UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                                                    FORM 10-QSB

      (Mark one)
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999

                                       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 0-18261

                         COMMUNITY FINANCIAL CORPORATION
-------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


          VIRGINIA                                              54-1532044
-------------------------------------------------------------------------------
(State of other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)


                   38 North Central Ave., Staunton, Va. 24401
-------------------------------------------------------------------------------
                (Address of principal executive offices zip code)

                                 (540) 886-0796
-------------------------------------------------------------------------------
                (Issuer's telephone number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  12
months (or for such  shorter  period  that the issuer was  required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.

              Yes    X               No

Number of shares of Common Stock,  par value $.01 per share,  outstanding at the
close of business on February 9, 2000,: 2,527,226.

Transitional Small Business Disclosure Format (Check one)

              Yes                    No    X



<PAGE>


                          COMMUNITY FINANCIAL CORPORATION


                                       INDEX



PART I.  FINANCIAL INFORMATION                                        PAGE

Item 1.  Financial Statements


         Consolidated Statements of Financial
         Condition at December 31, 1999 (unaudited)
         and March 31, 1999.............................................1

         Consolidated Statements of Income for the Three and
         Nine Months Ended December 31, 1999 and 1998 (unaudited)...... 2

         Consolidated  Statements  of Cash  Flows  for  the  Nine
         Months Ended December 31, 1999 and 1998 (unaudited)........... 3

         Notes to Unaudited Interim Consolidated
         Financial Statements.......................................... 4

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations........................... 8


PART II. OTHER INFORMATION............................................. 13




<PAGE>



                          COMMUNITY FINANCIAL CORPORATION
                   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                     December 31,     March 31,
                                         1999            1999
                                     ------------    -------------
                                      (Unaudited)

ASSETS
Cash (including interest bearing
  deposits of approximately
  $2,405,000 and $1,367,000)         $  9,297,680     $ 10,131,157
Securities
  Held to maturity                     26,847,223        5,561,314
  Available for sale                    6,805,366        3,543,092
Investment in Federal Home Loan
  Bank stock, at cost                   2,000,000        1,508,200
Loans receivable, net                 183,256,984      171,413,721
Real estate owned                       1,091,599          351,733
Property and equipment, net             6,651,566        6,050,785
Accrued interest receivable
  Loans                                 1,220,787        1,056,833
  Investments                             593,818          107,912
Prepaid expenses and other assets         910,743        1,085,272

        Total Assets                 $238,675,766     $200,810,019

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits                             $151,798,726     $153,015,076
Borrowings                             59,000,000       19,000,000
Advance payments by borrowers for
  taxes and insurance                     113,464          190,421
Other liabilities                       1,714,441        2,220,794

        Total Liabilities             212,626,631      174,426,291

Stockholders' Equity
  Preferred stock $.01 par value,
    authorized 3,000,000 shares,
    none outstanding
  Common stock, $.01 par value,
    authorized 10,000,000 shares,
    2,560,926 and 2,572,146 shares
    outstanding                            25,609           25,721
  Additional paid in capital            4,875,889        4,897,207
  Retained earnings                    19,997,876       19,395,509
  Net unrealized gain on securities
    available for sale                  1,149,761        2,065,291
     Total Stockholders' Equity        26,049,135       26,383,728

        Total Liabilities and
          Shareholders Equity        $238,675,766     $200,810,019


   See accompanying notes to consolidated financial statements.



<PAGE>
                                            COMMUNITY FINANCIAL CORPORATION
                                           CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                    Three Months Ended            Nine Months Ended
                                        December 31                  December 31
                                  -----------------------    -------------------------
                                   1999             1998       1999              1998
                                  ------           ------     ------            ------
                                        (Unaudited)                 (Unaudited)

<S>                             <C>           <C>           <C>           <C>
INTEREST INCOME
  Loans                         $ 3,812,512   $ 3,388,985   $10,908,835   $10,252,194
  Investment securities             592,399        98,495       899,444       248,584
  Other                              27,768        86,831       112,992       187,847
    Total interest income         4,432,679     3,574,311    11,921,271    10,688,625

