation  allowance on  foreclosed  real estate also  increased  expenses.
Finally,  the  effective  tax  rate  paid by the  Company  decreased  due to the
donation of certain foreclosed property.
<TABLE>
<CAPTION>

SELECTED FINANCIAL DATA
                                                                 SIX MONTHS ENDED
                                                                     JUNE 30,
                                                           -----------------------------
                                                               2004              2003
                                                               ----              ----
<S>                                                             <C>              <C>
Condensed Income Statement
Interest Income                                            $ 9,242,429       $ 7,842,180
Interest Expense                                             3,166,324         2,740,038
Net Interest Income                                          6,076,105         5,102,142
Provision for Loan Loss                                         83,974           114,327
Noninterest Income                                             830,253           841,747
Noninterest Expense                                          4,713,234         4,074,041
Income Before Income Taxes                                   2,109,150         1,755,521
Income Taxes                                                   416,376           605,215
Net Income                                                   1,692,774         1,150,306


Per Common Share
Basic Earnings                                               $    2.22         $    1.53
Diluted Earnings                                                  2.12              1.45
Book Value                                                       37.27             35.86
</TABLE>

RESULTS OF OPERATIONS - YEAR TO DATE

Net income for the six month period ended June 30, 2004 totaled $1,692,774
($2.22 basic and $2.12 diluted earnings per share) compared with net income of
$1,150,306 ($1.53 basic and $1.45 diluted earnings per

                                       11
<PAGE>

share) for the same period in the prior year. This increase of $542,468 or 47.2%
was caused by an increase in net interest  income,  a reduction in provision for
loan losses,  and a reduction in income tax expense,  which was partially offset
by an increase in  noninterest  expenses  and a slight  decrease in  noninterest
income. For the six month period ended June 30, 2004,  interest income increased
by $1,400,249  or 17.9% to  $9,242,429.  The increase was due to higher  average
interest  earning  asset  balances,  including  investments  and loans which was
partially  offset  by  lower  average  rates on  loans.  Interest  expense  also
increased to $3,166,324 in the six month period ending June 30, 2004 as compared
to  $2,740,038  in the same  period in the prior year an increase of $426,286 or
15.6%.  The increase was the result of higher  average  balances which more than
offset  lower  average  rates  paid on  advances.  Rates on  deposits  increased
slightly from the prior period.  The changes in average interest rates reflected
several  factors  including  a slight  increase  in short term  interest  rates,
changes in the composition of borrowings,  and continued  growth in certain loan
products.

Provision  for loan  losses  decreased  from prior year  levels to $83,974  from
$114,327 for the six month period  ending June 30, 2004 and 2003,  respectively.
The decrease was caused in by the Bank's continued low levels of delinquency and
charge offs which  lowered the Bank's  estimate of average  losses per dollar of
loan.  These decreases in loss estimates were partially  offset by higher ending
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  decreased  slightly  to $830,253  for the six month  period
ending June 30, 2004, a decrease of $11,494 or 1.4% from the prior year total of
$841,747. Loan appraisal, credit, and miscellaneous charges increased by $17,973
to $147,952.  This increase was offset by a decrease in gains from selling loans
which decreased to $21,404 from $364,690,  a decrease of $343,286 or 94.1%. This
change  reflects the Bank's  preference to keep a higher  proportion of loans in
its  portfolio  because the Bnak felt that the  immediate  profits  from selling
loans did not  sufficiently  offset the loss of future interest income caused by
the sale.  The Bank  also  recorded  $147,696  in income  from Bank  Owned  Life
Insurance  ("BOLI"),  compared to  $127,095  in 2003,  an increase of $20,601 or
16.2%.  This  increase was the result of a BOLI purchase at the end of the first
quarter of 2003.  Service charges increased by $328,976 or 155.4% form the prior
year amount.  The  increase  was due to strong  increases in deposits as well as
increases in sales of nondeposit  products.  In the prior year,  service charges
were also  reduced by a write-down  of OMSR's.  A loss of $27,504 on the sale of
certain  short term  securities  was recorded in the current  year. In the prior
year,  other  income  resulted  from the  rental of certain  properties,  in the
current year no property was rented to others.

