##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission File No. 0 -18279
 TRI-COUNTY FINANCIAL CORPORATION
  Maryland
    
    52-1652138(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)3035 Leonardtown Road, Waldorf, Maryland
    
    20601(Address of principal executive offices)
    
    (Zip Code)
 (301) 645-5601
 None
  Common Stock, par value $0.01 per share
 o þ
 o þ
 þ o
 þ
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 1.
    
    Portions of the Annual Report to Stockholders for the year
ended December 31, 2008. (Part II)2.
    
    Portions of the Proxy Statement for the 2009 Annual Meeting of Stockholders. (Part III)




---



##### 



INDEX
 PagePart IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    22Item 1B. Unresolved Staff Comments
    
    
    25Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Securities Holders
    
    
    26Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    27Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    28Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 8. Financial Statements and Supplementary Data
    
    
    28Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    28Item 9A(T) Controls and Procedures
    
    
    29Item 9B. Other Information
    
    
    29Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    29Item 11. Executive Compensation
    
    
    30Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    30Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    31Item 14. Principal Accountant Fees and Services
    
    
    31Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    31EX-10.20EX-13EX-21EX-23EX-31.1EX-31.2EX-32
  i




---



##### Table of Contents



PART I
 This report contains certain forward-looking statements within the meaning of the federal
securities laws. These statements are not historical facts, rather statements based on Tri-County
Financial Corporations current expectations regarding its business strategies, intended results
and future performance. Forward-looking statements are preceded by terms such as expects,
believes, anticipates, intends and similar expressions.
 Managements ability to predict results or the effect of future plans or strategies is
inherently uncertain. Factors that could affect actual results include interest rate trends, the
general economic climate in the market area in which Tri-County Financial Corporation operates, as
well as nationwide, Tri-County Financial Corporations ability to control costs and expenses,
competitive products and pricing, loan delinquency rates and changes in federal and state
legislation and regulation. These factors should be considered in evaluating the forward-looking
statements and undue reliance should not be placed on such statements. Tri-County Financial
Corporation assumes no obligation to update any forward-looking statement after the date of the
statements or to reflect the occurrence of anticipated or unanticipated events.
 
 Item 1. Business
    Available Information
  Market Area
  1




---



##### Table of Contents



Competition
  Lending Activities
 General.
 Residential First Mortgage Loans.
   2




---



##### Table of Contents



Commercial Real Estate and Other Non-Residential Real Estate Loans.
  Construction and Land Development Loans.
 3




---



##### Table of Contents



Home Equity and Second Mortgage Loans.
  Commercial Loans.
 4




---



##### Table of Contents



Consumer Loans.
 Commercial Equipment Loans.
 5




---



##### Table of Contents



Loan Portfolio Analysis.
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in Thousands)Real Estate LoansCommercial
    
    $
    236,410
    
    
    
    43.11
    %
    
    $
    190,484
    
    
    
    41.55
    %
    
    $
    181,933
    
    
    
    42.63
    %
    
    $
    170,096
    
    
    
    45.53
    %
    
    $
    137,983
    
    
    
    47.07
    %Residential first mortgage
    
    
    104,607
    
    
    
    19.07
    %
    
    
    90,932
    
    
    
    19.83
    %
    
    
    80,781
    
    
    
    18.93
    %
    
    
    73,628
    
    
    
    19.71
    %
    
    
    59,087
    
    
    
    20.16
    %Construction and land development
    
    
    57,565
    
    
    
    10.50
    %
    
    
    50,577
    
    
    
    11.03
    %
    
    
    41,715
    
    
    
    9.77
    %
    
    
    31,450
    
    
    
    8.42
    %
    
    
    17,598
    
    
    
    6.00
    %Home equity and second mortgage
    
    
    25,412
    
    
    
    4.63
    %
    
    
    24,650
    
    
    
    5.38
    %
    
    
    24,572
    
    
    
    5.76
    %
    
    
    25,884
    
    
    
    6.93
    %
    
    
    23,925
    
    
    
    8.16
    %Commercial loans
    
    
    101,936
    
    
    
    18.59
    %
    
    
    75,247
    
    
    
    16.41
    %
    
    
    76,651
    
    
    
    17.96
    %
    
    
    52,651
    
    
    
    14.09
    %
    
    
    37,495
    
    
    