INTEREST EXPENSE
  Deposits                        1,604,337     1,669,592     4,737,588   $ 4,821,221
  Borrowed money                    806,555       229,918     1,512,295       736,636
    Total interest expense        2,410,892     1,899,510     6,249,883     5,557,857

NET INTEREST INCOME               2,021,787     1,674,801     5,671,388     5,130,768

PROVISION FOR LOAN LOSSES           122,408        36,000       301,562       135,999

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES        1,899,379     1,638,801     5,369,826     4,994,769

NONINTEREST INCOME
  Service charges, fees
    and commissions                 893,061       388,192     2,079,395     1,010,059
  Gain on sale of securities              0       639,581       601,412       808,516
  Miscellaneous                      42,056         1,805       209,142         3,272
    Total noninterest income        935,117     1,029,578     2,889,949     1,821,847
NONINTEREST EXPENSE
  Compensation & benefits         1,085,324     1,016,665     3,239,208     2,396,537
  Occupancy                         325,744       164,913       883,183       507,574
  Data processing                   146,771       128,948       382,900       355,960
  Federal insurance premium          21,489        19,638        64,587        60,747
  Miscellaneous                     639,318       304,792     1,526,032       915,316
    Total noninterest expense     2,218,646     1,634,956     6,095,910     4,236,134

INCOME BEFORE TAXES                 615,850     1,033,423     2,163,865     2,580,482

INCOME TAXES                        185,477       420,290       852,711     1,087,846

NET INCOME                      $   430,373   $   613,133   $ 1,311,154   $ 1,492,636

BASIC EARNINGS PER SHARE        $      0.17   $      0.24   $      0.51   $      0.58
DILUTED EARNINGS PER SHARE      $      0.17   $      0.24   $      0.51   $      0.58
DIVIDENDS PER SHARE             $      0.08   $      0.08   $      0.24   $      0.23

</TABLE>

    See accompanying notes to consolidated financial statement.



<PAGE>
                  COMMUNITY FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                    Nine Months Ended
                                                      December 31,
                                              ---------------------------
                                                  1999           1998
                                              -----------     -----------
                                                     (Unaudited)

OPERATING ACTIVITIES
  Net income                                 $1,311,154      $1,492,636
  Adjustments to reconcile net income to
   net cash provided by operating activities
     Provision for loan losses                  301,562         135,999
     Depreciation                               463,394         191,385
     Amortization of premium and accretion
       of discount on securities, net             2,384            (153)
     (Decrease) in net deferred loan fees       (35,794)        (20,859)
     Increase in deferred income taxes           99,298           4,031
     (Increase) in other assets                (475,331)       (742,182)
     Increase in other liabilities               29,936         345,420
     (Gain)loss on sale of loans               (883,977)       (145,496)
     Proceeds from sale of loans             64,989,208      23,121,012
     Loans originated for resale            (64,990,651)    (23,856,772)
     Gain on sale of available for sale
       securities                              (601,412)       (808,516)
   Net cash provided(absorbed)by                209,771        (283,495)
       operating activities

INVESTING ACTIVITIES
  Proceeds from maturities of held to
    maturity securities                        5,500,000      1,200,000
  Proceeds from sale of available for
    sale securities                              612,189        821,698
  Purchases of investment securities         (31,668,378)    (2,421,437)
  Net decrease (increase) in loans           (11,070,452)     1,806,154
  Purchases of property and equipment         (1,238,375)    (2,469,928)
  Redemption (purchase) of FHLB stock           (491,800)           ---
  Increase in Real Estate Owned                 (739,866)           ---
    Net cash (absorbed) by
      investing activities                   (39,096,682)    (1,063,513)

FINANCING ACTIVITIES
  Dividends paid                                (617,315)      (590,638)
  Net increase (decrease) in deposits         (1,216,350)     9,976,765
  Proceeds from advances and other
   borrowed money                             91,000,000      4,000,000
  Repayments of advances and other
   borrowed money                            (51,000,000)    (7,000,000)
  Proceeds from issuance of common stock             ---        123,700
  Repurchase of common stock                    (112,901)           ---
Net cash provided by
  financing activities                        38,053,434      6,509,827
INCREASE IN CASH AND CASH EQUIVALENTS           (833,477)     5,162,819
CASH AND CASH EQUIVALENTS-beginning of period 10,131,157      7,266,145
CASH AND CASH EQUIVALENTS-end of period       $9,297,680    $12,428,964

 See accompanying notes to consolidated financial statements.