Noninterest  expense for the six month period  ended June 30, 2004  increased by
$639,193 or 15.7% to $4,713,234 from $4,074,041 in the same period for the prior
year.  Salary  and  employee  benefits  increased  by 17.6% to  $2,615,924  from
$2,225,053 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.  Benefits costs also increased due to increases in insurance  costs as
well as the  addition of certain  benefits.  Occupancy  expense  increased  from
$371,847  to  $390,140,  an  increase of 4.9% due to  additional  locations  and
increased  costs at certain  locations.  Advertising  increased to $240,230 from
$134,926,  an increase of $105,304  or 78.1%.  Advertising  increased  due to an
increase in certain sales efforts. Data processing expense increased to $289,220
from a prior year  total of  $194,033  an  increase  of  $95,187 or 49.1%.  This
increase  was due to  certain  nonrecurring  expenses  to further  improve  data
processing   capability.   Depreciation  of  furniture  fixtures  and  equipment
decreased  to  $180,200  from the prior  year total of  $229,739  a decrease  of
$49,539 or 21.6%.  This  decrease  was the result of certain  assets being fully
depreciated  at the end of 2003.  Telephone  communications  declined to $57,455
from  $102,732 in the prior year,  a decline of $45,277 or 44.1%.  This  decline
reflected a change in service  providers  which was offset by higher usage.  ATM
related expenses increased by $37,404 to $163,873 for the period ending June 30,
2004,  an increase of 29.6% due to higher  levels of activity,  more ATM's,  and
certain  price  increases  by ATM service  providers.  Office  supplies  expense
decreased  to  $61,765  from the prior year  amount of  $75,838,  a decrease  of
$14,073 or 18.6%. Prior year totals were increased by several initiatives in the
second  quarter of 2003.  The provision  for valuation  allowances on foreclosed
real estate  increased  to  $147,203 as of June 30, 2004 from none in 2003.  The
increase in 2004 was due to an adverse zoning

                                       12
<PAGE>

restriction  placed on a foreclosed  property.  This zoning changed the value of
the  property.  The  Bank is  appealing  this  decision,  however  the  Bank has
increased the valuation allowance pending this appeal. Office equipment expenses
decreased  to $45,685  from 2003's  level of  $79,973,  a decrease of $34,288 or
42.9%.  This decrease was caused by the retirement of certain  equipment.  Other
expenses  decreased  to  $521,539  from  $533,431 a decrease of $11,892 or 2.2%,
reflecting  some small cost  reductions.  Income taxes  decreased to $416,376 or
19.7% of pretax  income in the  current  year  compared  to $605,215 or 34.5% of
pretax  income in the prior year.  The  decrease  in the tax rate was  primarily
attributable to the  contribution of a foreclosed  property to an  environmental
organization which generated a current income tax deduction.

RESULTS OF OPERATIONS - SECOND QUARTER

The  Company  recorded  net income for the  second  quarter of 2004 of  $803,576
compared to $509,195 for the same period in 2003. The increase was the result of
an  increase in net  interest  and  noninterest  income  partially  offset by an
increase  in  noninterest  expense  compared  to the same  period  in 2003.  Net
interest  income  increased by 19.7% to $3,046,583 in 2003 from  $2,545,052 as a
result of increased  asset size offset by a slightly lower net interest  margin.
The  provision  for loan  losses  decreased  by 87.4% to  $13,772  in 2004  from
$108,941 in 2003 due to continued low loan write-offs which lowered the estimate
of  loan  losses  present  in  our  portfolio.   Loan   appraisal,   credit  and
miscellaneous  charges  decreased  by  $20,835  or  20.3%  to  $81,748  due to a
continued  trend in the market  toward low or no fee loans.  Gain on the sale of
mortgage loans  decreased from $237,595 to nothing because the Bank has not sold
loans in the current  quarter.  Service charges in 2003 were lower than in 2004,
due to write-offs of originated  mortgage servicing rights in 2003. Other income
amounts declined due to a decline in rental income.

Salary and employee expense increased to $1,317,544 from $1,095,727, an increase
of $221,817 or 20.2% due to an increased  average  salary per  employee,  higher
number of employees, and the addition of certain benefits. Occupancy expense was
comparable to the prior year. Advertising expenses increased by $26,499 or 37.2%
to $97,691,  this  increase  was the result of  delaying of certain  advertising
efforts in 2003. Data processing  expense increased to $137,222,  an increase of
$28,494 or 26.2% over the prior year total of $108,728.  The  increase  reflects
the addition of certain  capabilities such as internet banking in the past year.
Depreciation of furniture, fixtures and equipment declined due to the write down
of large  amounts of equipment in the prior year.  These  expenses  decreased by
$21,839 or 19.0%. Telephone communications also decreased to $19,480 or by 69.4%
from $63,656 due to changes in phone service  providers.  ATM expenses increased
by  $15,786  or 23.2% to  $83,775  in the  current  year due to  changes  in ATM
operations. Office supplies expense decreased to $22,346 from $52,373 a decrease
of $30,027 or 57.3% as prior year expenses were  increased by the need to change
some supplies in connection with the  introduction of internet  banking.  Office
equipment and other expense was similarly  reduced by the  retirement of certain
equipment.  The  provision for  valuation  allowance on  foreclosed  real estate
increased  to $33,376 in 2004  based on the write  down of certain  property  in
2004. Other expenses  declined by 8.7% The income tax rate was 30.1% compared to
33.4% for the same period in the prior  year.  This was caused by an increase in
nontaxable income.