    12.79
    %Consumer loans
    
    
    2,046
    
    
    
    0.37
    %
    
    
    2,465
    
    
    
    0.54
    %
    
    
    2,813
    
    
    
    0.66
    %
    
    
    3,128
    
    
    
    0.84
    %
    
    
    3,463
    
    
    
    1.18
    %Commercial equipment
    
    
    20,458
    
    
    
    3.73
    %
    
    
    24,113
    
    
    
    5.26
    %
    
    
    18,288
    
    
    
    4.29
    %
    
    
    16,742
    
    
    
    4.48
    %
    
    
    13,596
    
    
    
    4.64
    %Total loans
    
    
    548,434
    
    
    
    100.00
    %
    
    
    458,468
    
    
    
    100.00
    %
    
    
    426,754
    
    
    
    100.00
    %
    
    
    373,579
    
    
    
    100.00
    %
    
    
    293,147
    
    
    
    100.00
    %Less: Deferred loan fees
    
    
    311
    
    
    
    
    
    
    
    371
    
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    604
    
    
    
    
    
    
    
    764Loan loss reserve
    
    
    5,146
    
    
    
    
    
    
    
    4,482
    
    
    
    
    
    
    
    3,784
    
    
    
    
    
    
    
    3,383
    
    
    
    
    
    
    
    3,058Loans receivable, net
    
    $
    542,977
    
    
    
    
    
    
    $
    453,614
    
    
    
    
    
    
    $
    422,480
    
    
    
    
    
    
    $
    369,592
    
    
    
    
    
    
    $
    289,325
 6




---



##### Table of Contents



Loan Originations, Purchases and Sales.
 Loan Approvals, Procedures and Authority.
  Loans to One Borrower.
 Loan Commitments.
 7




---



##### Table of Contents



Maturity of Loan Portfolio.
 Due within one
    
    
    Due after one year through
    
    
    Due more thanyear after
    
    
    five years from
    
    
    five years fromDecember 31, 2008
    
    
    December 31, 2008
    
    
    December 31, 2008(In thousands)Real Estate LoansCommercial
    
    $
    48,929
    
    
    $
    44,578
    
    
    $
    142,903Residential first mortgage
    
    
    5,141
    
    
    
    17,656
    
    
    
    81,810Construction and land development
    
    
    55,445
    
    
    
    2,120
    
    
    
    Home equity and second mortgage
    
    
    15,883
    
    
    
    2,973
    
    
    
    6,556Commercial lines of credit
    
    
    101,936
    
    
    
    
    
    
    
    Consumer loans
    
    
    702
    
    
    
    1,036
    
    
    
    308Commercial equipment
    
    
    6,197
    
    
    
    10,501
    
    
    
    3,760Total loans
    
    $
    234,233
    
    
    $
    78,864
    
    
    $
    235,337
  Floating orFixed Rates
    
    
    Adjustable Rates
    
    
    Total(In thousands)Real Estate LoansCommercial
    
    $
    31,576
    
    
    $
    155,905
    
    
    $
    187,481Residential first mortgage
    
    
    92,006
    
    
    
    7,460
    
    
    
    99,466Construction and land
development
    
    
    
    
    
    
    2,120
    
    
    
    2,120Home equity and second
mortgage
    
    
    9,530
    
    
    
    
    
    
    
    9,530Commercial lines of credit
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    1,343
    
    
    
    
    
    
    
    1,343Commercial equipment
    
    
    14,261
    
    
    
    
    
    
    
    14,261$
    148,716
    
    
    $
    165,485
    
    
    $
    314,201
 Delinquencies.
 Non-Performing Assets and Asset Classification.
 8




---



##### Table of Contents



Foreclosed Real Estate.
 Delinquent and Nonaccrual Loans.
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Loans accounted for on a nonaccrual basis:Real Estate LoansCommercial
    
    $
    1,208
    
    
    $
    
    
    
    $
    390
    
    
    $
    
    
    
    $
    Residential first mortgage
    
    
    
    
    
    
    274
    
    
    
    273
    
    
    
    273
    
    
    
    273Construction and land development
    
    
    1,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and second mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    Commercial loans
    
    
    903
    
    
    
    60
    
    
    
    303
    
    
    
    258
    
    
    
    393Consumer loans
    
    
    148
    
    
    
