U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

FORM 10-K

| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ------------------------------------------------------------------------------------
| | For the fiscal year ended March 31, 2005                                            

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 0-18265.

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|Virginia
(State or other jurisdiction of
incorporation or organization)              |  | 54-1532044
(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------------------------ |  | -----------------------------------------------
|                                                                                     |  |                                                
|                                                                                     |  |                                                
|                                                                                     |  |                                                
|38 North Central Avenue, Staunton, Virginia
(Address of principal executive offices) |  | 24401
(Zip Code)                               

Registrant's telephone number: (540) 886-0796

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

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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 past twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.
YES   NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.

Indicate by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).
YES   NO

As of May 31, 2005, there were issued and outstanding 2,088,106 shares of the Registrant's
common stock. The aggregate market value of the voting and non-voting common equity  held
by non-affiliates of the Registrant, computed by reference to the average of the closing bid and
asked price of such stock as of May 31, 2005, was approximately $39.6 million. (The exclusion
from such amount of the market value of the shares owned by any person shall not be deemed an
admission by the Issuer that such person is an affiliate of the Registrant.)

**DOCUMENTS INCORPORATED BY REFERENCE**

Part II of Form 10-K--Portions of the Annual Report to Stockholders for the fiscal year ended March 31, 2005.

Part III of Form 10-K--Portions of the Proxy Statement for the 2005 Annual Meeting of Stockholders.

**PART I**

**Item  1.  Business**

**General**

---

Community Financial Corporation ("Community" or the "Company") is a Virginia corporation,
which owns Community Bank (the "Bank" or "Community Bank").  The Bank was organized in
1928 as a Virginia-chartered building and loan association, converted to a federally-chartered
savings and loan association in 1955 and to a federally-chartered savings bank in 1983. In 1988,
Community Bank converted to the stock form of organization through the sale and issuance of
shares of our common stock. References throughout this Form 10-K to the Company generally
include the Bank, unless the context otherwise requires. Our principal asset is the outstanding
stock of Community Bank, our wholly owned subsidiary. Our common stock trades on The
Nasdaq Stock Market under the symbol "CFFC." In November, 1997 Community Bank
established Community First Mortgage Corporation ("Community First"), a wholly owned
mortgage banking subsidiary to originate and sell mortgage loans. Community First was sold on
June 30, 2003.

Community and Community Bank are subject to comprehensive regulation, examination
and supervision by the Office of Thrift Supervision, Department of the Treasury ("OTS") and by
the Federal Deposit Insurance Corporation ("FDIC").  The Bank is a member of the Federal
Home Loan Bank ("FHLB") System and our deposits are backed by the full faith and credit of
the United States Government and are insured by the Savings Association Insurance Fund
("SAIF") to the maximum extent permitted by the FDIC. At March 31, 2005, Community had
$399.6 million in assets, deposits of $275.4 million and stockholders' equity of $31.3 million.
Community's primary business consists of attracting deposits from the general public and
originating real estate loans and other types of investments through our offices located in
Staunton, Waynesboro, Stuart Drafts, Raphine, Verona and Virginia Beach, Virginia.

Like all financial institutions, Community's operations are materially affected by general
economic conditions, the monetary and fiscal policies of the federal government and the policies
of the various regulatory authorities, including the OTS and the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"). Our results of operations are largely
dependent upon our net interest income, which is the difference between the interest we receive
on our loan portfolio and our investment securities portfolio, and the interest we pay on our
deposit accounts and borrowings.

Our main office is located at 38 North Central Avenue, Staunton, Virginia 24401. Our
telephone number is (540) 886-0796.

**Forward-Looking Statements**

This document, including information incorporated by reference, contains, and future
filings by the Company on Form 10-Q and Form 8-K and future oral and written statements by
the Company and its management may contain, forward-looking statements about the Company
and its subsidiary which we believe are within the meaning of the Private Securities

Words such as may, could, should, would, believe, anticipate, estimate, expect, intend,
plan and similar expressions are intended to identify these forward-looking statements.  The
important factors discussed below, as well as other factors discussed elsewhere in this document
and factors identified in our filings with the Securities and Exchange Commission and those
presented elsewhere by our management from time to time, could cause actual results to differ
materially from those indicated by the forward-looking statements made in this document.
Among the factors that could cause our actual results to differ from the these forward-looking
statements are:

- the strength of the United States economy in general and the strength of the local economies in
which we conduct our operations; general economic conditions, either nationally or regionally,
may be less favorable than expected, resulting in, among other things, a deterioration in the credit
quality of our loans and other assets;
- the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate
policies of the Federal Reserve Board;
- financial market, monetary and interest rate fluctuations, particularly the relative relationship of
short-term interest rates to long-term interest rates;
- the timely development of and acceptance of new products and services of Community Financial
Corporation and Community Bank, and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to competitors' products
and services;
- the impact of changes in financial services laws and regulations (including laws concerning
taxes, accounting standards, banking, securities and insurance); legislative or regulatory changes
may adversely affect the business in which we are engaged;
- the impact of technological changes;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in the foregoing.

Community Financial Corporation disclaims any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the receipt of new
information, or otherwise.

**Lending Activities**

**General.** We, like most other thrift institutions, concentrate our lending activities on first
mortgage conventional loans secured by residential and, to a lesser extent, commercial and multi-family real estate with an emphasis on multi-family housing.  We make construction loans
secured by commercial and multi-family real estate and one-to four-family residential properties.
Additionally, we make consumer loans in order to increase the diversification and decrease the
interest rate sensitivity of our loan portfolio, and to increase interest income as these loans
typically carry higher interest rates than mortgage loans. Substantially all of our loans are
originated within our market area which includes Shenandoah, Rockingham, Page, Highland,
Augusta, Albemarle, Bath, Rockbridge and Nelson Counties, and the Hampton Roads area in
Virginia.

Residential loan originations come primarily from walk-in customers, real estate brokers and
builders. Commercial and multi-family real estate loan originations are obtained through broker
referrals, direct solicitation of developers and continued business from customers. All completed
loan applications are reviewed by our salaried loan officers. As part of the application process,
information is obtained concerning the income, financial condition, employment and credit
history of the applicant. If commercial or multi-family real estate is involved, information is also
obtained concerning cash flow after debt service. The quality of loans is analyzed based on our
experience and on guidelines with respect to credit underwriting as well as the guidelines issued
by Freddie Mac and Fannie Mae and other purchasers of loans, depending on the type of loans
involved. The one-to four-family, adjustable-rate mortgage loans originated by us, however, are
not readily saleable in the secondary market due to the fact that we do not typically require
surveys, title insurance or written verifications of employment history and deposit relationships.
All real estate is appraised by independent fee appraisers who have been pre-approved by the
Board of Directors.

Our loan commitments are approved at different levels, depending on the size and type of the
loan being sought. The Board of Directors has authorized loan limits for individual loan officers
depending on the types of loans being approved. One-to four-family real estate loans not
exceeding $350,000 and commercial and multi-family real estate loans not exceeding $225,000
or less may be approved by the President of the Bank. All mortgage loans in excess of $950,000
must be approved by the Board of Directors. Consumer loans in excess of $175,000 on a secured
basis and $50,000 on an unsecured basis require the approval of three members of senior
management.  Loans in excess of individual loan officer or collective senior management loan
authority but less than $950,000 must be approved by a majority of our Loan Committee.
Regardless of the individual loan approval authority, the Board of Directors generally approves
or ratifies all loans.

The aggregate amount of loans that the Bank is permitted to make to any one borrower, including
related entities, and the aggregate amount that the Bank may invest in any one real estate project,
with certain exceptions, is limited to the greater of 15% of unimpaired capital and surplus or
$500,000. At March 31, 2005, the maximum amount which the Bank could have loaned to one
borrower and the borrower's related entities or invested in any one project was approximately
$4.8 million. At March 31, 2005, the Bank had no borrower, or groups of borrowers, with loans
outstanding in excess of $3.3 million.  The bank had only four borrowers, or groups of related
borrowers, with an aggregate outstanding loan balance at March 31, 2005, in excess of $3.0
million**,**all of which loans are performing in accordance to their payment terms.