FINANCIAL CONDITION

Assets

Total assets as of June 30, 2004 increased by $43,540,404 to  $395,270,396  from
the December 31, 2003 level of  $351,729,992.  Cash and due from banks increased
by  $3,189,944  or 137.5%  from  December  31,  2003's  total.  Interest-bearing
deposits with banks  decreased by $36,751 or .4% during the period to $8,875,581
at June 30, 2004.  Federal  funds sold  declined to $517,127 or by $421,039 from
the December 31, 2003 total of $938,166.  Investment securities,  including both
the  available  for  sale  and  held  to  maturity  portfolios,  increased  from
$99,895,249 to  $101,911,226  an increase of $2,015,977 or 2.0%.  Increases were
primarily the result of additional  purchases of investments  and the conversion
of Fed funds sold and interest  bearing  deposits to  investments.  Stock in the
Federal  Home Loan Bank and Federal  Reserve  Banks  increased  due to increased
borrowing  from the Federal Home Loan Bank system.  Loans held for sale declined
to nothing from  $474,880 at December  31, 2003.  This decline was caused by the

                                       13
<PAGE>

Bank's  decision to keep most of its current loan  production in its  portfolio.
The Bank's loan portfolio increased by $38,432,034 or 17.7% during the six month
period  ending June 30,  2004 to  $256,172,187  from  December  2003's  total of
$217,740,153.  The  increase  was  primarily  the result of an  increase  in its
portfolio of  commercial  real estate  loans.  The increase in  commercial  real
estate lending is a reflection of the strong local economy and continuing  sales
efforts by the Bank in this area. At June 30, 2004 the Bank's allowance for loan
losses totals  $2,665,110 or 1.03% of loan balances as compared to $2,572,799 or
1.16% of loan balances at December 31, 2003.  Management's  determination of the
adequacy of the  allowance is based on a periodic  evaluation  of the  portfolio
with  consideration  given to the  overall  loss  experience;  current  economic
conditions;  volume,  growth and  composition of the loan  portfolio;  financial
condition of the  borrowers;  and other relevant  factors that, in  management's
judgment,  warrant  recognition in providing an adequate  allowance.  Management
believes that the allowance is adequate.  Additional loan  information for prior
years is  presented in the Form 10-K for the year ended  December 31, 2003.  The
following  tables set forth the  composition of the Bank's loan  portfolio,  the
activity in the Bank's  allowance  for loan losses,  and  information  about the
Bank's nonperforming loans for the periods indicated:
<TABLE>
<CAPTION>

Loan Portfolio                                     June 30,                   December 31,
                                                     2004                         2003
                                          -------------------------   --------------------------
                                              Amount             %        Amount             %
                                              ------            ---       ------            ---
<S>                                             <C>             <C>        <C>              <C>
Real Estate Loans
  Commercial                              $ 113,141,635        43.60% $  93,824,812       42.46%
  Residential first mortgage                 51,394,409        19.80%    42,971,076       19.45%
  Construction and land development          21,422,608         8.25%    19,598,992        8.87%
  Home equity and second mortgage            22,265,518         8.58%    19,561,771        8.85%
Commercial loans                             47,391,119        18.26%    40,909,132       18.51%
Consumer loans                                3,900,381         1.50%     4,096,926        1.85%
                                          -------------       ------  -------------      ------
    Total loans                             259,515,670       100.00%   220,962,709      100.00%
  Less:  Deferred loan fees                     678,373         0.26%       649,756        0.29%
        Allowance for loan losses             2,665,110         1.03%     2,572,799        1.16%
                                          -------------       ------  -------------      ------
    Loans receivable net                  $ 256,172,187               $ 217,740,154
                                          -------------               -------------
</TABLE>