    80
    
    
    
    80
    
    
    
    7
    
    
    
    9Commercial equipment
    
    
    837
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,936
    
    
    
    414
    
    
    
    1,046
    
    
    
    591
    
    
    
    675Total non-performing loans
    
    $
    4,936
    
    
    $
    414
    
    
    $
    1,046
    
    
    $
    591
    
    
    $
    675
  9




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in Thousands)Balance at beginning of period
    
    $
    4,482
    
    
    $
    3,784
    
    
    $
    3,383
    
    
    $
    3,058
    
    
    $
    2,573Charge-offs:Real Estate LoansCommercial
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    Construction and land development
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and second mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial loans
    
    
    202
    
    
    
    73
    
    
    
    
    
    
    
    3
    
    
    
    1Consumer loans
    
    
    67
    
    
    
    56
    
    
    
    8
    
    
    
    2
    
    
    
    3Commercial equipment
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    14Total Charge-offs:
    
    
    639
    
    
    
    158
    
    
    
    8
    
    
    
    9
    
    
    
    17Recoveries:Residential first mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33Consumer loans
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    
    
    
    
    9Commercial equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    8Total Recoveries
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    5
    
    
    
    49Net charge-offs
    
    
    637
    
    
    
    156
    
    
    
    5
    
    
    
    4
    
    
    
    (32
    )Provision for Possible Loan Losses
    
    
    1,301
    
    
    
    855
    
    
    
    406
    
    
    
    329
    
    
    
    453Balance at End of Period
    
    $
    5,146
    
    
    $
    4,482
    
    
    $
    3,784
    
    
    $
    3,383
    
    
    $
    3,058
 10




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent ofof Loans
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    Loans inin Each
    
    
    
    
    
    
    in Each
    
    
    
    
    
    
    in Each
    
    
    
    
    
    
    in Each
    
    
    
    
    
    
    EachCategory
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Categoryto Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans(Dollars in thousands)Real Estate LoansCommercial
    
    $
    2,009
    
    
    
    43.11
    %
    
    $
    1,739
    
    
    
    41.55
    %
    
    $
    1,479
    
    
    
    42.63
    %
    
    $
    1,466
    
    
    
    45.53
    %
    
    $
    1,909
    
    
    
    47.07
    %Residential first mortgage
    
    
    105
    
    
    
    19.07
    %
    
    
    266
    
    
    
    19.83
    %
    
    
    97
    
    
    
    18.93
    %
    
    
    73
    
    
    
    19.71
    %
    
    
    59
    
    
    
    20.16
    %Construction and land development
    
    
    1,295
    
    
    
    10.50
    %
    
    
    1,125
    
    
    
    11.03
    %
    
    
    662
    
    
    
    9.77
    %
    
    
    502
    
    
    
    8.42
    %
    
    
    132
    
    
    
    6.00
    %Home equity and second mortgage
    
    
    102
    
    
    
    4.63
    %
    
    
    98
    
    
    
    5.38
    %
    
    
    104
    
    
    
    5.76
    %
    
    
    109
    
    
    
    6.93
    %
    
    
    120
    
    
    
    8.16
    %Commercial loans
    
    
    1,248
    
    
    
    18.59
    %
    
    
    930
    
    
    
    16.41
    %
    
    
    1,135
    
    
    
    17.96
    %
    
    
    709
    
    
    
    14.09
    %
    
    
    530
    
    
    
    12.79
    %Consumer loans
    
    
    43
    
    
    
    0.37
    %
    
    
    96
    
    
    
    0.54
    %
    
    
    126
    
    
    
    0.66
    %
    
    
    124
    
    
    
    0.84
    %
    
    
    138
    
    
    
    1.18
    %Commercial equipment
    
    
    344
    
    
    
    3.73
    %
    
    
    228
    
    
    
    5.26
    %
    
    
    181
    
    
    
    4.29
    %
    
    
    400
    
    
    
    4.48
    %
    
    
    170
    
    
    
    4.64
    %Total allowance for loan losses
    
    $
    5,146
    
    
    
    100.00
    %
    
    $
    4,482
    
    
    
    100.00
    %
    
    $
    3,784
    
    
    
    100.00
    %
    
    
    3,383
    
    
    