<PAGE>
                          COMMUNITY FINANCIAL CORPORATION
           NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 1999

NOTE 1. - BASIS OF PRESENTATION

The accompanying  unaudited interim consolidated  financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.

The  accompanying  consolidated  financial  statements  include the  accounts of
Community Financial Corporation ("Community" or the "Company"),its  wholly-owned
subsidiary,   Community   Bank  (the  "Bank")  and  Community   First   Mortgage
Corporation,  a  wholly-owned  subsidiary  of the Bank ("First  Mortgage").  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for  fair  presentation  have  been  included.
Operating results for the three and nine months ended December 31, 1999, are not
necessarily  indicative  of the results that may be expected for the year ending
March 31, 2000.


NOTE 2. - EARNINGS PER SHARE

Basic earnings per share is based on net income divided by the weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share shows the dilutive effect of additional common shares issuable under stock
option plans.  Basic  earnings per share for the three months ended December 31,
1999 and 1998  have been  determined  by  dividing  net  income by the  weighted
average  number of  shares of common  stock  outstanding  during  these  periods
2,569,958 and  2,571,694,  respectively.  The number of shares used to determine
diluted  earnings per share for the same three month  periods was  2,569,958 and
2,573,226,  respectively.  Basic  earnings  per share for the nine months  ended
December  31, 1999 and 1998 have been  determined  by dividing net income by the
weighted  average  number of shares of common  stock  outstanding  during  these
periods  2,571,414  and  2,568,691,  respectively.  The number of shares used to
determine  diluted  earnings  per  share  for the same nine  month  periods  was
2,571,414 and 2,594,982, respectively.


<PAGE>

                      COMMUNITY FINANCIAL CORPORATION
                        For the Three Months Ended

<TABLE>
<CAPTION>

                                December 31, 1999                December 31, 1998
                                    Weighted                        Weighted
                                     Average     Per-Share           Average     Per Share
                       Income         Shares       Amount   Income    Shares       Amount
                       -------     ------------  ---------  ------  -----------   ---------
<S>                     <C>        <C>           <C>        <C>        <C>          <C>

Basic EPS

Income available to
 common stockholders    $430,373   2,569,958     $0.17      $613,133   2,571,694    $0.24


Effect of Dilutive
 Securities

Options                      ---         ---                     ---       1,532

Diluted EPS

Income available to
 common stockholders    $430,373   2,569,958     $0.17      $613,133   2,573,226    $0.24

</TABLE>


                      COMMUNITY FINANCIAL CORPORATION
                          For the Nine Months Ended


<TABLE>
<CAPTION>

                                December 31, 1999                December 31, 1998
                                    Weighted                        Weighted
                                     Average     Per-Share           Average     Per Share
                       Income         Shares       Amount   Income    Shares       Amount
                       -------     ------------  ---------  ------  -----------   ---------
<S>                    <C>           <C>         <C>        <C>         <C>         <C>

Basic EPS

Income available to
 common stockholders   $1,311,154    2,571,414   $0.51      $1,492,636  2,568,691   $0.58



Effect of Dilutive
 Securities

Options                       ---          ---                     ---     26,291

Diluted EPS

Income available to
 common stockholders   $1,311,154    2,571,414   $0.51      $1,492,636  2,594,982   $0.58


</TABLE>

<PAGE>

NOTE 3. - STOCKHOLDERS' EQUITY

The  following  table  presents the Bank's  capital  levels at December 31, 1999
relative to the requirements applicable under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989:

                      Amount     Percent    Actual      Actual      Excess
                     Required   Required    Amount      Percent     Amount
                   ----------   ---------  ---------    -------   -----------