Loan Portfolio Composition. The following table sets forth the composition of our total loan
portfolio in dollars and percentages as of the dates indicated.

|                                     | March 31,             
|------------------------------------ | ----------------------
|                                     | 2005                  
|                                     |                       
|                                     | Amount                
|                                     | (Dollars in Thousands)
|Real Estate Loans:                  
|Residential                          | $123,256              
|Commercial and multi-family          | 95,700                
|Construction                         | 35,019                
|Total real estate                    | 253,975               
|Consumer Loans:                     
|Home equity                          | 17,963                
|Automobile                           | 44,112                
|Secured personal                     | 2,923                 
|Unsecured personal                   | 2,908                 
|Other                                | 807                   
|Total consumer                       | 68,713                
|Commercial business                  | 30,174                
|Total loans receivable               | 352,862               
|Less:                               
|Undisbursed loans in process         | 14,133                
|Deferred fees and unearned discounts | (1,100)               
|Allowance for losses                 | 3,021                 
|Total net items                      | 16,054                
|Total loans receivable, net          | $336,808              
|                                    
|Loans held for sale                  | $--                   

The following table shows the composition of our loan portfolio by fixed and adjustable-rate, at
the dates indicated.

|                             | March 31,             
|---------------------------- | ----------------------
|                             | 2005                  
|                             |                       
|                             | Amount                
|                             | (Dollars in Thousands)
|Fixed-Rate Loans:           
|Real Estate:                
|Residential                  | $34,129               
|Commercial and multi-family  | 12,303                
|Construction (1)             | --                    
|Total real estate loans      | 46,432                
|Home equity                  | 4,413                 
|Automobile                   | 43,970                
|Secured personal             | 2,619                 
|Unsecured personal           | 2,219                 
|Other                        | 650                   
|Total consumer loans         | 53,871                
|Commercial business          | 11,330                
|Total fixed-rate loans       | 111,633               
|Adjustable-Rate loans:      
|Real Estate:                
|Residential                  | 89,127                
|Commercial and multi-family  | 83,397                
|Construction (2)             | 35,019                
|Total real estate loans      | 207,543               
|Home equity                  | 13,550                
|Automobile                   | 142                   
|Secured personal             | 304                   
|Unsecured personal           | 689                   
|Other                        | 157                   
|Total consumer loans         | 14,842                
|Commercial Business          | 18,844                
|Total adjustable-rate loans  | 241,229               
|Total loans receivable       | 352,862               
|Less:                       
|Undisbursed loans in process | 14,133                
|Deferred fees and unearned   | (1,100)               
|Allowance for losses         | 3,021                 
|Total net items              | 16,054                
|Total loans receivable, net  | $336,628              
|                            
|Loans held for sale          | $--                   



**Loan Maturity and Repricing**

---

The following schedule illustrates the contractual maturity of our real estate construction
and commercial business loan portfolios as of March 31, 2005, before net items.  Loans that have
adjustable or renegotiable interest rates are shown as maturing in the period during which the
contract is due.  The schedule does not reflect the effects of possible prepayments or enforcement
of due-on-sale clauses.

|                                   | Real EstateConstructionor Development | CommercialBusiness | Total  
|---------------------------------- | ------------------------------------- | ------------------ | -------
|                                   | (Dollars in Thousands)               
|Due during periodsending March 31, |                                       |                    |        
|                                  
|2006                               | $31,318                               | $19,755            | $51,073
|2007 to 2010                       | 3,701                                 | 9,378              | 13,079 
|After 2010                         | --                                    | 1,041              | 1,041  
|Totals                             | $35,019                               | $30,174            | $65,193

The total amount of loans in the above table due after March 31, 2006, which have fixed interest rates is $9.8 million, while the total amount of loans due after such date which have floating or adjustable interest rates is $4.3 million.

**One-to Four-Family Residential Real Estate Lending**

---

Our primary lending program is the origination of loans secured by one- to four-family
residences, substantially all of which are located in our market areas. We evaluate both the
borrower's ability to make principal and interest payments and the value of the property that will
secure the loan. Although federal law permits us to make loans in amounts of up to 100% of the
appraised value of the underlying real estate, we generally make one-to four-family residential
real estate loans in amounts of 80% or less of the appraised value.  In certain instances, we will
lend up to 90% of the appraised value of the underlying real estate and require the borrower to
purchase private mortgage insurance in an amount sufficient to reduce our exposure to 80% or
less.

In order to reduce our exposure to changes in interest rates, we originate a limited amount of
30-year or 15-year fixed-rate, one-to four-family residential mortgage loans for our portfolio. For
the year ended March 31, 2005, 70.8% of all one-to four-family residential loans we originated
had adjustable interest rates. At March 31, 2005, $34.1 million or 9.7%, of our total loans
receivable, before net items, consisted of fixed-rate mortgage loans.

To compete with other lenders in our market area, we make one, three, five, seven and ten-year
adjustable-rate mortgage ("ARM") loans at interest rates which, for the initial period, may  be
below the index rate which would otherwise apply to these loans. Borrowers are qualified,
however, at the fully indexed interest rate. Our one-to four-family residential ARM loans
primarily have interest rates that adjust annually, based on a stated interest margin over the yields
on one year U.S. Treasury Bills.  Although our one- to four-family ARM loans primarily adjust
annually after the initial period, we offer a residential ARM loan which adjusts every three or
five years generally in accordance with the rates based on a stated margin over the yields on one
or three year U.S. Treasury Bills. Our ARM loans generally limit interest rate increases to 2%
each rate adjustment period and have an established ceiling rate at the time the loans are made of
up to 6% over the original interest rate. At March 31, 2005, residential ARM loans totaled $122.2
million, or 34.6%, of our total loans receivable before net items. ARM loans generally pose
different credit risks than fixed-rate loans primarily because during periods of rising interest
rates, the risk of defaults on ARM loans may increase due to the upward adjustment of interest
costs to borrowers.

All one-to four-family real estate mortgage loans being originated by us contain a "due-on-sale"
clause providing that we may declare the unpaid principal balance due and payable upon the sale
of the mortgaged property. It is our policy to enforce these due-on-sale clauses concerning
fixed-rated loans and to permit assumptions of ARM loans, for a fee, by qualified borrowers.

We require, in connection with the origination of residential real estate loans, title opinions and
fire and casualty insurance coverage, as well as flood insurance where appropriate, to protect our
interests. The cost of this insurance coverage is paid by the borrower. We generally do not
require escrows for taxes and insurance.

**Commercial and Multi-Family Real Estate, and Construction Lending**

---

We have originated and, in the past have purchased, commercial real estate loans and loan
participations. We also make commercial and residential real estate construction loans. Our
commercial real estate and construction loans are secured by various types of commercial real
estate, including multi-family residential buildings, hotels and motels, convenience stores,
commercial and industrial buildings, shopping centers and churches. We have in recent years
placed more emphasis on multi-family housing loans for our commercial real estate loan
portfolio. At March 31, 2005, commercial real estate, land and construction loans aggregated
$130.7 million or 37.1% of our total loans receivable before net items. Our commercial real
estate and construction loans are secured primarily by properties located in our market area.

Our commercial real estate loans are generally made at interest rates that adjust based on yields
for one-year U.S. Treasury securities, with a 2% annual cap on rate adjustments and a 6% cap on
interest rates over the life of the loan. Typically, we charge origination fees ranging from 1% to
2% on these loans. At March 31, 2005, we had $12.3 million in fixed-rate commercial real estate
and construction loans. Commercial real estate loans made by us are fully amortizing with
maturities ranging from five to 30 years.

At March 31, 2005, we had $1.9 million or 0.53% of our total loans receivable before net items
invested in commercial construction loans compared to $2.0 million or 0.68% at March 31, 2004.
At March 31, 2005, we had three commercial construction loans, the largest one having an
outstanding balance of $551,921. These three loans are presently performing in accordance with
their terms. Our commercial construction loans are generally made for a one year term or less,
with a requirement that the borrower have a commitment for permanent financing prior to
funding the construction loan. Our construction loans generally provide for a fixed rate of interest
at the prevailing prime rate or slightly above. Such loans are generally secured by the personal
guarantees of the borrowers and by first mortgages on the projects.

The Bank makes construction loans to individuals for the construction of their residences as well
as to builders and developers for the construction of one-to four-family residences and the
development of one-to-four family lots in Virginia. These construction loans are generally for a
term of twelve months or less with interest only due monthly. Construction loans are generally
made with permanent financing to be provided by the Bank, although not required. Construction
loans to builders may be made on a basis where a buyer has contracted to buy the house or the
construction may be on a speculative basis. Limits are set by the Bank as to the number of each
type of construction loan for each builder, whether speculative or pre-sold, dependent on the
determination made by the Bank during the underwriting process.

In our underwriting of commercial real estate and construction loans, we may lend, under
federal regulations, up to 100% of the security property's appraised value, although the loan to
original appraised value ratio on such properties is generally 80% or less. Our commercial real
estate and construction loan underwriting  requires an examination of debt service coverage
ratios, the borrower's creditworthiness and prior credit history and reputation, and we generally
require personal guarantees or endorsements of borrowers. We also carefully consider the
location of the security property.  At March 31, 2005, we had $33.1 million or 9.4% of our total
loans receivable in residential construction loans compared to $23.3 or 8.0% at March 31, 2004.