    100.00
    %
    
    
    3,058
    
    
    
    100.00
    %
 11




---



##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of
OperationsCritical Accounting Policies
 Investment Activities
   (In thousands)At December 31,2008
    
    
    2007
    
    
    2006Asset-backed securities:Freddie Mac and Fannie Mae
    
    $
    93,049
    
    
    $
    72,072
    
    
    $
    72,602Other
    
    
    25,150
    
    
    
    25,283
    
    
    
    29,956Total asset-backed securities
    
    
    118,199
    
    
    
    97,355
    
    
    
    102,558Corporate Equity Securities
    
    
    157
    
    
    
    251
    
    
    
    342Bond mutual funds
    
    
    3,560
    
    
    
    3,390
    
    
    
    3,262Treasury bills
    
    
    1,000
    
    
    
    799
    
    
    
    800Other Investments
    
    
    17
    
    
    
    37
    
    
    
    145Total investment securities
    
    
    122,933
    
    
    
    101,832
    
    
    
    107,107FHLB and Federal Reserve Bank stock
    
    
    6,453
    
    
    
    5,355
    
    
    
    6,100Total investment securities and FHLB
and Federal Reserve Bank stock
    
    $
    129,386
    
    
    $
    107,187
    
    
    $
    113,207
 12




---



##### Table of Contents



After One
    
    
    After FiveOne Year or Less
    
    
    Through Five Years
    
    
    Through Ten Years
    
    
    After Ten YearsAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield(Dollars in thousands)Investment securities available
for sale:Corporate equity securities
    
    $
    156
    
    
    
    1.12
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %Asset-backed securities
    
    
    2,053
    
    
    
    5.30
    %
    
    
    5,146
    
    
    
    5.27
    %
    
    
    2,445
    
    
    
    5.36
    %
    
    
    570
    
    
    
    5.92
    %Mutual Funds
    
    
    3,503
    
    
    
    4.19
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total investment
securities
available for sale
    
    $
    5,712
    
    
    
    4.51
    %
    
    $
    5,146
    
    
    
    5.27
    %
    
    $
    2,445
    
    
    
    5.36
    %
    
    $
    570
    
    
    
    5.92
    %Investment securities held-to-
maturity:Asset-backed securities
    
    $
    36,205
    
    
    
    5.12
    %
    
    $
    54,646
    
    
    
    5.12
    %
    
    $
    15,459
    
    
    
    5.37
    %
    
    $
    1,385
    
    
    
    6.29
    %Treasury bills
    
    
    1,000
    
    
    
    0.22
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Other investments
    
    
    
    
    
    
    0.00
    %
    
    
    17
    
    
    
    3.26
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total investment
securities
held-to-maturity
    
    $
    37,205
    
    
    
    4.99
    %
    
    $
    54,663
    
    
    
    5.12
    %
    
    $
    15,459
    
    
    
    5.37
    %
    
    $
    1,385
    
    
    
    6.29
    %
  Deposits and Other Sources of Funds
 General.
 Deposits.
 13




---



##### Table of Contents



For the Year Ended December 31,(Dollars in thousands)2008
    
    
    2007
    
    
    2006Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateSavings
    
    $
    26,434
    
    
    
    0.59
    %
    
    $
    28,391
    
    
    
    0.97
    %
    
    $
    34,570
    
    
    
    1.18
    %Interest-bearing demand and
money market accounts
    
    
    132,512
    
    
    
    1.75
    %
    
    
    137,001
    
    
    
    3.00
    %
    
    
    104,410
    
    
    
    2.92
    %Certificates of deposit
    
    
    268,363
    
    
    
    3.93
    %
    
    
    222,769
    
    
    
    4.72
    %
    
    
    204,675
    
    
    
    4.21
    %Total interest-bearing deposits
    
    
    427,310
    
    
    
    
    
    
    
    388,161
    
    
    
    3.84
    %
    
    
    343,655
    
    
    
    3.51
    %Noninterest-bearing demand deposits
    
    
    42,955
    
    
    
    
    
    
    
    45,969
    
    
    
    
    
    
    
    42,030$
    470,265
    
    
    
    2.77
    %
    
    $
    434,130
    
    
    
    3.43
    %
    
    $
    385,685
    
    
    