<TABLE>
<CAPTION>

Loan Loss Allowance
                                                         6 Months Ended                6 Months Ended
                                                          June 30, 2004                 June 30, 2003
                                                         --------------                --------------
<S>                                                           <C>                            <C>
Beginning Balance                                         $   2,572,799                $   2,314,074
Charge Offs                                                      (1,040)                     (51,233)
Recoveries                                                        9,377                          539
                                                          -------------                -------------
Net Charge offs                                                   8,337                      (50,694)
Additions charged to operations                                  83,974                      114,327
                                                                                       -------------
Balance at end of period                                  $   2,665,110                $   2,377,707
                                                          =============                =============

Ratio of net charge-offs during the period to
loans                                                            0.0004%                      0.0474%
                                                          =============                =============
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                      Balances as of        Balances as of
                                                      June 30, 2004        December 31, 2003
                                                      --------------       -----------------
<S>                                                        <C>                    <C>
Restructured Loans                                      $      --              $      --
                                                        ---------              ---------


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

Loans accounted for on a nonaccrual basis               $ 524,619              $ 379,544
                                                        ---------              ---------

Total non-performing loans                              $ 524,619              $ 379,544

Non-performing loans to total loans                         0.20%                  0.17%
                                                            ====                   ====

Allowance for loan losses to non-performing
loans                                                     508.01%                626.46%
                                                          ======                 ======
</TABLE>

Premises and  equipment  increased  due to the  renovation  of parts of the home
office  building.  These  improvements  were partially  offset by  depreciation.
Foreclosed  real estate  declined to $534,561 at June 30, 2004 from  $706,764 at
December  31, 2003 due to the  donation of one  property  and an increase in the
valuation allowance.


Liabilities

Deposit balances increased by $27,492,849 or 12.1% for the six months ended June
30, 2004.  This increase was primarily in interest  bearing  deposits  including
several types of interest bearing checking  accounts.  Management  believes that
ongoing stock market  volatility  combined with  questions  about certain Mutual
Fund  operations has made bank deposits more  attractive to the general  public.
The Bank has also increased  marketing  efforts for all deposit  products in the
current year.  Short term borrowings  increased to  $36,812,298,  an increase of
$5,621,013,  primarily  to serve as a funding  for loan  growth.  Long term debt
increased to  $72,947,302  at June 30, 2004,  from  $63,051,176  at December 31,
2003, to fund loan growth as noted above.

Stockholders' Equity

Stockholders'  equity increased $732,927 or 2.6% to $28,644,837 at June 30, 2004
compared to  $27,911,910  at December 31, 2003.  This reflects the net income of
$1,692,774  and the  exercise  of stock  options of  $207,185  for the six month
period.  These  increases in equity were offset by a cash  dividend of $541,633,
using  $200,882  to  purchase  shares in the open  market  and retire  them,  an
increase in the accumulated other  comprehensive loss of $501,656,  and activity
related to the ESOP shares of $74,011.  Book value on a per share basis,  $37.27
at June 30, 2004,  as compared to $37.05 at December  31,  2003,  reflects a .2%
increase, with a slight increase in outstanding shares, partially offsetting the
gains noted previously.

LIQUIDITY AND CAPITAL RESOURCES

On July 22,  2004,  the  Company  completed  its  offering  of  trust  preferred
securities.  The  securities  were issued by a special  purpose  business  trust
formed  by  the  Company  and  sold  in a  private  transaction  pursuant  to an
applicable  exemption  from  registration  under the Securities  Act of 1933, as
amended.  The Interest  rate on the trust  preferred  securities is variable and
adjustable  quarterly at 2.60% over LIBOR with an initial  rate of 4.29%.  These
securities  are  callable  at par at the  Company's  option  after 5 years.  The
Company  intends to use the  proceeds  of the  offering  for  general  corporate
purposes, to fund dividends to

                                       15
<PAGE>

shareholders  and for  contribution  to the  capital  of  Community  Bank of Tri
County.

The Company  currently has no business  other than that of the Bank and does not
currently have any material funding  commitments other than dividend payments on
the trust preferred securuties. 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,  short and long term
wholesale  borrowings,  and proceeds from maturing  investment  securities.  Its
principal  funding  commitments are for the origination or purchase of loans and
the payment of maturing  deposits.  Deposits are  considered a primary source of
funds supporting the Bank's lending and investment activities.