The Company originates loans to local real estate developers with whom it has established
relationships for the purpose of developing residential subdivisions (i.e., installing roads, sewers,
water and other utilities), as well as loans to individuals to purchase building lots. Land
development loans are secured by a lien on the property and made for a period usually not to
exceed twelve months with an interest rate that adjusts with the prime rate, and are made with
loan-to-value ratios not exceeding 80%. Monthly interest payments are required during the term
of the loan. Subdivision loans are structured so that the Company is repaid in full upon the sale
by the borrower of approximately 90% of the subdivision lots.

During fiscal 2005 lending rates increased.  The Bank was actively pursuing commercial real
estate loans while borrowers were seeking funding secured by commercial real estate.  In a rising
rate environment the volume of loans is likely to decline due to borrowers unwillingness to seek
funding at higher interest rates.

At March 31, 2005, we had 47 commercial real estate loans (or multiple loans to one borrower) in excess of $1.0 million with an aggregate balance of $97.6 million.  The largest relationship was to a single borrower for $3.3 million secured by a combination of single family construction loans.

The following table presents information as to the Company's commercial real estate and
construction lending portfolio as of March 31, 2005 by type of project.

|                                    | Number
of loans        | Principal
Balance
|----------------------------------- | ---------------------- | -----------------
|                                    | (Dollars in Thousands)
|Permanent financing:                |                        |                  
|Multi-family residential buildings  | 47                     | $15,276          
|Hotel and motel                     | 11                     | 8,856            
|Commercial and industrial buildings | 84                     | 23,791           
|Raw land                            | 122                    | 18,657           
|Church                              | 10                     | 2,056            
|Restaurant                          | 11                     | 3,009            
|Warehouse                           | 18                     | 5,363            
|Retail Store                        | 43                     | 16,914           
|School/Recreational                 | 16                     | 3,688            
|Total                               | 362                    | $97,610          

Commercial real estate and construction lending is generally considered to involve a higher level of credit
risk than one-to four-family residential lending due to the concentration of principal in a limited number of loans
and borrowers and the effects of general economic conditions on real estate developers and managers. Our risk of
loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property's sale value
upon completion of the project and the estimated cost of the project. If the estimated cost of construction or
development proves to be inaccurate, we may be required to advance funds beyond the amount originally committed
to permit completion of the project. If the estimate of value proves to be inaccurate, we may be confronted, at or
prior to the maturity of the loan, with a project with value which is insufficient to assure full repayment. Because we
usually provide loans to a developer for the entire estimated cost and interest of the project, defaults in repayment
generally do not occur during the construction period and it is therefore difficult to identify problem loans at an
early stage. When loan payments become due, borrowers may experience cash flow from the project which is not
adequate to service total debt. This cash flow shortage can result in the failure to make loan payments. In such
cases, we may be compelled to modify the terms of the loan. In addition, the nature of these loans is such that they
are generally less predictable and more difficult to evaluate and monitor.

**Consumer Lending**

---

We offer various secured and unsecured consumer loans, including unsecured personal loans,
automobile loans, deposit account loans, installment and demand loans, and home equity loans.
At March 31, 2005, we had $68.7 million or 19.5% of our total loans receivable before net items
invested in consumer loans. With the exception of $13.6 million of home equity loans at March
31, 2005, our consumer loans primarily have fixed interest rates and generally have terms
ranging from 90 days to five years. The largest component of consumer loans are automobile
loans. The balance of automobile loans receivable has increased from $19.2 million for fiscal
2003 to  $31.3 million for fiscal 2004 and to $44.1 million at March 31, 2005. The increase in
automobile loans is attributable to indirect lending relationships with automobile dealerships in
our lending areas. The automobile loans are generally evenly divided between new and used
automobiles. The automobile loans are primarily without recourse to the dealer but the Bank may
require either full or partial recourse to the dealer under certain circumstances. If the customer's
credit history or the loan to value of the vehicle warrants,  the Bank may require full or partial
recourse to the dealer. We originate all of our consumer loans in our market area and intend to
continue our consumer lending in this geographic area.

We offer VISA credit card accounts. We presently charge no annual membership fee and an
annual rate of interest of 15.96%.  At March 31, 2005, 1,091 credit card accounts had been
issued, with an aggregate outstanding balance of $409,000 and unused credit available of $3.3
million. The total unused credit available under our home equity loans was $14.1 million at
March 31, 2005. Consumer loans do not include unused lines of credit on our credit card
accounts  and home equity lines.

The underwriting standards employed by us for consumer loans include a determination of the
applicant's payment history on other debts and an assessment of ability to meet existing
obligations and payments on the proposed loan. The stability of the applicant's monthly income
may be determined by verification of gross monthly income from primary employment, and
additionally from any verifiable secondary income. Although creditworthiness of the applicant is
of primary consideration, the underwriting process also includes a comparison of the value of the
security in relation to the proposed loan amount.

Consumer loans may entail greater risk than do residential mortgage loans, particularly in
the case of consumer loans which are unsecured, such as credit card receivables, or secured by
rapidly depreciable assets such as automobiles.  In such cases, any repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment of the outstanding
loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts against the borrower. In
addition, consumer loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy.  Furthermore, the application of various federal and state laws, including federal and
state bankruptcy and insolvency laws, may limit the amount which can be recovered on such
loans. Such loans may also give rise to claims and defenses by a consumer loan borrower against
an assignee of such loan such as us, and a borrower may be able to assert against such assignee
claims and defenses which it has against the seller of the underlying collateral. We add general
provisions to our loan loss allowance, in amounts determined in accordance with industry
standards, at the time the loans are originated. Consumer loan delinquencies often increase over
time as the loans age. Accordingly, although the level of non-performing assets in our consumer
loan portfolio has generally been low ($44,000 at March 31, 2005), there can be no assurance
that delinquencies will not increase in the future.

**Commercial Business Lending**

---

We also originate commercial business loans. At March 31, 2005, we had $30.2 million in
commercial business loans outstanding, representing 8.6% of our total loans receivable, before
net items. We offer commercial business loans to service existing customers, to consolidate our
banking relationships with these customers, and to further our asset/liability management goals.

Unlike residential mortgage loans which generally are made on the basis of the
borrower's ability to make repayment from his or her employment and other income, and which
are secured by real property whose value tends to be more easily ascertainable, commercial
business loans are of higher risk and typically are made on the basis of the borrower's ability to
make repayment from the cash flow of the borrower's business. As a result, the availability of
funds for the repayment of commercial business loans may be dependent upon the success of the
business itself. Our commercial business loans almost always include personal guarantees and
are usually, but not always, secured by business assets.  However, the collateral securing the
loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on
the success of the business. Collateral securing the loans include but are not limited to business
automobiles, equipment and accounts receivable.

We recognize the generally increased credit risk associated with commercial business lending.
Our commercial business lending practice emphasizes credit file documentation and analysis of
the borrower's character, management capabilities, capacity to repay the loan, the adequacy of
the borrower's capital and collateral. An analysis of the borrower's past, present and future cash
flows is also an important aspect of our credit analysis.

**Loan Originations, Purchases and Sales**

---

Federal regulations authorize us to make real estate loans anywhere in the United States.
However, at March 31, 2005, substantially all of our real estate loans were secured by real estate
located in our market area.

Until the sale of our mortgage banking subsidiary in June, 2003, we originated fixed-rate
residential mortgage loans in our mortgage banking subsidiary for sale in the secondary market
and retained mortgage loans originated by Community Bank for our portfolio. Prior to fiscal
1997 we retained the servicing for mortgage loans sold. During fiscal 1997 we began to sell loans
with servicing released to be more competitive in that market.

We have not purchased any loans during the last three fiscal years.  Management believes that
purchases of loans and loan participations are generally desirable only when local mortgage
demand is less than the supply of funds available for local mortgage origination.

The following table shows our loan origination, purchase, sale and repayment activities for the
periods indicated.

|                                        | Year Ended March 31,
|--------------------------------------- | --------------------
|                                        | 2005                
|                                        | (In Thousands)      
|Origination by Type:                   
|Adjustable Rate:                       
|Real estate -  1-4 family residential   | $31,366             
|- commercial                            | 27,559              
|Non-real estate - consumer              | 6,775               
|Total adjustable rate                   | 65,700              
|Fixed Rate:                            
|Real estate -  1-4 family residential   | 12,949              
|- commercial                            | 4,846               
|Non-real estate- consumer               | 32,974              
|Total fixed rate                        | 50,769              
|Sales and Repayments:                  
|Real estate loans sold                  | --                  
|Principal repayments                    | 55,478              
|Total reductions                        | 55,658              
|Increase/(Decrease) in other items,
net | 3,484               
|Net increase                            | $57,507             

During fiscal 2003 and 2004 all real estate loan sales were related to our former mortgage
banking subsidiary which was sold in June 30, 2003. All loans originated by our former
mortgage banking subsidiary were originated for sale while substantially all other loans were
originated by Community Bank and were retained in our portfolio.

