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

FORM 10-QSB

|   | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934        
|-- | ----------------------------------------------------------------------------------------
|   | For the quarterly period ended December 31, 2002                                        
|OR
|   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   | For the transition period from __________________ to ___________________                





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|VIRGINIA                                                      | 54-1532044                         
|------------------------------------------------------------- | -----------------------------------
|(State of other jurisdiction ofincorporation or organization) | (I.R.S. EmployerIdentification No.)

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Number of shares of Common Stock, par value $.01 per share, outstanding at the close of business on February 10, 2003:  2,059,847.

Transitional Small Business Disclosure Format (Check one):         Yes                    No





|PART I.  | FINANCIAL INFORMATION                                                                              |   
|-------- | -------------------------------------------------------------------------------------------------- | --
|Item 1.  | Consolidated Financial Statements                                                                  |   
|         | Consolidated Statements of Financial Conditionat December 31, 2002 (unaudited) and March 31, 2002  | 3 
|         | Consolidated Statements of Income for theThree and Nine Months Ended December 31, 2002 (unaudited) | 4 
|         | Consolidated Statements of Cash Flows for theNine Months Ended December 31, 2002 (unaudited)       | 5 
|         | Notes to Unaudited ConsolidatedFinancial Statements                                                | 6 
|Item 2.  | Management's Discussion and Analysis or Plan of Operation                                          | 9 
|PART II. | OTHER INFORMATION                                                                                  | 11



|                                                                                                                                                       | December 31,2002 | March 31, 2002
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------- | --------------
|                                                                                                                                                       | (Unaudited)      |               
|ASSETS                                                                                                                                                 |                  |               
|Cash (including interest-bearing deposits of approximately
  $2,570,000 at December 31, 2002 and $1,931,000 at March 31, 2002)                         | $    5,897,724   | $    3,206,926
|Securities                                                                                                                                             |                  |               
|Held to maturity                                                                                                                                       | 21,804,265       | 16,773,803    
|Available for sale                                                                                                                                     | 10,497,694       | 8,399,486     
|Investment in Federal Home Loan Bank stock, at cost                                                                                                    | 1,700,000        | 2,600,000     
|Loans receivable, net of allowances for loan losses  of $1,766,397 at December 31, 2002 and  1,675,679 at March 31, 2002                               | 230,947,607      | 219,433,684   
|Loans held for sale                                                                                                                                    | 4,857,040        | 4,409,122     
|Real estate owned                                                                                                                                      | 735,510          | 793,603       
|Property and equipment, net                                                                                                                            | 7,142,516        | 5,421,183     
|Accrued interest receivable                                                                                                                            |                  |               
|Loans                                                                                                                                                  | 1,057,050        | 1,211,437     
|Investments                                                                                                                                            | 285,657          | 369,447       
|Prepaid expenses and other assets                                                                                                                      | 1,131,472        | 755,280       
|Total Assets                                                                                                                                           | $286,056,535     | $263,373,971  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                   |                  |               
|Liabilities                                                                                                                                            |                  |               
|Deposits                                                                                                                                               | $233,206,946     | $204,535,456  
|Advances from Federal Home Loan Bank                                                                                                                   | 23,000,000       | 28,000,000    
|Securities sold under agreement to repurchase                                                                                                          | 1,654,700        | 950,805       
|Advance payments by borrowers for taxes and insurance                                                                                                  | 155,322          | 254,846       
|Other liabilities                                                                                                                                      | 2,168,593        | 2,937,754     
|Total Liabilities                                                                                                                                      | 260,185,561      | 236,678,861   
|Stockholders' Equity                                                                                                                                   |                  |               
|Preferred stock $.01 par value, authorized 3,000,000 shares,
    none outstanding                                                                      | ---              | ---           
|Common stock, $.01 par value, authorized 10,000,000 shares,
    2,058,847 and 2,253,147 shares outstanding at December 31, 2002
    and March 31, 2002 | 20,588           | 22,531        
|Additional paid in capital                                                                                                                             | 4,004,249        | 4,326,489     
|Retained earnings                                                                                                                                      | 19,949,406       | 20,223,498    
|Accumulated other comprehensive income                                                                                                                 | 1,896,731        | 2,122,592     
|Total Stockholders' Equity                                                                                                                             | 25,870,974       | 26,695,110    
|Total Liabilities and Stockholders' Equity                                                                                                             | $286,056,535     | $263,373,971  