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

The Bank may borrow up to 35% of  consolidated  Bank  assets on a line of credit
available from the FHLB. As of June 30, 2004, the maximum  available  under this
line would be $138 million,  while  current  outstanding  advances  totaled $110
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, 2004, the
Bank's tangible,  leverage and risk-based  capital ratios were 7.53%,  9.75% and
10.67%, 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 No. 5, "Accounting for  Contingencies",  which requires
that losses be accrued when they are probable of occurring and estimable and (2)
SFAS No. 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

                                       16
<PAGE>

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

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

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

ITEM  1 -  LEGAL  PROCEEDINGS  - The  Company  is  not  involved  in  any  legal
proceedings, other than routine legal proceedings occurring in the normal course
of  business.  Such  routine  proceedings,  in the  aggregate  are  believed  by
management to be immaterial to the Company's  financial condition and results of
operations.

ITEM 2 - CHANGE IN SECURITIES,  USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

         (a) Not applicable

         (b) Not applicable

         (c) Not applicable

         (d) Not applicable

                                       17
<PAGE>


The following table sets forth information  regarding the Company's  repurchases
of its Common Stock during the three months ended June 30, 2004:
<TABLE>
<CAPTION>

                                                                            (c)
                                                                       TOTAL NUMBER
                                                                         OF SHARES              (d)
                                                                         PURCHASED            MAXIMUM
                                       (a)                              AS PART OF       NUMBER OF SHARES
                                      TOTAL               (b)             PUBLICLY         THAT MAY YET BE
                                    NUMBER OF           AVERAGE       ANNOUNCED PLANS     PURCHASED UNDER
                                      SHARES          PRICE PAID            OR              THE PLANS OR
              PERIOD                PURCHASED          PER SHARE         PROGRAMS             PROGRAMS
              ------                ---------         ----------      ---------------    -----------------
    <S>                                 <C>             <C>                <C>                  <C>
   April 2004
   Beginning Date: April 1
   Ending Date: April 30               553            $ 42.36              553                5,296

   May 2004
   Beginning Date: May 1
   Ending Date: May 31                 309              44.82              309                4,987

   June 2004
   Beginning Date: June 1
   Ending Date: June 30                250              44.20              250                4,737
                                     -----                               -----
   Total                             4,730            $ 42.47            4,730
                                     =====                               =====
</TABLE>


In an 8-K dated July 25, 2002,  and in a press release dated July 23, 2002;  the
Company  announced a plan to buy up to 38,000  shares of its stock  through open
market  purchases.  This offer was  contingent  upon market  conditions and will
continue  until it is completed or terminated  by the Board of Directors.  There
were 8,236  shares  purchased  under  this plan in 2002 and 20,297 in 2003.  The
Company intends to continue to purchase shares under this plan.

ITEM 3. - DEFAULT UPON SENIOR SECURITIES -- None

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

     The Annual  Meeting of the  Stockholders  of the Company was held on May 5,
2004. The results of the vote were as follows:

     1.   The  following  individuals  were  elected  as  directors,  each for a
          three-year term:
<TABLE>
<CAPTION>

                                                     VOTES FOR                  VOTES WITHHELD
                                                     ---------                  --------------
                       <S>                             <C>                          <C>
                  C. Marie Brown                      533,639                     4,443

                  Louis P. Jenkins, Jr.               533,639                     4,443

                  Michael L. Middleton                533,496                     4,586
</TABLE>

          The following individual was elected as a director for a one-year
     term:
<TABLE>
<CAPTION>

                                                     VOTES FOR                  VOTES WITHHELD
                                                     ---------                  --------------
                    <S>                                <C>                            <C>
                  James R. Shepard                    527,205                     10,877
</TABLE>


                                       18
<PAGE>

ITEM 5. - OTHER INFORMATION -- None

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K


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

          Exhibit  3.1  Articles of Incorporation of Tri-County Financial
                        Corporation*
          Exhibit  3.2  Amended and Restated Bylaws of Tri-County Financial
                        Corporation*
          Exhibit 31.1  Rule 13a-14(a) Certification of Chief Executive Officer
          Exhibit 31.2  Rule 13a-14(a) Certification of Chief Financial Officer
          Exhibit 32    Rule 1350 Certifications

     (b)Reports on Form 8-K - Not applicable

        -----------

        *  Incorporated by reference to the Registrant's Registration Statement
           on Form S-4 (File No. 33-31287).

        ** Incorporated by reference to the Registrant's Form 10-K for the
           fiscal year ended December 31, 2001.


                                       19
<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, 2004               By: /s/Michael L. Middleton
                                    -------------------------------------
                                    Michael L. Middleton, President,
                                    CEO, and Chairman of the Board





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


                                       20