**Delinquent and Problem Loans**

---

When a borrower fails to make a required payment on a loan, we attempt to cause the deficiency
to be cured by contacting the borrower. A notice is mailed to the borrower after a payment is 15
days past due and again when the loan is 30 days past due. For most loans, if the delinquency is
not cured within 30 days we issue a notice of intent to foreclose on the property and if the
delinquency is not cured within 60 days, we may institute foreclosure action. If foreclosed on,
real property is sold at a public sale and may be purchased by us.  Historically, deficiencies have
been cured promptly.

The following table sets forth information concerning delinquent mortgage and other loans at
March 31, 2005. The amounts presented represent the total remaining principal balances of the
related loans, rather than the actual payment amounts which are overdue.

|                       | Residential Real
Estate | CommercialReal Estate | Construction | Consumer | CommercialBusiness | Total 
|---------------------- | ----------------------- | --------------------- | ------------ | -------- | ------------------ | ------
|                       | Number                  | Amount                | Number       | Amount   | Number             | Amount
|                       | (Dollars in Thousands) 
|                      
|Loans
Delinquent
for: 
|30-59 days             | 5                       | $340                  | --           | $--      | 1                  | $150  
|60-89 days             | 5                       | 404                   | --           | --       | --                 | --    
|90 days
and over       | 3                       | 175                   | --           | --       | 2                  | 164   
|Total
delinquent
loans | 13                      | $919                  | --           | $--      | 3                  | $314  

Federal regulations provide for the classification of loans, debt, equity securities and other assets
considered to be of lesser quality as "substandard," "doubtful" or "loss" assets. The regulations
require insured institutions to classify their own assets and to establish prudent general
allowances for losses for assets classified "substandard" or "doubtful." For the portion of assets
classified as "loss," an institution is required to either establish specific allowances of 100% of
the amount classified or charge such amount off its books.  Assets which do not currently expose
the insured institution to sufficient risk to warrant classification in one of the aforementioned
categories but possess potential weaknesses are required to be designated "special mention" by
management. In addition, the OTS may require the establishment of a general allowance for
losses based on assets classified as "substandard" and "doubtful" or based on the general quality
of the asset portfolio of an institution. In connection with the filing of our periodic reports with
the OTS and in accordance with our classification of assets policy, we regularly review the loans
in our portfolio to determine whether any loans require classification in accordance with
applicable regulations.

On the basis of management's review of our assets, at March 31, 2005, we had classified
$1,881,000 of our assets as substandard, none as doubtful and none as loss. The $1,881,000 in
classified loans is comprised primarily of residential and commercial real estate loans, which
includes one combination multi-family and commercial real estate loan of $1.1 million. In
addition, $2.7 million of loans have been designated as special mention.

**Non-Performing Assets**

---

The table below sets forth the amounts and categories of non-performing assets in our
loan portfolio. Non-performing assets include non-accruing loans, accruing loans delinquent 90
days or more as to principal or interest payments and real estate acquired through foreclosure,
which include assets acquired in settlement of loans. Typically, a loan becomes nonaccruing
when it is 90 days delinquent. All consumer loans more than 120 days delinquent are charged
against the consumer loan allowance for loan losses. Accruing mortgage loans delinquent more
than 90 days are loans that we consider to be well secured and in the process of collection. For
the years presented, we have no accruing loans 90 days or more delinquent and no troubled debt
restructurings (which involve forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than that of market rates).

|                                         | March 31,             
|---------------------------------------- | ----------------------
|                                         | 2005                  
|                                         | (Dollars in Thousands)
|Non-accruing loans:                     
|                                        
|Commercial business and consumer         | $   70                
|Real Estate                              | 339                   
|Total non-accruing loans                 | 409                   
|Real estate acquired through foreclosure | 139                   
|Total non-performing assets              | $  548                
|Total as a percentage of total assets    | .14%                  
|Allowance for loan losses                | $3,021                

Non-performing assets at March 31, 2005 were comprised primarily of repossessed automobiles and loans
delinquent 90 days or more. Based on current market values of the properties securing these loans, management
anticipates no significant losses in excess of the reserves for losses previously recorded.

Nonaccrual loans amounted to $408,873 at March 31, 2005.  If interest on these loans had been accrued, such
income would have approximated $8,000 for the year ended March 31, 2005, none of which is included in interest
income.

**Other Loans Of Concern**

---

As of March 31, 2005, there were $4.0 million in loans with respect to which known information
about the possible credit problems of the borrowers or the cash flows of the security properties
have caused management to have doubts as to the ability of the borrowers to comply with present
loan repayment terms and which may result in the future inclusion of such items in the
non-performing asset categories.

The $4.0 million in other loans of concern is comprised primarily of commercial real estate
loans, which includes one combination commercial real estate and multi-family loan in the
amount of $1.1 million. This loan was current as to interest and principal payments as of March
31, 2005.

Although management believes that these loans are adequately secured and no material loss is
expected, certain circumstances may cause the borrower to be unable to comply with the present
loan repayment terms at some future date.

**Allowance for Losses on Loans and Real Estate**

---

We provide valuation allowances for anticipated losses on loans and real estate when
management determines that a significant decline in the value of the collateral has occurred, as a
result of which the value of the collateral is less than the amount of the unpaid principal of the
related loan plus estimated costs of acquisition and sale. In addition, we also provide allowances
based on the dollar amount and type of collateral securing our loans in order to protect against
unanticipated losses. Although management believes that it uses the best information available to
make such determinations, future adjustments to allowances may be necessary, and net income
could be significantly affected, if circumstances differ substantially from the assumptions used in
making the initial determinations. During fiscal 2005, our net increase in allowance for losses on
loans was $375,000, due primarily to a $57.5 million net increase in loans. At March 31, 2005,
we had an allowance for loan losses of $3,021,000. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Results of Operations - Provision for Loan
Losses". The following table sets forth an analysis of our allowance for loan losses.

|                                                                                          | Year Ended March 31,  
|----------------------------------------------------------------------------------------- | ----------------------
|                                                                                          | 2005                  
|                                                                                          | (Dollars in Thousands)
|Balance at beginning of period                                                            | $2,646                
|Provision charged to operations                                                           | 870                   
|Charge-offs:                                                                             
|Residential real estate                                                                   | -                     
|Commercial and Multi-family                                                               | (241)                 
|Construction                                                                              | (51)                  
|Automobile                                                                                | (332)                 
|Secured personal                                                                          |                       
|Unsecured personal                                                                        | (47)                  
|Other                                                                                     | (3)                   
|Commercial Business                                                                       | 6                     
|                                                                                         
|Recoveries:                                                                               |                       
|Residential real estate                                                                   | 15                    
|Commercial and Multifamily                                                                | 43                    
|Construction                                                                              | -                     
|Automobile                                                                                | 85                    
|Secured personal                                                                          |                       
|Unsecured personal                                                                        | 29                    
|Other                                                                                    
|Commercial Business                                                                       | 13                    
|Net charge-offs                                                                           | (495)                 
|Balance at end of period                                                                  | $3,021                
|Ratio of net charge-offs during the
period to average loans outstanding
during the period | .16%                  

The distribution of the allowance for losses on loans at the dates indicated is summarized as
follows:

|                                                | Residential            | Commercialand Multi-FamilyReal Estate | Construction | CommercialBusiness | Consumer  | Total    
|----------------------------------------------- | ---------------------- | ------------------------------------- | ------------ | ------------------ | --------- | ---------
|                                                | (Dollars in Thousands) |                                      
|                                               
|March 31, 2005                                 
|Amount of loan loss allowance                   | $      308             | $      718                            | $      409   | $     554          | $ 1,032   | $   3,021
|Loan amounts by category                        | 123,256                | 95,700                                | 35,019       | 30,174             | 68,713    | 352,862  
|Percent of loans
in eachcategory to total loans | 34.94%                 | 27.12%                                | 9.92%        | 8.55%              | 19.47%    | 100.00%  
|                                               
|March 31, 2004                                 
|Amount of loan lossallowance                    | $      283             | $      889                            | $      299   | $     286          | $    889  | $   2,646
|Loan amounts by category                        | 121,143                | 73,107                                | 25,321       | 16,361             | 55,939    | 291,871  
|Percent of loans in eachcategory to total loans | 41.49%                 | 25.05%                                | 8.68%        | 5.61%              | 19.17%    | 100.00%  
|                                               
|March 31, 2003                                 
|Amount of loan lossallowance                    | $     257              | $     532                             | $     295    | $     212          | $    644  | $   1,940
|Loan amounts by category                        | 127,774                | 51,548                                | 25,105       | 12,110             | 42,815    | 259,352  
|Percent of loans in eachcategory to total loans | 49.26%                 | 19.88%                                | 9.68%        | 4.67%              | 16.51%    | 100.00%  
|                                               
|March 31, 2002                                 
|Amount of loan loss
allowance                   | $     259              | $     465                             | $     267    | $     258          | $    427  | $   1,676
|Loan amounts by category                        | 107,425                | 45,154                                | 26,878       | 14,737             | 39,598    | 233,792  
|Percent of loans
in eachcategory to total loans | 45.95%                 | 19.31%                                | 11.50%       | 6.30%              | 16.94%    | 100.00%  
|                                               
|March 31,2001                                  
|Amount of loan lossallowance                    | $     214              | $     409                             | $     230    | $     248          | $     376 | $  1,477 
|Loan amounts by category                        | 105,794                | 46,514                                | 23,507       | 14,167             | 33,061    | 223,043  
|Percent of loans in eachcategory to total loans | 47.46%                 | 20.84%                                | 10.53%       | 6.35%              | 14.82%    | 100.00%  

**Subsidiary Activities**

---

We established Community First Mortgage Corporation, a mortgage banking subsidiary, in November
1997, began operations in May 31, 1998 and sold the subsidiary in June 2003. The primary business of Community
First was to originate fixed-rate mortgage loans to sell to third party investors to generate fee income and gains on
the sale of mortgage loans. The success of a mortgage banking operation such as Community First is generally
dependent on increasing the volume of mortgage loans originated and sold to investors.