Tangible Capital  $ 3,614,000   1.50%     $23,849,000    9.95%    $20,235,000
Core Capital        9,636,000   4.00       23,849,000    9.95      14,213,000
Risk-based Capital 12,818,000   8.00       26,168,000   16.33      13,350,000



The Bank may make a capital  distribution  without the approval of the Office of
Thrift Supervision (the "OTS"), provided that it notifies the OTS 30 days before
it declares the capital distribution and meets the following  requirements:  (i)
the Bank has a regulatory  rating in one of the two top examination  categories,
(ii) the Bank is not of  supervisory  concern,  and will remain  adequately-  or
well-capitalized,  as defined in the OTS prompt corrective  action  regulations,
following the proposed distribution,  and (iii) the distribution does not exceed
the Bank's net income for the calendar year-to-date plus retained net income for
the previous two calendar  years (less any dividends  previously  paid).  If the
Bank does not meet the  above  stated  requirements,  it must  obtain  the prior
approval of the OTS before declaring any proposed distributions.


NOTE 4. - SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS

Total  interest  paid for the three months ended  December 31, 1999 and 1998 was
$2,310,699 and $1,904,816, respectively. Total interest paid for the nine months
ended  December 31, 1999 and 1998 was $6,076,483  and  $5,582,318.  Total income
taxes paid for the three  months  ended  December 31, 1999 and 1998 was $230,583
and  $217,482.  Total income  taxes paid for the nine months ended  December 31,
1999 and 1998 was $972,751 and $987,444.

<PAGE>

NOTE 5. - COMPREHENSIVE INCOME

FASB Statement No. 130, "Reporting  Comprehensive Income",  effective for fiscal
years beginning on or after January 1, 1998, establishes standards for reporting
and displaying comprehensive income and its components.  Comprehensive income is
defined as "...the change in equity (net assets) of a business enterprise during
a period from  transactions  and other events and  circumstances  from non-owner
sources." In addition, "it includes all changes in equity during a period except
those  resulting  from  investments  by owners  and  distributions  to  owners."
Comprehensive  income for the Bank includes net income and unrealized  gains and
losses on  securities  available for sale.  The  following  tables set forth the
components of comprehensive  income for the three and nine-months ended December
31, 1999 and 1998:

                                               Three Months Ended December 31
                                              --------------------------------
                                                 1999                  1998
                                              ---------              ---------


Net income                                    $ 430,373              $ 613,133
Other comprehensive income,
  net of tax
    Unrealized gains(losses)on securities:
      Unrealized holding gains(losses)
        arising during the period              (457,807)               698,555

      Less: Reclassification
        adjustment for(gains)losses
        included in net income                      ---               (379,465)
                                              ---------               ---------
                                              $( 27,434)              $ 932,223
                                              ==========              =========


                                                Nine Months Ended December 31
                                              --------------------------------
                                                 1999                  1998
                                              ---------              ---------



Net income                                    $ 1,311,154            $1,492,636
Other comprehensive income,
  net of tax
    Unrealized gains(losses)on securities:
      Unrealized holding gains(losses)
        arising during the period                (542,656)              805,262

      Less: Reclassification
        adjustment for (gains)losses
        included in net income                   (372,875)             (468,939)
                                              -----------            ----------
                                              $   395,623            $1,828,959
                                              ===========            ==========
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS.

FINANCIAL CONDITION

The Company's total assets increased $37.9 million to $238.7 million at December
31, 1999,  due primarily to an increase in held to maturity  securities of $21.3
million which was funded by reverse repurchase  borrowings and Federal Home Loan
Bank ("FHLB") advances.  Approximately $20 million of the increase in securities
was part of the  Company's  asset/liability  strategy to increase  net  interest
income.  Deposits decreased $1.2 million to $151.8 million at December 31, 1999,
from $153.0 million at March 31, l999 while borrowings increased during the same
period from $19.0  million to $59.0  million.  The  decrease in deposits was due
primarily  to seasonal  withdrawals  from  transaction  accounts.  Stockholders'
equity  decreased to $26.0 million at December 31, 1999, from $26.4 at March 31,
1999,  due  primarily to earnings  for the nine month period ended  December 31,
1999 which was offset by aggregate payments of $0.24 per share in cash dividends
and a decrease in the unrealized gain on securities available for sale.

