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 September 30, 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 November 13, 1999,: 2,572,146.

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 September 30, 1999 (unaudited)
         and March 31, 1999.............................................1

         Consolidated Statements of Income for the Three
         and Six Months Ended September 30, 1999 and 1998 (unaudited)...2

         Consolidated Statements of Cash Flows for the Six
         Months Ended September 30, 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............................6


PART II. OTHER INFORMATION.............................................11



<PAGE>


                         COMMUNITY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                     September 30,    March 31,
                                         1999            1999
                                     ------------    -------------
                                      (Unaudited)
<S>                                  <C>              <C>
ASSETS
Cash (including interest bearing
  deposits of approximately
  $1,367,000 and $6,407,000)         $  5,771,044     $ 10,131,157
Securities
  Held to maturity                     31,348,646        5,561,314
  Available for sale                    2,642,640        3,543,092
Investment in Federal Home Loan
  Bank stock, at cost                   1,700,000        1,508,200
Loans receivable, net                 178,930,487      171,413,721
Real estate owned                         870,478          351,733
Property and equipment, net             6,790,552        6,050,785
Accrued interest receivable
  Loans                                 1,135,827        1,056,833
  Investments                             212,772          107,912
Prepaid expenses and other assets         911,533        1,085,272

        Total Assets                 $230,313,979     $200,810,019

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits                             $148,021,270     $153,015,076
Borrowings                             54,000,000       19,000,000
Advance payments by borrowers for
  taxes and insurance                     144,283         190,421
Other liabilities                       1,753,182        2,220,794

        Total Liabilities             203,918,735      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,
    2,572,146 shares
    outstanding                            25,721           25,721
  Additional paid in capital            4,897,207        4,897,207
  Retained earnings                    19,864,748       19,395,509
  Net unrealized gain on securities
    available for sale                  1,607,568        2,065,291
     Total Stockholders' Equity        26,395,244       26,383,728

        Total Liabilities and
          Stockholders' Equity       $230,313,979     $200,810,019
</TABLE>
   See accompanying notes to consolidated financial statements.


                                       1
<PAGE>


                         COMMUNITY FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                          Three Months Ended                 Six Months Ended
                                              September 30                     September 30
                                     -----------------------------      -----------------------------
                                          1999           1998              1999              1998
                                     -----------       -----------      -----------        ----------
                                     (Unaudited)                        (Unaudited)
<S>                                  <C>               <C>               <C>               <C>
INTEREST INCOME
  Loans                              $3,632,134        $3,423,547        $7,096,323        $6,863,209
  Investment securities                 180,458            83,401           307,045           150,089
  Other                                  44,657            50,376            85,224           101,016
    Total interest income             3,857,249         3,557,324         7,448,592         7,114,314

INTEREST EXPENSE
  Deposits                            1,559,956         1,613,005         3,133,251        $3,151,629
  Borrowed money                        419,297           224,685           705,740           506,718
    Total interest expense            1,979,253         1,837,690         3,838,991         3,658,347

NET INTEREST INCOME                   1,877,996         1,719,634         3,649,601         3,270,078

PROVISION FOR LOAN LOSSES               110,154            25,000           179,154            99,999

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES            1,767,842         1,694,634         3,470,447         3,355,968

NONINTEREST INCOME
  Service charges, fees
    and commissions                     662,836           327,229         1,200,551           623,002
  Gain on sale of securities             51,206            69,761           601,412           168,935
  Miscellaneous                         152,613                31           152,869               332
    Total noninterest income            866,655           397,021         1,954,832           792,269
NONINTEREST EXPENSE
  Compensation & benefits             1,068,412           763,087         2,153,884         1,379,872
  Occupancy                             289,105           192,692           557,439           342,661
  Data processing                       123,815           113,543           236,129           227,012
  Federal insurance premium              21,799            20,751            43,098            41,109
  Miscellaneous                         450,023           337,297           886,714           610,524
    Total noninterest expense         1,953,154         1,427,370         3,877,264         2,601,178

INCOME BEFORE TAXES                     681,343           664,285         1,548,015         1,547,059

INCOME TAXES                            311,738           291,142           667,234           667,556

NET INCOME                           $  369,605        $  373,143        $  880,781        $  879,503

BASIC EARNINGS PER SHARE             $     0.14        $     0.14        $     0.34        $     0.34
DILUTED EARNINGS PER SHARE           $     0.14        $     0.13        $     0.34        $     0.34
DIVIDENDS PER SHARE                  $     0.08        $     0.08        $     0.16        $     0.15
</TABLE>
       See accompanying notes to consolidated financial statement.