**Investment Activities**

---

As a member of the FHLB System, Community Bank must maintain minimum levels of
investments that qualify as liquid assets to meet the safety and soundness requirements under
OTS regulations. Liquidity may increase or decrease depending upon the availability of funds
and comparative yields on investments in relation to the return on loans.

Historically, we have maintained our liquid assets at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate
liquidity is maintained. As of March 31, 2005, the Bank's liquidity ratio (liquid assets as a
percentage of net withdrawable savings and current borrowings) was 5.3%.

The contractual maturities and weighted average yields of the investment securities portfolio, excluding FHLB of Atlanta stock and Freddie Mac stock,
are indicated in the following table.

|                                             | March 31, 2005        
|-------------------------------------------- | ----------------------
|                                             | Within 1Year or Less  
|                                             | Book Value            
|                                             | (Dollars in Thousands)
|Federal agency obligations                   | $ -                   
|State agency obligationsand commercial paper | 590                   
|Total Investment Securities                  | $590                  
|Weighted Average Yield (1)                   | 5.90%                 

(1) The weighted average yield is not computed on a tax equivalent basis. Included in the above table are $22.5
million of securities that are callable in three years or less.

The following table sets forth the composition of our available for sale and held to maturity securities portfolios at
the dates indicated.

|                                                     | March 31,             
|---------------------------------------------------- | ----------------------
|                                                     | 2005                  
|                                                     | BookValue             
|                                                     | (Dollars in Thousands)
|Interest-bearing deposits withbanks:                 | $ 1,555               
|                                                    
|Investment securities:                              
|Federal agency obligations                           | $23,834               
|State agencies and commercial
     paper             | 2,797                 
|United States agency equity
     securities          | 13,497                
|Subtotal                                             | 40,128                
|FHLB stock                                           | 4,229                 
|Total investment securities 
       and FHLB stock   | $44,357               
|Average remaining life or term
     to repricing (1) |                       

(1)     Excludes Freddie Mac common stock and other marketable equity securities.

During fiscal 2005, the market rates paid on investment securities increased.  During fiscal 2005, we invested primarily in federal and state agency securities with maturities of one to five years, some of which are callable within three months to three years from date of purchase.

**Sources of Funds**

---

**General**. Deposits have traditionally been the principal source of our funds for use in lending and
for other general business purposes. In addition to deposits, we derive funds from loan
repayments, cash flows generated from operations, which includes interest credited to deposit
accounts, repurchase agreements entered into with commercial banks and FHLB of Atlanta
advances.

Contractual loan payments are a relatively stable source of funds, while deposit inflows and
outflows and the related cost of such funds have varied widely. Borrowings may be used on a
short-term basis to compensate for reductions in deposits or deposit inflows at less than projected
levels and may be used on a longer-term basis to support expanded lending activities.

**Deposits**. We attract both short-term and long-term deposits from the general public by offering
a wide assortment of accounts and rates. We have been required by market conditions to rely on
short-term accounts and other deposit alternatives that are more responsive to market interest
rates than fixed interest rate, fixed-term certificates that were our primary source of deposits in
the past. We offer regular passbook accounts, checking accounts, various money market
accounts, fixed-rate long-term certificates with varying maturities, $100,000 or more jumbo
certificates of deposit and individual retirement accounts. Certain of our jumbo certificates which
have matured revert to a passbook rate and are reflected in the tables as passbook accounts. We
do not solicit brokered deposits due to our ability historically to attract funds from our local
markets or borrow from the FHLB at lower rates.

The following table sets forth the dollar amount of savings deposits in the various types of
deposit programs offered by us at the periods indicated.

|                                         | At March 31,  
|---------------------------------------- | --------------
|                                         | 2005          
|                                         | (In Thousands)
|Passbook and statement accounts          | $ 41,908      
|NOW and Super NOW accounts               | 54,223        
|Money market accounts                    | 16,043        
|One-to five-year fixed-rate certificates | 160,129       
|Six-month and 91 day certificates        | 3,127         
|Total                                    | $275,430      

The variety of deposit accounts we offer has allowed us to be competitive in obtaining funds and
has allowed us to respond with flexibility (by paying rates of interest more closely approximating
market rates of interest) to, although not eliminate the threat of, disintermediation (the flow of
funds away from depository institutions such as thrift institutions into direct investment vehicles
such as government and corporate securities). In addition, we have become much more subject to
short-term fluctuations in deposit flows, as customers have become more interest rate conscious.
Our ability to attract and maintain deposits, and our cost of funds, has been, and will continue to
be, significantly affected by money market conditions.

The following table sets forth our deposit flows during the periods indicated.

|                           | Year Ended March 31,  
|-------------------------- | ----------------------
|                           | 2005                  
|                           | (Dollars in Thousands)
|Opening balance            | $260,231              
|Net deposits (withdrawals) | 11,199                
|Interest credited          | 4,000                 
|Ending balance             | 275,430               
|Net increase               | $ 15,199              
|Percent increase           | 5.84%                 

During the fiscal years ended March 31, 2004 and 2003, we emphasized free checking accounts,
offered a more competitive rate on savings accounts and remained competitive in regard to the
rates offered by competitors. During fiscal 2005 market interest rates increased and contributed
to a decrease in savings and money market accounts. The change in deposits is related primarily
to rising interest rates and customers preference for higher rate time deposits. We remained
competitive on deposit rates and in particular on time deposits. Due to these efforts we
experienced an increase in both non-interest bearing demand and time deposits during fiscal
2005. We may use borrowings from time to time as an alternative source of funds. See "-
Borrowings."

The following table contains information pertaining to the average amount of and the average
rate paid on each of the following deposit categories for the periods indicated.

|                                     | Year Ended March 31,  
|------------------------------------ | ----------------------
|                                     | 2005                  
|                                     | AverageBalance        
|                                     | (Dollars in Thousands)
|Deposit Category:                   
|Non-interest bearing demand deposits | $ 24,703              
|Interest bearing demand deposits     | 46,659                
|Savings deposits                     | 46,961                
|Time deposits                        | 147,580               
|Total deposits                       | $265,903              

The following table shows rate information for our certificates of deposit as indicated.

|               | Less Than2.00%         | 2.00-3.00% | 3.01-4.00% | 4.01-5.00% | 5.01-6.00% | 6.01-7.00% | Total   
|-------------- | ---------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | --------
|               | (Dollars In Thousands)
|March 31, 2005 | $26,949                | $65,465    | $44,012    | $23,953    | $2,675     | $202       | $163,256
|March 31, 2004 | $39,521                | $28,833    | $30,368    | $30,886    | $5,668     | $212       | $135,488
|March 31, 2003 | $5,595                 | $42,035    | $33,460    | $36,553    | $10,408    | $419       | $128,470

The following table indicates the amount of the certificates of deposit by time remaining until
maturity as of March 31, 2005.

|                                             | Maturity              
|-------------------------------------------- | ----------------------
|                                             | 3 Monthsorless        
|                                             | (Dollars In Thousands)
|Certificates of deposit less than
 $100,000  | $10,478               
|Certificates of deposit of $100,000
 or more | 1,863                 
|Total certificates of deposit                | $12,341               

**Borrowings**

---

As a member of the FHLB of Atlanta, we are required to own capital stock in the FHLB of
Atlanta and are authorized to apply for advances from the FHLB of Atlanta. Each FHLB credit
program has its own interest rate, which may be fixed or variable, and range of maturities. The
FHLB of Atlanta may prescribe the acceptable uses to which these advances may be put, as well
as limitations on the size of the advances and repayment provisions. Our borrowings, from time
to time, also include securities sold under agreements to repurchase, with mortgage-backed
securities or other securities pledged as collateral. The proceeds are utilized by us for general
corporate purposes. At March 31, 2005, we had $15,650,497 of securities sold under agreements
to repurchase which adjust with the federal funds rate. For additional information on our
securities sold under agreements to repurchase, see Note 8 of the Notes to Consolidated Financial
Statements contained in the Annual Report to Shareholders which is incorporated by reference in
Part II, Item 8 of this report.