At December  31,  1999,  non-performing  assets  totaled $1.8 million or .80% of
assets  compared  to  $1.1  million  or  .60%  of  assets  at  March  31,  1999.
Non-performing  loans  totaled  $329,000 or .14 % of total loans at December 31,
1999  compared to $750,000 or .44% of total loans at March 31, 1999. At December
31, 1999 non-performing assets were comprised of eight personal residence loans,
seven single family rental  properties,  one  commercial  loan and four consumer
loans more than ninety days past due. Also included in non-performing  assets is
approximately   $475,000  of  single  family  residential   properties  and  one
multi-family loan of $360,000 which was acquired by foreclosure.  In addition to
the  nonperforming  assets,  at December 31, 1999, we had other loans of concern
consisting  of eight single family  loans,  five rental real estate  loans,  two
commercial  loan with  total  balances  of  $450,000  and  unsecured  loans with
balances of $41,000.  Based on current market values of the collateral  securing
our  non-performing  assets  and other  loans of  concern,  management  does not
anticipate  any  significant  losses  in  excess  of  the  reserves  for  losses
previously  recorded.  While we currently  believe that our loans are adequately
secured or reserved for, many of the loans made by us are secured by residential
properties used as vacation homes or rental properties by the borrowers.  In the
event the real estate rental market substantially weakens or economic conditions
in our market area deteriorate, it is possible both that some of these borrowers
may default and that the value of the real estate collateral may be insufficient
to fully secure the loan. In such event, we may experience  increased  levels of
delinquencies  and related  losses  having an adverse  impact on net income.  At
December 31, 1999 our allowance for loan losses  totaled $1.2 million or .60% of
net  loans  receivable  and  69%  of  non-performing  assets.  See  "Results  of
Operations  -Nine Months Ended  December 31, 1999 and 1998 - Provision  for Loan
Losses."

Management establishes an allowance for loan losses based on an analysis of risk
factors  in the  loan  portfolio.  This  analysis  includes  the  evaluation  of
concentrations  of credit,  past loss experience,  current economic  conditions,
amount and composition of the loan portfolio, estimated fair value of underlying
collateral,  loan  commitments  outstanding,  delinquencies,  and other factors.
Since the Company has had low loan losses  during its history,  management  also
considers loss experience of similar  portfolios in comparable  lending markets.
Accordingly,  the  calculation  of the adequacy of the allowance for loan losses
was not based directly on the level of non-performing assets.

<PAGE>

Management  will continue to monitor the  allowance for loan losses  through the
provision  for loan losses as economic  conditions  and other  factors  dictate.
Although the Company maintains its allowance for loan losses at a level which it
considers to be adequate to provide for losses,  there can be no assurance  that
future losses will not exceed  estimated  amounts or that additional  provisions
for  loan  losses  will  not  be  required  in  future  periods.   In  addition,
management's  determination as to the amount of the allowance for loan losses is
subject to review by OTS and the Federal Deposit  Insurance  Corporation as part
of their  examination  process,  which  may  result in the  establishment  of an
additional allowance based upon their judgement of the information  available to
them at the time of their examination.

LIQUIDITY AND CAPITAL RESOURCES

Historically,  the Bank has  maintained  its  liquid  assets  above the  minimum
requirements  imposed by federal regulations and 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 provided.  As of December 31, 1999,
the Bank's  liquidity  ratio (liquid assets as a percentage of net  withdrawable
savings  and  current   borrowings)  was  7.6%,  which  exceeds  the  regulatory
requirement.

The Bank is subject to certain capital to asset  requirements in accordance with
Bank regulations.  See Note 3 of the Notes to Consolidated  Financial Statements
contained in this report.