                                       2

<PAGE>


                         COMMUNITY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                    Six Months Ended
                                                      September 30,
                                              ---------------------------
                                                  1999           1998
                                              -----------     -----------
                                                     (Unaudited)
<S>                                            <C>              <C>
OPERATING ACTIVITIES
  Net income                                   $880,781        $879,503
  Adjustments to reconcile net income to
   net cash provided by operating activities
     Provision for loan losses                  179,154          99,999
     Depreciation                               301,097         147,214
     Amortization of premium and accretion
       of discount on securities, net               996            (124)
     (Decrease) in net deferred loan fees       (63,412)        (17,475)
     Increase in deferred income taxes           56,779          12,309
     (Increase) in other assets                 (10,115)       (361,393)
     Increase (decrease) in other liabilities  (138,577)        (49,365)
     (Gain)loss on sale of loans               (471,770)        (42,343)
     Proceeds from sale of loans             31,768,091      13,228,720
     Loans originated for resale            (34,296,135)    (14,750,319)
     Gain on sale of available for sale
       securities                              (601,412)       (168,935)
   Net cash absorbed by operating activities (2,394,523)     (1,022,209)

INVESTING ACTIVITIES
  Proceeds from maturities of held to
    maturity securities                          500,000        650,000
  Proceeds from sale of available for
    sale securities                              612,189        172,319
  Purchases of held to maturity
    securities                               (26,250,000)    (1,861,793)
  Net decrease (increase) in loans            (4,671,021)      (414,255)
  Purchases of property and equipment         (1,040,864)    (2,085,016)
  Redemption (purchase) of FHLB stock           (191,800)           ---
  Increase in Real Estate Owned                 (518,745)        (2,415)
    Net cash absorbed by
      investing activities                   (31,560,241)    (3,541,160)

FINANCING ACTIVITIES
  Dividends paid                                (411,543)      (384,867)
  Net increase (decrease) in deposits         (4,993,806)     6,079,202
  Proceeds from advances and other
   borrowed money                             71,000,000      4,000,000
  Repayments of advances and other
   borrowed money                            (36,000,000)    (7,000,000)
  Proceeds from issuance of common stock             ---        108,500
Net cash provided by
  financing activities                        29,594,651      2,802,835
INCREASE IN CASH AND CASH EQUIVALENTS         (4,360,113)    (1,760,534)
CASH AND CASH EQUIVALENTS-beginning of period 10,131,157      7,266,145
CASH AND CASH EQUIVALENTS-end of period       $5,771,044     $5,505,611
</TABLE>
 See accompanying notes to consolidated financial statements.

                                       3
<PAGE>


                         COMMUNITY FINANCIAL CORPORATION
          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 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 six months ended September 30, 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 September 30,
1999 and 1998  have been  determined  by  dividing  net  income by the  weighted
average  number of  shares of common  stock  outstanding  during  these  periods
2,572,146 and  2,569,837,  respectively.  The number of shares used to determine
diluted  earnings per share for the same three month  periods was  2,572,146 and
2,590,331,  respectively.  Basic  earnings  per share for the six  months  ended
September  30, 1999 and 1998 have been  determined by dividing net income by the
weighted  average  number of shares of common  stock  outstanding  during  these
periods  2,572,146  and  2,567,181,  respectively.  The number of shares used to
determine  diluted  earnings  per  share  for the same  six  month  periods  was
2,572,146 and 2,604,921, respectively.

<TABLE>
<CAPTION>
                         COMMUNITY FINANCIAL CORPORATION
                           For the Three Months Ended

                            September 30, 1999                September 30, 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    $369,605   2,572,146     $0.14   $373,143   2,569,837    $0.14



Effect of Dilutive
 Securities

Options                     ---         ---                ---         20,494

Diluted EPS

Income available to
 common stockholders    $369,605  2,572,146     $0.14   $373,143    2,590,331   $0.13

</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                         COMMUNITY FINANCIAL CORPORATION
                            For the Six Months Ended


                            September 30, 1999                September 30, 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  $880,781   2,572,146     $0.34   $879,503   2,567,181    $0.34



Effect of Dilutive
 Securities

Options                      ---      ---                   ---        37,740

Diluted EPS

Income available to
 common stockholders  $880,781  2,572,887     $0.34   $879,503    2,604,921   $0.34

</TABLE>

NOTE 3. - STOCKHOLDERS' EQUITY

The following  table  presents the Bank's  capital  levels at September 30, 1999
relative to the requirements applicable under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ('FIRREA'):

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

Tangible Capital  $ 3,471,000   1.50%     $23,417,000   10.12%    $19,946,000
Core Capital        9,257,000   4.00       23,417,000   10.12      14,160,000
Risk-based Capital 12,278,000   8.00       25,822,000   15.26      13,544,000


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.