We generally utilize borrowings to supplement deposits when they are available at a lower
overall cost to us or they can be invested at a positive rate of return.

The following table sets forth information as to our borrowings and the weighted average
interest rate paid on such borrowings at the dates indicated.  For additional information on our
borrowings, see Notes 7 and 8 of the Notes to Consolidated Financial Statements contained in the
Annual Report to Shareholders which is incorporated by reference in Part II, Item 8 of this report.

|                                                 | At March 31,          
|------------------------------------------------ | ----------------------
|                                                 | 2005                  
|                                                 | (Dollars in Thousands)
|Securities sold under agreements to
  repurchase | $ 15,650              
|FHLB advances                                    | 76,000                
|Total Borrowings                                 | $ 91,650              
|Weighted average interest rate of
 borrowings    | 3.11%                 

Information related to short-term borrowing activity from the Federal Home Loan Bank is
as follows:

|At or for the Year Ended March 31,          | 2005    | 2004    | 2003   
|------------------------------------------- | ------- | ------- | -------
|                                           
|Amount outstanding at year end              | $71,000 | $46,000 | $22,000
|Average interest rate on amount at year end | 3.13%   | 1.25%   | 1.57%  
|                                           
|Average amount outstanding during the year  | $61,485 | $27,721 | $23,428
|Average interest rate during the year       | 2.04%   | 1.27%   | 1.78%  
|                                           
|Maximum amount outstanding during the year  | $78,000 | $46,000 | $30,000

**Competition**

---

Community faces strong competition both in originating real estate loans and in attracting
deposits. Competition in originating real estate loans comes primarily from other thrift
institutions, commercial banks and mortgage bankers who also make loans secured by real estate
located in our market area. We compete for real estate loans principally on the basis of our
interest rates and loan fees, the types of loans and the quality of services provided to borrowers.

We face substantial competition in attracting deposits from other thrift institutions, commercial
banks, money market and mutual funds, credit unions and other investment vehicles. Our ability
to attract and retain deposits depends on our ability to provide an investment opportunity that
satisfies the requirements of investors as to rate of return, liquidity, risk and other factors. We
compete for these deposits by offering a variety of deposit accounts at competitive rates and
convenient business hours.

We consider our primary markets for deposits to be Augusta County and Hampton Roads and for
mortgage loans to be Augusta and Rockingham Counties and the Hampton Roads area.  We
estimate that our market share of savings deposits in Augusta County is approximately 10% and
our share of mortgage loans in Augusta and Rockingham Counties is less than 10%. The opening
of an office by the Bank in April, 1997 in Virginia Beach, Virginia expanded the Bank's market
area to the Hampton Roads area of Virginia.

**Regulation**

---

**General.** Community Bank is a federally chartered financial institution, the deposits of which are
federally insured. Accordingly, Community Bank is subject to broad federal regulation and
oversight extending to all its operations. The Bank is a member of the FHLB of Atlanta and is
subject to certain limited regulation by the Board of Governors of the Federal Reserve System
("Federal Reserve Board").  As the savings and loan holding company of Community Bank,
Community Financial also is subject to federal regulation and oversight.

Certain of these regulatory requirements and restrictions are discussed below or elsewhere in this
document.

**Federal Regulation of Savings Associations.** The OTS has extensive authority over the
operations of savings associations. As part of this authority, we are required to file periodic
reports with the OTS and we are subject to periodic examinations by the OTS. When an
examination is conducted by the OTS, the examiners may require us to provide for higher general
or specific loan loss reserves.

**Regulatory Capital Requirements**. Federally insured savings associations, such as Community
Bank, are required to maintain a minimum level of regulatory capital. The OTS has established
capital standards, including a tangible capital requirement, a leverage ratio (or core capital)
requirement and a risk-based capital requirement applicable to such savings associations. These
capital requirements must be generally as stringent as the comparable capital requirements for
national banks. The OTS is also authorized to impose capital requirements in excess of these
standards on individual associations on a case-by-case basis. See Note 11 of the Notes to
Consolidated Financial Statements in our Annual Report to Stockholders which is incorporated
by reference in Part II, Item 8 of this report for information on our regulatory capital levels and
applicable OTS requirements.

The OTS and the FDIC are authorized and, under certain circumstances required, to take certain
actions against savings associations that fail to meet their capital requirements, which can impose
limitations on the operations of the savings association.

**Limitations on Dividends and Other Capital Distributions.** OTS regulations impose various
restrictions on savings associations with respect to their ability to make distributions of capital,
which include dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account.

Generally, savings associations, such as Community Bank that are well capitalized before and
after the proposed distribution meet their capital requirements, may make capital distributions
during any calendar year equal to net income for the current year plus the previous two years net
income, less capital distributions paid over that same period, subject to filing a prior notice with
the OTS.  However, an association deemed to be in need of more than normal supervision by the
OTS may have its dividend authority restricted by the OTS.  Community Bank may pay
dividends in accordance with this general authority. In other circumstances, a savings association
must file an application for prior approval and its ability to pay dividends may be restricted.

**Qualified Thrift Lender Test**. All savings associations, including Community Bank, are
required to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. This test requires a savings association to have at least 65% of its portfolio assets (as
defined by regulation) in qualified thrift investments on a monthly average for nine out of every
12 months on a rolling basis. As an alternative, the savings association may maintain 60% of its
assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code. Under either
test, such assets primarily consist of residential housing related loans and investments. At March
31, 2005, Community Bank met the test and has always met the test since its effective date.

Any savings institution that fails to meet the QTL test must convert to a national bank, unless it
requalifies as a QTL and thereafter remains a QTL. If an institution has not yet requalified or
converted to a national bank, its new investments and activities are limited to those permissible
for both a savings institution and a national bank, and it is limited to national bank branching
rights in its home state. If the institution has not requalified or converted to a national bank
within three years after the failure, it must sell all investments and stop all activities not
permissible for a national bank. If any institution that fails the QTL test is controlled by a holding
company, then within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding companies. See"-Holding Company Regulation."

**Community Reinvestment Act**. Under the Community Reinvestment Act ("CRA"),
every FDIC insured institution has a continuing and affirmative obligation consistent with safe
and sound banking practices to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending requirements
or programs for financial institutions nor does it limit an institution's discretion to develop the
types of products and services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires the OTS, in connection with the examination of
Community Bank, to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications, such as a merger or
the establishment of a branch, by Community Bank. An unsatisfactory rating may be used as the
basis for the denial of an application by the OTS. Community Bank was examined for CRA
compliance in January, 2005 and received a rating of "Satisfactory".****

**Holding Company Regulation.** Community Financial is a unitary savings and loan holding
company subject to regulatory oversight by the OTS. As such, we are required to register and file
reports with the OTS and are subject to regulation and examination by the OTS. In addition, the
OTS has enforcement authority over us and our non-savings association subsidiaries, which also
permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings association.

As a unitary savings and loan holding company that acquired Community Bank before May 4,
1999, we generally are not subject to activity restrictions. If we acquire control of one or more
savings associations as a separate subsidiary, our activities and those of any of our subsidiaries
(other than Community Bank or any other SAIF-insured savings association) would become
subject to such restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.

**Federal and State Taxation**

---

**Federal Taxation.** Savings associations such as Community Bank that meet certain definitional
tests relating to the composition of assets and other conditions prescribed by the Internal Revenue
Code of 1986, as amended (the "Code"), had been permitted to establish reserves for bad debts
and to make annual additions thereto which could, within specified formula limits, be taken as a
deduction in computing taxable income for federal income tax purposes. The amount of the bad
debt reserve deduction for "non-qualifying loans" was computed under the experience method.
The amount of the bad debt reserve deduction is now actual net charge-offs. As a result, the Bank
must recapture as taxable income that portion of the reserve that exceeds the amount that could
have been taken under the experience method for post- 1987 tax years. At March 31, 2005,
Community Bank's had no excess reserves to be recaptured.

In addition to the regular income tax, corporations, including savings associations such as
Community Bank, generally are subject to a minimum tax. An alternative minimum tax is
imposed at a minimum tax rate of 20% on alternative minimum taxable income, which is the
sum of a corporation's regular taxable income (with certain adjustments) and tax preference
items, less any available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset no more than
90% of alternative minimum taxable income.