|                                                           | Three Months Ended
December 31 | Nine Months Ended
December 31
|---------------------------------------------------------- | ------------------------------ | -----------------------------
|                                                           | 2002                           | 2001                         
|                                                           | (Unaudited)                    | (Unaudited)                  
|INTEREST INCOME  Loans                                     | $4,038,803                     | $4,093,083                   
|Investment securities                                      | 268,809                        | 187,622                      
|Other                                                      | 154,525                        | 166,838                      
|Total interest income                                      | 4,462,137                      | 4,447,543                    
|INTEREST EXPENSE
  Deposits                                | 1,532,896                      | 1,815,056                    
|Borrowed money                                             | 121,116                        | 176,113                      
|Total interest expense                                     | 1,654,012                      | 1,991,169                    
|NET INTEREST INCOME                                        | 2,808,125                      | 2,456,374                    
|PROVISION FOR LOAN LOSSES                                  | 57,649                         | 75,234                       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES        | 2,750,476                      | 2,381,140                    
|NONINTEREST INCOME
  Service charges, fees and commissions | 945,551                        | 837,569                      
|Miscellaneous                                              | 48,788                         | 23,128                       
|Total noninterest income                                   | 994,339                        | 860,697                      
|NONINTEREST EXPENSE
  Compensation & benefits              | 1,509,488                      | 1,247,466                    
|Occupancy                                                  | 344,017                        | 345,234                      
|Data processing                                            | 269,800                        | 202,128                      
|Federal insurance premium                                  | 9,198                          | 8,067                        
|Miscellaneous                                              | 438,119                        | 419,985                      
|Total noninterest expense                                  | 2,570,622                      | 2,222,880                    
|INCOME BEFORE TAXES                                        | 1,174,193                      | 1,018,957                    
|INCOME TAXES                                               | 360,575                        | 340,114                      
|NET INCOME                                                 | $    813,618                   | $    678,843                 
|BASIC EARNINGS PER SHARE                                   | $          0.39                | $          0.30              
|DILUTED EARNINGS PER SHARE                                 | $          0.38                | $          0.30              
|DIVIDENDS PER SHARE                                        | $          0.09                | $          0.08              



|                                                                                     | Nine Months Ended
December 31,
|------------------------------------------------------------------------------------ | ------------------------------
|                                                                                     | 2002                          
|                                                                                     | (Unaudited)                   
|OPERATING ACTIVITIES                                                                 |                               
|Net income                                                                           | $  2,326,151                  
|Adjustments to reconcile net income to
    net cash provided by operating activities |                               
|Provision for loan losses                                                            | 232,286                       
|Depreciation                                                                         | 536,835                       
|Amortization of premium and accretion of discount on securities, net                 | 38,149                        
|Increase (decrease) in net deferred loan fees                                        | (15,435)                      
|(Decrease) increase in deferred income taxes                                         | (12,859)                      
|(Increase) in other assets                                                           | (138,015)                     
|(Decrease) increase in other liabilities                                             | (617,871)                     
|(Gain) on sale of loans                                                              | (190,384)                     
|Proceeds from sale of loans                                                          | 54,081,822                    
|Loans originated for resale                                                          | (54,444,740)                  
|Net cash provided by operating activities                                            | 1,795,939                     
|INVESTING ACTIVITIES                                                                 |                               
|Proceeds from maturities of held to maturity securities                              | 5,750,000                     
|Purchases of investment securities                                                   | (13,324,528)                  
|Net (increase) in loans                                                              | (11,668,724)                  
|Purchases of property and equipment                                                  | (2,258,168)                   
|Redemption of FHLB stock                                                             | 900,000                       
|Decrease (increase) in Real Estate Owned                                             | 58,093                        
|Net cash provided (absorbed) by investing activities                                 | (20,543,327)                  
|FINANCING ACTIVITIES                                                                 |                               
|Dividends paid                                                                       | (568,811)                     
|Net increase in deposits                                                             | 28,671,490                    
|Proceeds from advances and other borrowed money                                      | 257,219,365                   
|Repayments of advances and other borrowed money                                      | (261,515,503)                 
|Proceeds from issuance of common stock                                               | 58,390                        
|Repurchase of common stock                                                           | (2,426,745)                   
|Net cash provided (absorbed) by financing activities                                 | 21,438,186                    
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     | 2,690,798                     
|CASH AND CASH EQUIVALENTS-beginning of period                                        | 3,206,926                     
|CASH AND CASH EQUIVALENTS-end of period                                              | $  5,897,724                  



NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B.  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 nine months ended December 31, 2002, are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2003.