                                       5
<PAGE>


NOTE 4. - SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS

Total  interest paid for the three months ended  September 30, 1999 and 1998 was
$1,921,980 and $1,849,282,  respectively. Total interest paid for the six months
ended  September 30, 1999 and 1998 was $3,765,784 and  $3,677,502.  Total income
taxes paid for the three months ended  September  30, 1999 and 1998 was $316,197
and  $737,382.  Total income taxes paid for the six months ended  September  30,
1999 and 1998 was $742,168 and $737,382.

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

FINANCIAL CONDITION

The  Company's  total  assets  increased  $29.5  million  to $230.3  million  at
September 30, 1999, due primarily to an increase in held to maturity  securities
of $25.8  million  which was funded by reverse  repurchase  borrowings  and FHLB
advances.  Approximately  $20 million of the increase in securities  was part of
the  Company's  asset/liability  strategy to increase  net interest  income.  An
additional $5 million of securities with  maturities  prior to December 31, 1999
were purchased as part of the Company's  Year 2000  contingency  plan.  Deposits
decreased  $5.0  million to $148.0  million at September  30, 1999,  from $153.0
million at March 31, l999 while borrowings increased during the same period from
$19.0  million to $54.0  million.  The decrease in deposits was due primarily to
increased  rate  competition  on  certificates  of deposits  by other  financial
institutions and withdrawals from transaction accounts. Stockholders' equity was
unchanged at $26.4  million at  September  30,  1999,  from March 31, 1999,  due
primarily to earnings for the six month  period ended  September  30, 1999 which
was offset by  aggregate  payments  of $0.16 per share in cash  dividends  and a
decrease in the unrealized gain on securities available for sale.

At September  30, 1999,  non-performing  assets  totaled $2.0 million or .80% of
assets  compared  to  $1.1  million  or  .60%  of  assets  at  March  31,  1999.
Non-performing  loans  totaled $1.1 million or .63 % of total loans at September
30, 1999  compared to  $750,000  or .44% of total  loans at March 31,  1999.  At
September 30, 1999 non-performing assets were comprised of one loan secured by a
certificate of deposit,  seven  personal  residence  loans,  seven single family
rental properties, a construction loan and three consumer loans more than ninety
days past due. Also included in non-performing assets is approximately  $400,000
of single family  residential  properties  and one multi family loan of $454,000
which was acquired by foreclosure.  In addition to the nonperforming  assets, at
September  30, 1999,  the company had other loans of concern  consisting of nine
single family loans,  four rental real estate loans,  two  commercial  loan with
total balances of $450,000 and unsecured  loans with balances of $46,000.  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,  the  Company  may  experience  increased  levels of
delinquencies  and related  losses  having an adverse  impact on net income.  At
September 30, 1999 the Company's  allowance for loan losses totaled $1.2 million
or .60% of net loans receivable and 61% of non-performing  assets.  See "Results
of Operations -Six Months Ended September 30, 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 extremely low loan losses during its

                                       6
<PAGE>


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.

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 September 30, 1999,
the Bank's  liquidity  ratio (liquid assets as a percentage of net  withdrawable
savings  and  current  borrowings)  was 13.01%,  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 September 30, 1999 and 1998.
----------------------------------------------

      General.  Net income for the three  months  ended  September  30, 1999 was
$369,605 compared to $373,143 for the three months ended September 30, 1998. The
slight decrease was due primarily to an increase in noninterest  expenses and an
increase in the provision for loan losses,  offset by an increase in noninterest
income and net interest income. Income before income taxes increased to $681,343
for the three months ended September 30, 1999 from $664,285 for the three months
ended September 30, 1998.

      Interest  Income.  Total interest income increased to $3.9 million for the
three months ended  September  30, 1999,  from $3.6 million for the three months
ended  September 30, 1998. The increase in interest  income was due primarily to
an increase in the average  balance of  outstanding  loans for the three  months
ended  September  30, 1999 as compared to the period ended  September  30, 1998,
offset by a decrease in the average yield on earnings  assets from 8.26% for the
three  months  ended  September  30,  1998 to 8.03% for the three  months  ended
September 30, 1999.