To the extent earnings appropriated to a savings association's bad debt reserves for "qualifying
real property loans" and deducted for federal income tax purposes exceed the allowable amount
of such reserves computed under the experience method and to the extent of the association's
supplemental reserves for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other distributions to a
shareholder (including distributions on redemption, dissolution or liquidation) or for any other
purpose (except to absorb bad debt losses).

Community Financial and Community Bank file consolidated federal income tax returns
on a fiscal year basis. Savings associations, such as the Community Bank, that file federal
income tax returns as part of a consolidated group are required by applicable Treasury regulations
to reduce their taxable income for purposes of computing the percentage bad debt deduction for
losses attributable to activities of the non-savings association members of the consolidated group
that are functionally related to the activities of the savings association member.

Our federal income tax returns and our consolidated subsidiary for the last three years are open to
possible audit by the Internal Revenue Service (the "IRS"). In the opinion of management, any
examination of still open returns (including returns of subsidiaries and predecessors of, or entities
merged into, Community Bank) would not result in a deficiency which could have a material
adverse effect on the financial condition of Community Financial and our consolidated
subsidiaries.

**Virginia Taxation**. We conduct our business in Virginia and consequently are subject to the
Virginia corporate income tax. The Commonwealth of Virginia imposes a corporate income tax
on a basis similar to federal income tax at a rate of 6% on Virginia taxable income.

**Executive Officers**

---

The following information as to the business experience during the past five years is supplied
with respect to executive officers of Community Financial. Except as otherwise indicated, the
persons named have served as officers of Community Financial since it became the holding
company of Community Bank, and all offices and positions described below are also with
Community Bank. There are no arrangements or understandings between the persons named and
any other person pursuant to which such officers were selected.

P. Douglas Richard, age 61, is President and Chief Executive Officer of the Company. He was
appointed in April, 2000 and was previously a Senior Vice President and Regional President of
the Hampton Roads division. Prior to joining the Company, Mr. Richard was Chief Executive
Officer of Seaboard Savings Bank in Virginia Beach, Virginia.

R. Jerry Giles, age 56, is our Chief Financial Officer and Senior Vice President. He was
appointed in April 1994. Prior to joining the Company, Mr. Giles was a Certified Public
Accountant in public accounting and the Chief Financial Officer with a savings bank for eleven
years.

Chris P. Kyriakides, age 42, is our Senior Vice President and Regional President, a position he
has held since January, 1997.  Prior to joining the Company, Mr. Kyriakides was Chief
Operations Officer of Seaboard Savings Bank in Virginia Beach, Virginia.

Benny N. Werner, age 56, is our Senior Vice President of Retail Banking, a position he has held
since May 1998. Prior to joining the Company, Mr. Werner was employed by Crestar for three
years as President-Warrenton area and employed by Jefferson Savings and Loan, Warrenton,
Virginia as Senior Vice President of Retail Banking for seventeen years.

Norman C. Smiley, III., age 43, is our Chief Lending Officer and Senior Vice President, a
position he has held since November 2000. We have employed Mr. Smiley since April 1996.
Prior to joining the Company, Mr. Smiley was a Branch Manager for First Virginia where he was
employed for 14 years.

**Employees**

---

At March 31, 2005, we had a total of 138 employees, including 26 hourly employees. None of
our employees are represented by any collective bargaining group. Management considers our
employee relations to be good.

**Item  2.  Properties**

---

The following table sets forth information at March 31, 2005, with respect to our offices,
furniture and equipment.  We believe that our current facilities are adequate to meet our present
and foreseeable need.

|Location                                        | Opened | Owned orLeaseExpiration | Gross SquareFootage | Net Book Valueat March 31,2005
|----------------------------------------------- | ------ | ----------------------- | ------------------- | ------------------------------
|38 North Central AvenueStaunton, Virginia       | 1965   | Owned                   | 17,000              | $1,463,000                    
|Rte 250 West
Waynesboro, Virginia               | 1989   | Owned                   | 5,300               | 663,000                       
|Route 340 and 608
Stuarts Draft, Virginia       | 1993   | Owned                   | 3,000               | 1,049,000                     
|5300 Kemps River Drive
Virginia Beach, Virginia | 1997   | 2007                    | 2,400               | 54,000                        
|621 Nevan Road
Virginia Beach, Virginia         | 1998   | 2038                    | 13,000              | 935,000                       
|101 Community Way
Staunton, Virginia            | 1999   | 2039                    | 4,500               | 678,000                       
|2134 Raphine Road,
Raphine, Virginia            | 2001   | 2006                    | 2,308               | 50,000                        
|21 Dick Huff LaneVerona, Virginia               | 2002   | Owned                   | 3,850               | 1,431,000                     
|123 West Frederick StreetStaunton, Virginia     | 2003   | Owned                   | 22,000              | 1,523,000                     

Our accounting and record-keeping activities are maintained on an in-house computer system.
The net book value of our computer equipment at March 31, 2005 was $99,675.

**Item 3.  Legal Proceedings**

---

There are no material pending legal proceedings to which we or our subsidiary is a party
or to which any of our property is subject.

**Item 4.  Submission of Matters to a Vote of Security Holders**

---

No matter was submitted to a vote of security holders, through the solicitation of proxies or
otherwise, during the quarter ended March 31, 2005.

**PART II**

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

---

The information contained under the caption "Common Stock" on page 36 of the Registrant's
Annual Report to Stockholders attached hereto as Exhibit 13 is incorporated herein by reference.
In addition, the Equity Compensation Plan information contained in Part III, Item 12 of this Form
10-K is incorporated herein by reference. No stock was repurchased by the Company during the
fourth quarter of fiscal 2005.

**Item 6. Selected Financial Data**

---

The Selected Consolidated Financial Data on page 3 in the Registrant's Annual Report to
Stockholders attached hereto as Exhibit 13 is incorporated herein by reference.

**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation**

---

The information under the caption "Management's Discussion and Analysis" on pages 5 through
12 of the Registrant's Annual Report to Stockholders attached hereto as Exhibit 13 is
incorporated herein by reference.

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk**

---

The information under the caption "Management's Discussion and Analysis" on pages 5 through
12 of the Registrant's Annual Report to Stockholders attached hereto as Exhibit 13 is
incorporated herein by reference.

**Item 8.  Financial Statements and Supplementary Data**

---

The Financial Statements on pages 13 through 35 in the Registrant's Annual Report to
Stockholders attached hereto as Exhibit 13 is incorporated herein by reference.

**Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**

---

There has been no current report on Form 8-K filed within 48 months prior to the date of the
most recent financial statements reporting a change in accountants and/or reporting
disagreements on any matter of accounting principle on financial statements disclosure.

**Item 9A.  Controls and Procedures**

---

An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
of the Securities Exchange Act of 1934 (the "Act")) as of March 31, 2005, was carried out under
the supervision and with the participation of the Company's Chief Executive Officer, Chief
Financial Officer and several other members of the Company's senior management. The
Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures currently in effect are effective in ensuring that the
information required to be disclosed by the Company in the reports it files or submits under the
Act is: (i) accumulated and communicated to the Company's management (including the Chief
Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and forms. In
addition, there have been no changes in our internal control over financial reporting (as defined
in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2005, that has
materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.

The Company does not expect that its disclosure controls and procedures and internal control
over financial reporting will prevent all error and all fraud. A control procedure, no matter how
well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control procedure are met. Because of the inherent limitations in all control
procedures, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls may be circumvented by the
individual acts of some persons, by collusion of two or more people, or by override of the
control. The design of any control procedure also is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control
procedure, misstatements due to error or fraud may occur and not be detected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and annually
report on their systems of internal control over financial reporting. In addition, our independent
accountants must report on management's evaluation. We are in the process of evaluating,
documenting and testing our system of internal control over financial reporting to provide the
basis for our report that will, for the first time, be a required part of our annual report on Form
10-K for the fiscal year ending March 31, 2006. Due to the ongoing evaluation and testing of our
internal controls, there can be no assurance that if any control deficiencies are identified they will
be remediated before the end of the 2006 fiscal year, or that there will not be significant
deficiencies or material weaknesses that would be required to be reported.

**Item 9B.  Other Information**

---

None.

**PART III**

Item 10.  Directors and Executive Officers of the Registrant

---

Directors and Executive Officers

Information concerning directors of the Registrant is incorporated herein by reference from our
definitive Proxy Statement for the 2005 Annual Meeting of Stockholders, copy of which will be
filed not later than 120 days after the close of the fiscal year.

Information concerning executive officers is set forth in Part I of this report under the caption
"Executive Officers."

Compliance with Section 16(a)

Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is
incorporated herein by reference from our definitive Proxy Statement for the 2005 Annual
Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of
the fiscal year.

Audit Committee Financial Expert

Information concerning the audit committee of the Company's Board of Directors,
including information regarding audit committee financial experts serving on the audit
committee, is incorporated herein by reference from the definitive Proxy Statement for the 2005
Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the
close of the fiscal year.