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. Diluted earnings per share is computed by dividing net
earnings by the weighted average number of common shares and common share
equivalents outstanding. Basic and diluted earnings per share are computed in
the following table.

|                                          | For the Three Months Ended
|----------------------------------------- | --------------------------
|                                          |                           
|                                          | December 31, 2002         
|                                          | Income                    
|                                          |                           
|Basic EPS                                 |                           
|                                          |                           
|Income available to
  common stockholders | $813,618                  
|                                          |                           
|Effect of Dilutive Securities             |                           
|                                          |                           
|Options                                   | ---                       
|                                          |                           
|Diluted EPS                               |                           
|                                          |                           
|Income available to
  common stockholders | $813,618                  

|                                          | For the Nine Months Ended
|----------------------------------------- | -------------------------
|                                          |                          
|                                          | December 31, 2002        
|                                          | Income                   
|                                          |                          
|Basic EPS                                 |                          
|                                          |                          
|Income available to
  common stockholders | $2,326,151               
|                                          |                          
|Effect of Dilutive Securities             |                          
|                                          |                          
|Options                                   | ---                      
|                                          |                          
|Diluted EPS                               |                          
|                                          |                          
|Income available to
  common stockholders | $2,326,151               

NOTE 3 - STOCKHOLDERS' EQUITY

The following table presents the Bank's regulatory capital levels at December 31, 2002:

|                   | AmountRequired | PercentRequired | ActualAmount | ActualPercent | ExcessAmount
|------------------ | -------------- | --------------- | ------------ | ------------- | ------------
|                   |                |                 |              |               |             
|Tangible Capital   | $  4,281,000   | 1.50%           | $23,223,000  | 8.14%         | $18,942,000 
|Core Capital       | 11,415,000     | 4.00            | 23,223,000   | 8.14          | 11,808,000  
|Risk-based Capital | 16,212,000     | 8.00            | 26,339,000   | 13.00         | 10,127,000  

Capital distributions by OTS-regulated savings banks are limited by regulation
("Capital Distribution Regulation").  Capital distributions are defined to include,
in part, dividends, stock repurchases and cash-out mergers.  The Capital Distribution
Regulation permits a savings bank to make capital distributions during a calendar year
equal to net income for the current year plus the previous two years net income, less
capital distributions paid over the same period. Any distributions in excess of that
amount require prior OTS approval. The Capital Distribution Regulation requires that
savings banks in holding company structures provide the applicable OTS Regional
Director with a 30-day advance written notice of all proposed capital distributions
whether or not advance approval is required by the regulation. The OTS may object to
capital distributions if the bank is not meeting its regulatory capital requirements,
the distribution raises safety and soundness concerns or is otherwise in violation of
law.

NOTE 4 - SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS

Total interest paid for the nine months ended December 31, 2002 and 2001 was
$6,388,328 and $7,219,914. Total income taxes paid for the nine months ended
December 31, 2002 and 2001 was $1,232,871 and $1,351,451.

NOTE 5 - COMPREHENSIVE INCOME

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. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. Comprehensive income for the Company 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
nine-month periods ended December 31, 2002 and 2001:

|                                                                                                                                          | Nine Months Ended December 31
|----------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------
|                                                                                                                                          | 2002                         
|                                                                                                                                          |                              
|Net income                                                                                                                                | $2,326,151                   
|Other comprehensive income, net of tax
    Unrealized (losses) on securities:
      Unrealized holding (losses) arising during the period | (225,861)                    
|                                                                                                                                          |                              
|                                                                                                                                          | $2,100,290                   

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FINANCIAL CONDITION

The Company's total assets increased $22.7 million to $286.1 million at
December 31, 2002 from $263.4 million at March 31, 2002 due primarily to
increases in securities of $7.1 million and loans receivable of $11.5 million.
Deposits increased $28.7 million to $233.2 million at December 31, 2002, from
$204.5 million at March 31, 2002. The increase in deposits was due primarily
to increases in savings accounts of $21.0 million, money market accounts of
$8.3 million and checking accounts of $5.4 million, which was offset by a
decrease in time deposits of $6.0 million. Stockholders' equity decreased
$800,000 to $25.9 million at December 31, 2002, from $26.7 million at March 31,
2002, due primarily to the Company's stock repurchase of $2.4 million, a
decrease in the net unrealized gain on securities available for sale and three
cash dividend payments totaling $569,000 or $.26 per share for the nine month
period ended December 31, 2002 partially offset by earnings for the nine month
period ended December 31, 2002.

At December 31, 2002, non-performing assets totaled approximately $2.1 million
or .73% of assets compared to $941,000 or .36% of assets at March 31, 2002.
Non-performing assets at December 31, 2002 were comprised primarily of real
estate 90 days or more past due. At December 31, 2002, our allowance for loan
losses to non-performing assets was 80.8% and to total assets was .62%. Based
on current market values of the properties securing these loans, management does not anticipate any significant losses in excess of the reserves
for losses previously recorded.

As of December 31, 2002, there were also $3.0 million in loans with respect to
which known information about the possible credit problems of the borrowers or the cash flows of the security properties have caused management to have doubts as to the ability of the borrowers to comply with present loan repayment terms and
which may result in the future inclusion of such items in the non-performing asset categories. These loans are comprised primarily of commercial real estate loans. Included in the commercial real estate loans of
concern was a loan to one borrower in the amount of $1.2 million, which we are
monitoring due to a prior bankruptcy. The loan is presently current as to
principal and interest.