      Interest Expense. Total interest expense increased to $2.0 million for the
three months ended  September  30, 1999,  from $1.8 million for the three months
ended September 30, 1998. Interest on deposits decreased to $1.5 million for the
three  months  ended  September  30, 1999 from $1.6 million for the three months
ended September 30, 1998 due primarily to a decrease in the average rate paid on
deposits. The average rate paid on deposits for the three months ended September
30,  1999 was 4.17%  compared  to 4.57% for the same  period in the prior  year.
Interest  expense on borrowed money  increased to $419,297 for the quarter ended
September 30, 1999,  from $224,685 for the quarter ended September 30, 1998, due
to an  increase  in average  borrowings  from the  Federal  Home Loan Bank.  The
average rate paid on interest-bearing liabilities was

                                       7
<PAGE>

4.68% for the three months ended  September  30, 1999  compared to 4.72% for the
three months ended September 30, 1998.

      Provision for Loan Losses. The provision for loan losses increased to
$110,154 for the three months ended September 30, 1999, from $25,000 for the
three months ended September 30, 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 September 30, 1999. "See
Financial Condition."

      Noninterest Income. Noninterest income increased to $866,655 for the three
months  ended  September  30,  1999,  from  $397,021  for the three months ended
September 30, 1998 due primarily to both an increase in service  charges and the
resolution  of  expenses  related to the Bank's  computer  conversion.  The Bank
converted to an in-house computer system in November 1998 and incurred excessive
expenses of $149,000  related to the  conversion  which were  reimbursed  by the
software provider.  The increase in service charges, fees and commissions is due
to the increase in secondary  mortgage  loan sales at Community  First  Mortgage
("First Mortgage").

      Noninterest  Expenses.  Noninterest  expense increased to $2.0 million for
the three months ended  September 30, 1999, from $1.4 for the three months ended
September 30, 1998. The increase in noninterest  expense is attributable to both
increased  staffing as a result of increased  loan  origination  activity and an
increase  in  compensation  and other  expenses  related  to the  opening  of an
additional office in Staunton, Virginia during the quarter.

      Taxes.  Taxes  increased to $311,738 for the three months ended  September
30, 1999,  from $291,142 for the three months ended  September 30, 1998,  due to
both an  increase  in income  before  taxes  and an  increase  in the  Company's
effective income tax rate to 45.8% for the three months ended September 30, 1999
compared to 43.9% for the three months ended  September 30, 1998.  The Company's
effective  tax  rate  increased  due to increased  loan  charge-offs  which  are
nondeductible.


Six Months Ended September 30, 1999 and 1998
--------------------------------------------

      General.  Net income  for the six  months  ended  September  30,  1999 was
$880,781  compared to $879,503 for the six months ended  September  30, l998 for
the same reasons discussed above.  Income before income taxes remained unchanged
at $1.5 million for the six months ended  September  30, 1999 and  September 30,
1998.

      Interest  Income.  Total interest income increased to $7.4 million for the
six months ended  September 30, 1999, from $7.1 million for the six months ended
September 30, 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 8.26% to 8.05% for the same period.

      Interest Expense. Total interest expense increased to $3.8 million for the
six months ended  September 30, 1999, from $3.7 million for the six months ended
September 30, 1998.  Interest on deposits remained unchanged at $3.1 million for
the six months  ended  September  30,  1999,  from the same period last year due
primarily to an increase in the average outstanding deposit balances offset by a
decrease in the rate paid.  The rate paid on deposits  decreased  from 4.57% for
the six months  ended  September  30,  1998 to 4.21% for the same  period in the
current fiscal year.  Interest  expense on borrowed money  increased to $705,740
for the six months  ended  September  30, 1999 from  $506,718 for the six months
ended September 30, 1998, due primarily to increased borrowings.

      Provision  for Loan Losses.  The  provision  for loan losses  increased to
$179,154 for the six months ended September 30, 1999, from $ 99,999 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 six
months ended  September 30, 1999 compared to the six months ended  September 30,
1998.

                                       8
<PAGE>


      Noninterest Income. Noninterest income increased to $1,954,832 for the six
months  ended  September  30,  1999,  from  $792,269  for the six  months  ended
September 30, 1998, due to an increase in service charges, fees, commissions and
gains on securities  transactions and the  reimbursement of $149,000 in computer
expenses as described above.