Code of Ethics

The Company has adopted a written Code of Ethics based upon the standards set forth
under Item 406 of Regulation S-K of the Securities Exchange Act.  The Code of Ethics applies to
all of the Company's directors, officers and employees.  A copy of the Company's Code of
Ethics was filed with the SEC as Exhibit 14 to its Annual Report on Form 10-KSB for the year
ended March 31, 2004.  You may obtain a copy of the Code of Ethics free of charge from the
Company by writing to the Secretary of Community Financial Corporation at 38 North Central
Avenue, Staunton, Virginia 24401, or by calling (540) 885-0993

**Item 11.  Executive Compensation**

---

Information concerning executive compensation is incorporated herein by reference from our
definitive Proxy Statement for the 2005 Annual Meeting of Stockholders, a copy of which will
be filed not later than 120 days after the close of the fiscal year.

**Item 12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters**

---

Information concerning security ownership of certain beneficial owners and management is
incorporated herein by reference from our definitive Proxy Statement for the 2005 Annual
Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of
the fiscal year.

The following table summarizes our equity compensation plans as of March 31, 2005.

Equity Compensation Plans

|Plan Category                                            | Number of securities
to be issued upon
exercise of out-standing options,
warrants and rights | Weighted-average
exercise price of
outstanding options,
warrants and rights | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(1))
|-------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------
|                                                        
|Equity compensation plans approved by security holders   | 301,650                                                                                      | $15.32                                                                      | 14,700                                                                                                                                     
|                                                         |                                                                                              |                                                                             |                                                                                                                                            
|Equity compensationplans not approvedby security holders | 0                                                                                            | 0                                                                           | 0                                                                                                                                          
|                                                         |                                                                                              |                                                                             |                                                                                                                                            
|Total                                                    | 301,650                                                                                      | $15.32                                                                      | 14,700                                                                                                                                     

The number of shares available for issuance are adjusted for changes in capitalization due to
reorganization, recapitalization, stock splits, stock dividends combination or exchange of shares,
merger, consolidation or any change in the corporate structure.

**Item 13.  Certain Relationships and Related Transactions**

---

Information concerning certain relationships and transactions is incorporated herein by reference
from our definitive Proxy Statement for the 2005 Annual Meeting of Stockholders, a copy of
which will be filed not later than 120 days after the close of the fiscal year.

**Item 14. Principal Accountant Fees and Services**

---

Information concerning fees and services by our principal accountants is incorporated herein by
reference from our definitive Proxy Statement for the 2005 Annual Meeting of Stockholders, a
copy of which will be filed not later than 120 days after the close of the fiscal year.

**PART IV**

Item 15. Exhibits, Financial Statement Schedules

---

See Exhibit Index.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) 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.

|                        | ***COMMUNITY FINANCIAL CORPORATION***
|----------------------- | -------------------------------------
|                       
|Date:     June 29, 2005 | By:                                  

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

|By:   | /s/ P. Douglas Richard

P. Douglas Richard
President and Chief
Executive Officer
(Principal Executive Officer) | By:   | /s/ James R. Cooke, Jr.

James R. Cooke, Jr.
Chairman of the Board
and Director
|----- | -------------------------------------------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------------
|Date: | June 29, 2005                                                                                                  | Date: | June 29, 2005                                                                  
|By:   | /s/ Jane C. Hickok

Jane C. Hickok
Vice Chairman of the Board
and Director                                     | By:   | /s/ Charles F. Andersen

Charles F. Andersen
Director                          
|Date: | June 29, 2005                                                                                                  | Date: | June 29, 2005                                                                  
|By:   | /s/ Dale C. Smith

Dale C. Smith
Director                                                                      | By:   | /s/ Morgan N. Trimyer, Jr.

Morgan N. Trimyer, Jr.
Director                    
|Date: | June 29, 2005                                                                                                  | Date: | June 29, 2005                                                                  
|By:   | /s/ R. Jerry Giles

R. Jerry Giles
Chief Financial Officer
(Principal Financial and
Accounting Officer)        | By:   | /s/ Charles W. Fairchilds
Charles W. Fairchilds
Director                       
|Date: | June 29, 2005                                                                                                  | Date: | June 29, 2005                                                                  

**INDEX TO EXHIBITS**

|**RegulationS-B ExhibitNumber** | **Document**                                                                                                                                                                                                                                                                                               
|------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                               
|3.1                             | Amended and Restated Articles of Incorporation, filed on July 5, 1996 as an
exhibit to the Registrant's Definitive Proxy Statement on Schedule 14A (SEC
File No. 000-18265), are incorporated herein by reference.                                                                                         
|3.2                             | Bylaws, as amended and currently in effect.                                                                                                                                                                                                                                                                
|4                               | Registrant's Specimen Common Stock Certificate, filed on June 29, 1999, as
Exhibit 10 to the Annual Report on Form 10-K (SEC File No. 000-18265) for the
fiscal year ended March 31, 1999, is incorporated herein by reference.                                                                            
|10.1                            | Registrant's Stock Option and Incentive Plan, filed on May 19, 1989 as an
exhibit to the Registrant's Registration Statement on Form S-4 (SEC File No.
33-28817), is incorporated herein by reference.                                                                                                     
|10.2                            | Employment Agreement by and between Community Bank and P. Douglas
Richard, filed on August 14, 2002 as an exhibit to the Registrant's Quarterly
Report on Form 10-Q (SEC File No. 000-18265) for the quarter ended September
30, 2000, is incorporated herein by reference.                                
|10.3                            | Amendments No. One and Two to the Employment Agreement between the
Bank and P. Douglas Richard, filed on August 14, 2002 as exhibits to the
Registrant's Quarterly Report on Form 10-Q (SEC File No. 000-18265) for the
quarter ended June 30, 2002, are incorporated herein by reference.                 
|10.4                            | Registrant's 1996 Incentive Plan, filed on July 5, 1996 as an exhibit to the
Registrant's Definitive Proxy Statement on Schedule 14A (SEC File No.
000-18265), is incorporated herein by reference.                                                                                                        
|10.5                            | Employment Agreement by and between Community Bank and Chris P.
Kyriakides, as amended, filed on August 14, 2002 as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (SEC File No. 000-18265) for the
quarter ended June 30, 2002, is incorporated herein by reference.                        
|10.6                            | Severance Agreements by and between Community Bank and each of R. Jerry
Giles, Norman C. Smiley, Benny N. Werner, filed on June 30, 2003 as exhibit to
the Registrant's Annual Report on Form 10-K (SEC File No. 000-18265) for the
fiscal year ended March 31, 2003, are incorporated herein by reference.
|10.7                            | Amendments to the Severance Agreements by and between the Bank and each of
R. Jerry Giles, Norman C. Smiley, III  and Benny N. Werner.                                                                                                                                                                     

**INDEX TO EXHIBITS (Continued)**

|**RegulationS-B ExhibitNumber** | **Document**                                                                                                                                                                                                                                                                                                       
|------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                               
|10.8                            | Retirement Agreements by and between Community Bank and Non-Employee
Directors filed on June 29, 2004 as an exhibit to the Registrant's Annual Report
on Form 10-KSB (SEC File No. 000-18265) for the fiscal year ended March 31,
2004, and incorporated here by reference.                                        
|10.9                            | Form of First Amendment to the Retirement Agreements by and between
Community Bank and Non-Employee Directors.                                                                                                                                                                                                     
|10.10                           | Salary Continuance Agreements by and between Community Bank and Officers
Richard, Kyriakides, Giles, Smiley and Werner filed on June 29, 2004 as an
exhibit to the Registrant's Annual Report on Form 10-KSB (SEC File No. 000-18265) for the fiscal year ended March 31, 2004, and incorporated here by
reference.
|10.11                           | Form of Director Deferred Fee Agreement, as amended.                                                                                                                                                                                                                                                               
|11                              | Statement re computation of per share earnings (see Note 12 of the Notes to
Consolidated Financial Statements included in the Annual Report to
Stockholders filed as Exhibit 13 to this Annual Report on Form 10-K).                                                                                               
|13                              | Annual Report to Security Holders.                                                                                                                                                                                                                                                                                 
|14                              | Code of Ethics, filed on June 29, 2004 as an exhibit to the Registrant's Annual
Report on Form 10-KSB (SEC File No. 000-18265) for the fiscal year ended
March 31, 2004, and incorporated here by reference.                                                                                                       
|21                              | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                    
|23                              | Consent of Independent Auditors.                                                                                                                                                                                                                                                                                   
|31.1                            | Rule 13(a)-14(a) Certification (Chief Executive Officer).                                                                                                                                                                                                                                                          
|31.2                            | Rule 13(a)-14(a) Certification (Chief Financial Officer).                                                                                                                                                                                                                                                          
|32                              | Section 1350 Certifications