RESULTS OF OPERATIONS

Three Months Ended December 31, 1999 and 1998.
----------------------------------------------

General.  Net income for the three months  ended  December 31, 1999 was $430,373
compared to $613,133 for the three months ended  December 31, 1998. The decrease
was due primarily to both an increase in noninterest  expenses and a decrease in
the gain on sale of securities,  offset by an increase in service charges,  fees
and commissions and net interest income. Income before income taxes decreased to
$615,580 for the three months ended  December 31, 1999 from  $1,033,423  for the
three months ended December 31, 1998.

Interest  Income.  Total interest income increased to $4.4 million for the three
months ended  December  31,  1999,  from $3.6 million for the three months ended
December  31,  1998.  The  increase in interest  income was due  primarily to an
increase in the average balance of both outstanding loans and investments offset
by a decrease in the average yield on interest earning assets from 7.93% for the
three  months  ended  December  31,  1998 to 7.89%  for the three  months  ended
December 31, 1999.

Interest Expense. Total interest expense increased to $2.4 million for the three
months ended  December  31,  1999,  from $1.9 million for the three months ended
December 31, 1998.  Interest on deposits decreased to $1.6 million for the three
months  ended  December  31, 1999 from $1.7  million for the three  months ended
December  31,  1998 due  primarily  to a decrease  in the  average  rate paid on
deposits.  The average rate paid on deposits for the three months ended December
31,  1999 was 4.18%  compared  to 4.53% for the same  period in the prior  year.
Interest  expense on borrowed money  increased to $806,555 for the quarter ended
December 31, 1999, from $229,918 for the quarter ended December 31, 1998, due to
an increase in average  borrowings.  The average  rate paid on  interest-bearing
liabilities  was 4.55% for the three months ended  December 31, 1999 compared to
4.65% for the three months ended December 31, 1998.

<PAGE>

Provision for Loan Losses.  The provision for loan losses  increased to $122,408
for the three months ended December 31, 1999,  from $36,000 for the three months
ended  December  31,  1998.  The  increase  in  provision  for  loan  losses  is
attributable primarily to charge-offs on one-to-four family loans and foreclosed
property  for  the  three  months  ended  December  31,  1999.   "See  Financial
Condition."

Noninterest  Income.  Noninterest  income  decreased  to $935,117  for the three
months  ended  December  31, 1999,  from  $1,029,578  for the three months ended
December  31, 1998 due  primarily  to a decrease  in gain on sale of  securities
offset by an increase in charges, fees and commissions.  The increase in service
charges,  fees and commissions is due to the increase in secondary mortgage loan
sales at Community First Mortgage.


Noninterest  Expenses.  Noninterest  expense  increased  to $2.2 million for the
three  months  ended  December  31,  1999,  from $1.6 for the three months ended
December 31, 1998. The increase in noninterest  expense is  attributable to both
increased  secondary market loan sales and an increase in compensation and other
expenses  related to the opening of an additional  office in Staunton,  Virginia
during the quarter.

Taxes. Taxes decreased to $185,477 for the three months ended December 31, 1999,
from  $420,290  for the three months  ended  December  31,  1998,  due to both a
decrease in income before taxes and a decrease in the effective  income tax rate
to 30% for the three  months  ended  December  31,  1999.  The  decrease  in the
effective tax is due to an increase in tax preferred investment securities.

Nine Months Ended December 31, 1999 and 1998
--------------------------------------------

General.  Net  income  for the nine  months  ended  December  31,  1999 was $1.3
compared to $1.5 for the nine months ended  December 31, l998.  The decrease was
due primarily to an increase in noninterest  expenses,  offset by an increase in
net interest  income.  Income before income taxes decrease from $2.6 million for
the nine months  ended  December  31,  1998 to $2.2  million for the same period
ended December 31, 1999.

Interest  Income.  Total interest income increased to $11.9 million for the nine
months ended  December 31,  1999,  from $10.7  million for the nine months ended
December 31, 1998, due primarily to an increase in the average  balance of loans
and investment securities outstanding during the period, offset by a decrease in
the yield on loans and securities from 8.15% to 7.92% for the same periods.