    3.13
    %
  Certificatesof DepositMaturity Period
    
    (In thousands)Three months or less
    
    $
    36,310Three through six months
    
    
    12,779Six through twelve months
    
    
    35,650Over twelve months
    
    
    30,928Total
    
    $
    115,667
 Borrowings.
 At or for the Year Ended December 31,(dollars in thousands)2008
    
    
    2007
    
    
    2006Long-term debtLong-term debt outstanding at end of period
    
    $
    104,963
    
    
    $
    86,005
    
    
    $
    96,046Weighted average rate on outstanding long-term debt at end of period
    
    
    3.81
    %
    
    
    4.45
    %
    
    
    4.42
    %Maximum outstanding long-term debt of any month end
    
    
    104,998
    
    
    
    96,042
    
    
    
    108,078Average outstanding long-term debt, during period
    
    
    102,112
    
    
    
    86,993
    
    
    
    101,520Approximate average rate paid on long-term debt during period
    
    
    4.09
    %
    
    
    4.49
    %
    
    
    4.42
    %Short-term debtShort-term debt outstanding at end of period at end of period
    
    $
    1,522
    
    
    $
    1,555
    
    
    $
    6,568Weighted average rate on short-term debt at end of period
    
    
    1.83
    %
    
    
    3.58
    %
    
    
    5.08
    %Maximum outstanding short-term debt at any month end during
period
    
    $
    20,943
    
    
    $
    5,555
    
    
    $
    37,590Average outstanding short-term debt
    
    
    4,355
    
    
    
    2,902
    
    
    
    18,129Approximate average rate paid on short-term debt
    
    
    3.59
    %
    
    
    3.51
    %
    
    
    4.99
    %
  14




---



##### Table of Contents



Subsidiary Activities
   SUPERVISION AND REGULATION
 Regulation of the Company
 General.
   15




---



##### Table of Contents



16




---



##### Table of Contents



Dividends.
 Stock Repurchases.
 Capital Requirements.
 Regulation of the Bank
 General.
   17




---



##### Table of Contents



Capital Adequacy.
      18




---



##### Table of Contents



Branching. de novo
 Dividend Limitations.
  Insurance of Deposit Accounts.
  19




---



##### Table of Contents



Transactions with Affiliates.
 Loans to Directors, Executive Officers and Principal Stockholders.
 Enforcement.
  20




---



##### Table of Contents



Personnel
  Executive Officers of the Registrant
  Michael L. Middleton
 Gregory C. Cockerham
 William J. Pasenelli
 James M. Burke
 James F. DiMisa
 21




---



##### Table of Contents



Item 1A. Risk Factors
 An investment in shares of our common stock involves various risks. Our business, financial
condition and results of operations could be harmed by any of the following risks or by other risks
that have not been identified or that we may believe are immaterial or unlikely. The value or
market price of our common stock could decline due to any of these risks, and you may lose all or
part of your investment. The risks discussed below also include forward-looking statements, and
our actual results may differ substantially from those discussed in these forward-looking
statements.
 Higher loan losses could require us to increase our allowance for loan losses through a charge to
earnings.
  Certain interest rate movements may hurt our earnings.
  Our increased emphasis on commercial and construction lending may expose us to increased lending
risks.
  22




---



##### Table of Contents



The limitations on executive compensation imposed through our participation in the Capital Purchase
Program may restrict our ability to attract, retain and motivate key employees, which could
adversely affect our operations.
  The terms governing the issuance of the preferred stock to Treasury may be changed, the effect of
which may have an adverse effect on our operations.
  Strong competition within our market area could hurt our profits and slow growth.
  If the value of real estate in Southern Maryland were to decline materially, a significant portion
of our loan portfolio could become under-collateralized, which could have a material adverse effect
on us.
  Our business is subject to the success of the local economy in which we operate.
  23




---



##### Table of Contents



The trading history of our common stock is characterized by low trading volume. Our common stock
may be subject to sudden decreases.
   Ø
    
    actual or anticipated fluctuations in our operating results;Ø
    
    changes in interest rates;Ø
    
    changes in the legal or regulatory environment in which we operate;Ø
    
    press releases, announcements or publicity relating to us or our competitors or
relating to trends in our industry;Ø
    
    changes in expectations as to our future financial performance, including financial
estimates or recommendations by securities analysts and investors;Ø
    
    future sales of our common stock;Ø
    
    changes in economic conditions in our marketplace, general conditions in the U.S.
economy, financial markets or the banking industry; andØ
    
    other developments affecting our competitors or us.
  We operate in a highly regulated environment and we may be adversely affected by changes in laws
and regulations.
  24




---



##### Table of Contents



Provisions of our articles of incorporation, bylaws and Maryland law, as well as state and federal
banking regulations, could delay or prevent a takeover of us by a third party.
  