      Noninterest  Expenses.  Noninterest expenses increased to $3.8 million for
the six months ended  September 30, 1999,  from $2.6 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
growth in Community Bank and Community First Mortgage as described above.

      Taxes.  Taxes were  relatively  unchanged  at $667,234  for the six months
ended  September 30, 1999,  from $667,556 for the six months ended September 30,
1998.


YEAR 2000 ISSUES

      The approaching millennium is causing organizations of all types to review
their computer  systems for the ability to properly  accommodate  the year 2000.
When computer  systems were first  developed,  two digits were used to designate
the year in date calculations and "19" was assumed for the century. As a result,
there is significant concern about the integrity of date sensitive  calculations
when the calendar rolls over to January 1, 2000. An older system could interpret
01/01/00 as January 1, 1900,  potentially  causing  major  problems  calculating
information related to interest,  principal payments,  delinquencies or maturity
dates.  An internal  committee  comprised of senior  officers and management has
been  formed  to  address  the  potential  risk  that the year  2000  poses  for
Community.  This committee  reports to the full board of directors  quarterly or
more often as warranted.

      Financial  institution  regulators  have issued  guidance  concerning  the
responsibilities  of senior  management  and  directors.  The Federal  Financial
Institutions  Examination Council has issued several  interagency  statements on
Year 2000 Project  Management  Awareness.  These  statements  require  financial
institutions to, among other things, examine the year 2000 issue with respect to
their  customers,  suppliers and borrowers.  These  statements also require each
federally insured financial institution to survey its exposure, measure its risk
and  prepare a plan to address  the year 2000 issue.  In  addition,  the federal
banking regulators have issued safety and soundness guidelines to be followed by
insured depository institutions to assure resolution of any year 2000 problems.

      Accurate  data  processing  is essential to our  operations  and a lack of
accurate processing by our vendors or us could have a significant adverse impact
on our financial  condition and results of operations.  Based on our testing, we
believe that our in-house data processing  operations will function  properly on
and after January 1, 2000. A contingency plan, however, has been developed by us
in the  unlikely  event  that our data  processing  operations  do not  function
properly on or after January 1, 2000. This plan focuses on conducting operations
in a manual mode, including the recording of transactions on spreadsheets.

      We have  also  received  year  2000  updates  from  most of our  material,
non-information system providers, including but not limited to security cameras,
credit card and ATM card processors, the vault alarm, check printers,  telephone
systems,  participation  loan servicers,  and  institutions we invest through or
with.  Based on these updates,  we do not anticipate any  significant  year 2000
issues. Our future expense to be year 2000 compliant is immaterial.

      In addition to expenses related to our own systems,  we could incur losses
if loan  payments  are delayed due to year 2000  problems  affecting  any of our
significant borrowers or impairing the payroll systems of large employers in our
market area. We have been communicating with our vendors to assess

                                       9
<PAGE>


their  progress in evaluating  their  systems and  implementing  any  corrective
measures required by them to be prepared for the year 2000. We have been advised
by such  parties that they have plans in place to address and correct the issues
associated with the year 2000 problem;  however, no assurance can be given as to
the adequacy of these plans or to the  timeliness  of their  implementation.  We
consider the year 2000 issue as part of our underwriting criteria.


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.


                                       10
<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.

      The Company held an annual meeting (the "Meeting") of stockholders on July
28, 1999. The following directors were elected at the meeting: Charles F.
Anderson, M.D., Charles W. Fairchilds, Thomas W. Winfree. The following
directors term of office continued after the meeting: Jane C. Hickok, Dale C.
Smith, James R. Cooke, Jr., DDS and Kenneth L. Elmore.

      The matters voted on at the Meeting were

      (1) The election of three directors.


                                      For             Withheld


         Charles F. Andersen       2,388,211            2,700
         Charles W. Fairchilds     2,385,151            5,760
         Thomas W. Winfree         2,351,254           39,657


      (2) Ratification  of the  appointment  of BDO Seidman,  LLP as independent
          accountants for the Company for the fiscal year ending March 31, 2000.


                       For           Against          Abstentions

                    2,384,811           0                6,100





                                       11

<PAGE>


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.




                                       12
<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: November 15, 1999
                                   By: /s/ R. Jerry Giles
                                       -------------------------------
                                        R. Jerry Giles
                                        Chief Financial Officer
                                          (Duly Authorized Officer and Principal
                                           Accounting Officer)




                               EXHIBIT INDEX

Exhibit No.            Description

27                     Financial Data Schedule.