Interest Expense.  Total interest expense increased to $6.3 million for the nine
months  ended  December  31,  1999,  from $5.6 million for the nine months ended
December 31, 1998.  Interest on deposits  decreased to $4.7 million for the nine
months ended December 31, 1999,  from $4.8 million for the same period last year
due  primarily  to a  decrease  in the  rate  paid.  The rate  paid on  deposits
decreased  from 4.57% for the nine months  ended  December 31, 1998 to 4.21% for
the same period in the current fiscal year.  Interest  expense on borrowed money
increased  to $1.5  million for the nine  months  ended  December  31, 1999 from
$737,000 for the nine months ended December 31, 1998, due primarily to increased
borrowings offset by a decrease in the rate paid.

Provision for Loan Losses.  The provision for loan losses  increased to $301,562
for the nine months ended  December 31, 1999,  from $135,999 for the same period
last year. The increase is  attributable  primarily to increased  charge-offs on
one-to-four  family  loans and  foreclosed  property  for the nine months  ended
December 31, 1999 compared to the nine months ended December 31, 1998.

Noninterest  Income.  Noninterest  income increased to $2.9 million for the nine
months  ended  December  31,  1999,  from $1.8 million for the nine months ended
December 31, 1998, due to an increase in service charges, fees, and commissions,
primarily from increased mortgage loan sales.


<PAGE>

Noninterest  Expenses.  Noninterest  expenses  increased to $6.1 million for the
nine months ended December 31, 1999,  from $4.2 million for the same period last
year. The increase in noninterest expense is attributable to both an increase in
compensation due to increased  staffing and other expenses related to the growth
of  Community  First  Mortgage  and  expenses  associated  with the  opening  of
additional  office in Staunton,  Virginia  during the quarter ended December 31,
1999.

Taxes.  Taxes decreased to $852,711 for the nine months ended December 31, 1999,
from  $1,087,846 for the nine months ended December 31, 1998 due to the decrease
in income before taxes.


Forward-Looking Statements

This Quarterly Report on Form 10-QSB contains certain forward-looking statements
with respect to our financial  condition,  results of  operations  and business.
These forward-looking  statements involve certain risks and uncertainties.  When
used in this  Quarterly  Report on Form 10-QSB or future  filings by us with the
Securities  and Exchange  Commission,  in our press  releases or other public or
shareholder  communications,  or in oral statements made with the approval of an
authorized  executive officer,  the words or phrases "will likely result",  "are
expected  to",  "will  continue",  "is  anticipated",   "estimate",   "project",
"believe"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  We wish to caution  readers  not to place  undue  reliance on any such
forward-looking statements,  which speak only as of the date made, and to advise
readers  that  various  factors   including   regional  and  national   economic
conditions,  changes in levels of market interest rates, credit risks of lending
activities,  and competitive  and regulatory  factors could affect our financial
performance  and could  cause our actual  results  for future  periods to differ
materially from those anticipated or projected.

We do not undertake and specifically disclaim any obligation to publicly release
the result of any revisions, which may be made to any forward-looking statements
to  reflect  the   occurrence  of  anticipated   or   unanticipated   events  or
circumstances after the date of such statements.


<PAGE>

                           PART II. OTHER INFORMATION


Item 1. Legal Proceedings

        Not  Applicable.

Item 2. Changes in Securities

        Not Applicable.

Item 3. Defaults Upon Senior Securities

        Not Applicable.

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

        Not Applicable.

Item 5. Other Information

        Not Applicable.

Item 6. Exhibits and Reports on Form 8-K

        a.  Exhibits

            See Exhibit Index.


        b.  Reports on Form 8-K

            None to be reported.


<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                   COMMUNITY FINANCIAL CORPORATION

Date: February 9, 2000
                                   By: /s/ R. Jerry Giles
                                       -------------------------------
                                       R. Jerry Giles
                                       Chief Financial Officer
                                       (Duly Authorized Officer and Principal
                                        Accounting Officer)


<PAGE>


                                  EXHIBIT INDEX

EXHIBIT NO.            DESCRIPTION

27                     Financial Data Schedule.