 Item 1B. Unresolved Staff Comments
  25




---



##### Table of Contents



Item 2. Properties
  Year Facility
    
    Leased
    
    Date of
    
    ApproximateOffice
    
    Commenced
    
    Or
    
    Lease
    
    SquareLocation
    
    Operation
    
    Owned
    
    Expiration
    
    FootageMain Office:
    
    1974
    
    Owned
    
    
    
    16,5003035 Leonardtown Road
Waldorf, MarylandBranch Offices:
    
    1992
    
    Owned
    
    
    
    2,50022730 Three Notch Road
Lexington Park, Maryland25395 Point Lookout Road
    
    1961
    
    Owned
    
    
    
    13,000Leonardtown, Maryland101 Drury Drive
    
    2001
    
    Owned
    
    
    
    2,645La Plata, Maryland10321 Southern Maryland Boulevard
    
    1991
    
    Leased
    
    2009
    
    2,500Dunkirk, Maryland8010 Matthews Road
    
    1996
    
    Owned
    
    
    
    2,500Bryans Road, Maryland20 St. Patricks Drive
    
    1998
    
    Leased (Land)
    
    
    
    2,840Waldorf, Maryland
    
    
    
    Owned (Building)30165 Three Notch Road
    
    2001
    
    Leased (Land)
    
    2026
    
    2,800Charlotte Hall, Maryland
    
    
    
    Owned (Building)200 Market Square
    
    2005
    
    Leased (Land)
    
    2028
    
    2,800Prince Frederick, Maryland
    
    
    
    Owned (Building)11725 Rousby Hall Road
    
    2008
    
    Leased(Land)
    
    2028
    
    2,800Lusby, Maryland
    
    
    
    Owned (Building)
 
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  26




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Security Holder Matters and Issuer
Purchases of Equity Securities
 Market Price and Dividends on Registrants and Related Stockholder Matters.
  Stock Performance Graph.
  Recent Sales of Unregistered Securities.
   27




---



##### Table of Contents



Purchases of Equity Securities by the Issuer and Affiliated Purchasers for the Most Recent Fiscal
Quarter.
 Total Numberof Shares
    
    
    MaximumPurchased
    
    
    Number ofas Part of
    
    
    SharesTotal
    
    
    
    
    
    
    Publicly
    
    
    that May Yet BeNumber of
    
    
    Average
    
    
    Announced Plans
    
    
    Purchased UnderShares
    
    
    Price Paid
    
    
    or
    
    
    the Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    Programs
    
    
    ProgramsOctober 2008Beginning date: October 1Ending date: October 31
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    147,435November 2008Beginning date: November 1Ending date: November 30
    
    
    6,952
    
    
    
    17.09
    
    
    
    6,952
    
    
    
    140,483December 2008Beginning date: December 1Ending date: December 31
    
    
    337
    
    
    
    16.15
    
    
    
    337
    
    
    
    140,146Total
    
    
    7,289
    
    
    $
    17.05
    
    
    
    7,289
    
    
    
    140,146
  
 Item 6. Selected Financial Data
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operation
 Managements Discussion and Analysis of
Financial Condition and Results of Operations
 
 Item 7A. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  28




---



##### Table of Contents



Item 9A(T). Controls and Procedures
 (a)
    
    Disclosure Controls and Procedures
  (b)
    
    Internal Controls Over Financial Reporting
   (c)
    
    Changes to Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Items to be voted on by Stockholders Item 1  Election of Directors Item 1  Business  Executive Officers of the Registrant
 Other
Information Relating to Directors and Executive Officers Section 16(a) Beneficial Ownership
Reporting Compliance
 29




---



##### Table of Contents



Corporate Governance  Code of Ethics
 Corporate Governance  Committees of the Board of
Directors  Audit Committee
 
 Item 11. Executive Compensation
 Executive Compensation Directors Compensation
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
 (a) Security Ownership of Certain Owners
 Principal Holders of Voting Securities
 (b) Security Ownership of Management
 Principal Holders of Voting Securities
 (c) Changes in Control
  (d) Equity Compensation Plan Information
  (c)(a)
    
    
    
    
    
    Number of securities remainingNumber of securities to be
    
    (b)
    
    available for future issuanceissued
    
    Weighted average exercise
    
    under equity compensation plansupon exercise of outstanding
    
    price of outstanding options,
    
    (excluding securities reflected inPlan Category
    
    options, warrants, and rights
    
    warrants, and rights
    
    column (a))Equity plans
approved by
security holders
    
    
    294,604
    
    
    $
    15.95
    
    
    
    133,488Equity compensation
plans not approved
by security holders
(1)
    
    
    58,613
    
    
    $
    13.19Total
    
    
    353,217
    
    
    $
    15.49
    
    
    
    133,488
 
 (1)
    
    Consists of the Companys 1995 Stock Option Plan for Non-Employee Directors, which expired in
2005 and which provided grants of non-incentive stock options to directors who are not
employees of the Company or its subsidiaries. Options were granted at an exercise price equal
to their fair market value at the date of grant and had a term of ten years. Options are
generally exercisable while an optionee serves as a director or within one year thereafter. 30




---



##### Table of Contents



Item 13. Certain Relationships, Related Transactions and Director Independence
 Other Information Relating to Directors and Executive Officers  Policies and
Procedures for Approval and Related Parties Transactions and Relationships and Transactions with
the Company and the Bank
 Proposal 1  Election
of Directors
 
 Item 14. Principal Accountant Fees and Services
 Audit Related Matters  Audit Fees an Pre Approval of Services by the Independent
Registered Public Accounting Firm
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) List of Documents Filed as Part of this Report
 (1) Financial Statements .
       (2) Financial Statement Schedules .
 (3) Exhibits .
 No.
    
    Description3.1
    
    Articles of Incorporation of Tri-County Financial Corporation (1)3.2
    
    Amended and Restated Bylaws of Tri-County Financial Corporation (2)4.1
    
    Articles Supplementary establishing Fixed Rate Cumulative Perpetual Preferred
Stock, Series A, of Tri-County Financial Corporation (12)4.2
    
    Form of stock certificate for Fixed Rate Cumulative Perpetual Preferred
Stock, Series A (12)4.3
    
    Warrant to Purchase 777.00777 Shares of Common Stock of Tri-County Financial
Corporation (12)4.4
    
    Articles Supplementary establishing Fixed Rate Cumulative Perpetual Preferred
Stock, Series B, of Tri-County Financial Corporation (12)4.5
    
    Form of stock certificate for Fixed Rate Cumulative Perpetual Preferred
Stock, Series B (12)10.1*
    
    Tri-County Financial Corporation 1995 Stock Option and Incentive Plan, as
amended (3)10.2*
    
    Tri-County Financial Corporation 1995 Stock Option Plan for Non-Employee
Directors, as amended (3)10.3*
    
    Employment Agreement with Michael L. Middleton (4)10.4*
    
    Executive Incentive Compensation Plan (3)
 31




---



##### Table of Contents



No.
    
    Description10.5*
    
    Executive Compensation Plan 2003 Amendment (5)10.6*
    
    Retirement Plan for Directors (6)10.7*
    
    Split Dollar Agreements with Michael L. Middleton (3)10.8*
    
    Split Dollar Agreement with William J. Pasenelli (7)10.9*
    
    Salary Continuation Agreement with Michael L. Middleton (5)10.10*
    
    Salary Continuation Agreement with Gregory C. Cockerham (4)10.11*
    
    Salary Continuation Agreement with William J. Pasenelli (4)10.12*
    
    Tri-County Financial Corporation 2005 Equity Compensation Plan (8)10.13*
    
    Community Bank of Tri-County Executive Deferred Compensation Plan (6)10.14*
    
    Amended and Restated Employment Agreement by and among Community Bank of Tri-County,
William J. Pasenelli and Tri-County Financial Corporation, as guarantor (9)10.15*
    
    Amended and Restated Employment Agreement by and among Community Bank of Tri-County,
Gregory C. Cockerham and Tri-County Financial Corporation, as guarantor (9)10.16*
    
    Amendment No. 1 to the Tri-County Financial Corporation 2005 Equity Compensation Plan
(10)10.17
    
    Letter Agreement and related Securities Purchase Agreement  Standard Terms,
dated December 19, 2008, between Tri-County Financial Corporation and United States
Department of the Treasury (12)10.18
    
    Form of Waiver executed by each of Michael L. Middleton, Gregory C. Cockerham
and William J. Pasenelli (12)10.19*
    
    Form of Letter Agreement between Tri-County Financial Corporation and each of Michael
L. Middleton, Gregory C. Cockerham and William J. Pasenelli (12)10.20*
    
    First Amendment to the Salary Continuation Agreement with Michael L. Middleton13
    
    Annual Report to Stockholders for the year ended December 31, 200814
    
    Code of Ethics (11)21
    
    Subsidiaries of the Registrant23
    
    Consent of Stegman & Company, Independent Registered Public Accounting Firm31.1
    
    Rule 13a-14a Certification of Chief Executive Officer31.2
    
    Rule 13a-14a Certification of Chief Financial Officer32
    
    Certification pursuant to 18 U.S.C. Section 1350
 
 *
    
    Management contract or compensatory arrangement.(1)
    
    Incorporated by reference to the Registrants Registration Statement on Form
S-4 (No. 33-31287).(2)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2006.(3)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.(4)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2006.(5)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 2003.(6)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 2006.(7)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 2001.(8)
    
    Incorporated by reference to Appendix A in the definitive proxy statement (File
No. 000-18279) filed with the Securities and Exchange Commission on April 11, 2005.(9)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007.(10)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007.(11)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2005.(12)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K as
filed with the Securities and Exchange Commission on December 22, 2008 32




---



##### Table of Contents



(b)
    
    Exhibits.The exhibits required by Item 601 of Regulation S-K are
either filed as part of this Annual Report on Form 10-K or incorporated by reference
herein.(c)
    
    Financial Statements and Schedules Excluded From Annual Report.There
are no other financial statements and financial statement schedules which were excluded
from this Annual Report pursuant to Rule 14a-3(b)(1) which are required to be included
herein.
 33




---



##### Table of Contents



SIGNATURES
  TRI-COUNTY FINANCIAL CORPORATIONDate: March 9, 2009
    By:

/s/  Michael L. MiddletonMichael L. MiddletonPresident and Chief Executive Officer
(Duly Authorized Representative)  By:
    
    /s/  Michael L. Middleton
    
    
    
    By:
    
    /s/  William J. PasenelliMichael L. Middleton
    
    
    
    
    
    William J. PasenelliDirector, President and Chief Executive Officer
    
    
    
    
    
    Chief Financial Officer(Principal Executive Officer)
    
    
    
    
    
    (Principal Financial and Accounting Officer)Date: March 9, 2009
    
    
    
    Date: March 9, 2009By:
    
    /s/  C. Marie Brown
    
    
    
    By:
    
    /s/  Herbert N. Redmond, Jr.C. Marie Brown
    
    
    
    
    
    Herbert N. Redmond, Jr.Director
    
    
    
    
    
    DirectorDate: March 9, 2009
    
    
    
    Date: March 9, 2009By:
    
    /s/  H. Beaman Smith
    
    
    
    By:
    
    /s/  Austin J. Slater, Jr.H. Beaman Smith
    
    
    
    
    
    Austin J. Slater, Jr.Director
    
    
    
    
    
    DirectorDate: March 9, 2009
    
    
    
    Date: March 9, 2009By:
    
    /s/  Louis P. Jenkins, Jr.
    
    
    
    By:
    
    /s/  James R. ShepherdLouis P. Jenkins, Jr.
    
    
    
    
    
    James R. ShepherdDirector
    
    
    
    
    
    DirectorDate: March 9, 2009
    
    
    
    Date: March 9, 2009By:
    
    /s/  Philip T. Goldstein
    
    
    
    By:
    
    /s/  Joseph V. Stone, Jr.Philip T. Goldstein
    
    
    
    
    
    Joseph V. Stone, Jr.Director
    
    
    
    
    
    DirectorDate: March 9, 2009
    
    
    
    Date: March 9, 2009