CRITICAL ACCOUNTING POLICIES

General

The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States (GAAP). The financial
information contained within our statements is, to a significant extent,
financial information that is based on measures of the financial effects of
transactions and events that have already occurred. A variety of factors could
affect the ultimate value that is obtained either when earning income,
recognizing an expense, recovering an asset or relieving a liability. We use
historical loss factors as one factor in determining the inherent loss that may
be present in our loan portfolio. Actual losses could differ significantly from
the historical factors that we use. In addition, GAAP itself may change from
one previously acceptable method to another method. Although the economics of
our transactions would be the same, the timing of events that would impact our
transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be
sustained in our loan portfolio. The allowance is based on two basic principles
of accounting: (i) Statement of Financial Accounting Standard ("SFAS") No.5,
Accounting for Contingencies, which requires that losses be accrued when they
are probable of occurring and estimable and (ii) SFAS 114, Accounting by
Creditors for Impairment of a Loan, which requires that losses be accrued based
on the differences between the value of collateral, present value of future
cash flows or values that are observable in the secondary market and the loan
balance.

We maintain an allowance for loan losses to provide for estimated probable losses in our loan portfolio.  Management determines the level of reserves based on loan performance, the value of the collateral, economic and market conditions, and previous experience.  Management reviews the adequacy of the allowance at least quarterly, utilizing its internal loan classification system. Management believes that the allowance for loan loss is adequate at December 31, 2002.  Although management believes it uses the best information available, future adjustments to the allowance may be necessary.

LIQUIDITY

Historically, the Bank has maintained its liquid assets at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. Management believes that the Bank will continue to
have adequate liquidity for the foreseeable future. Cash flow projections are
regularly reviewed and updated to assure that adequate liquidity is provided. As of December 31, 2002,
the Bank's liquidity ratio (liquid assets as a percentage of net withdrawable savings and current borrowings) was 11.3%.

At December 31, 2002, we had commitments to purchase or originate $17.4 million
of loans. Certificates of deposit scheduled to mature in one year or less at
December 31, 2002, totaled $57.1 million. Based on our historical experience,
management believes that a significant portion of such deposits will remain
with us. Management further believes that loan repayments and other sources of
funds will be adequate to meet our foreseeable short-term and long-term
liquidity needs.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2002 and 2001.

General.  Net income for the three months ended December 31, 2002 was $814,000
compared to $679,000 for the three months ended December 31, 2001, an increase
of $135,000. Net interest income increased $352,000, while non-interest income
increased $134,000 during the three months ended December 31, 2002 compared to
the same period in 2001. Return on equity for the three months ended December
31, 2002 was 12.42% compared to 10.35% for the three month period ended
December 31, 2001. Return on assets was 1.13% for quarter ended December 31,
2002 compared to 1.08% for the same period in the previous fiscal year.

Interest Income. Total interest income increased by $15,000 to $4.5 million for
the three months ended December 31, 2002, from $4.4 million for the three
months ended December 31, 2001, due to an increase in the average balance of
our investment securities and loans offset by a decline in yield for the three
months ended December 31, 2002 as compared to the period ended December 31,
2001. The decline in yield was due to the decline in market interest rates
generally. The average yield earned on loans and securities was 6.43% for the
three months ended December 31, 2002 compared to 7.43% for the three months
ended December 31, 2001.

Interest Expense.  Total interest expense decreased by $337,000 to $1.7 million
for the quarter ended December 31, 2002, from $2.0 million for the quarter
ended December 31, 2001. Interest on deposits decreased by $282,000 to $1.5
million for the quarter ended December 31, 2002 from $1.8 million for the
quarter ended December 31, 2001 due primarily to a 119 basis point decline in
the average rate paid on deposits to 2.64%. Interest expense on borrowed money
decreased by $55,000 to $121,000 for the quarter ended December 31, 2002, from
$176,000 for the quarter ended December 31, 2001, as a result of a decline both
in the rate paid and the average outstanding balances on borrowings.  The
average rate paid on interest-bearing liabilities was 2.54% during the three
months ended December 31, 2002 compared to 3.62% for the three months ended
December 31, 2001.

Provision for Loan Losses.  The provision for loan losses decreased by $17,000
to $58,000 for the three months ended December 31, 2002, from $75,000 for the
three months ended December 31, 2001.

Noninterest Income.  Noninterest income increased by $134,000 to $994,000 for
the three months ended December 31, 2002, from $860,000 for the three months
ended December 31, 2001 due primarily to an increase in service charges and
fees on transaction accounts in the Company's subsidiary, Community Bank. The
number of transaction accounts increased by 2,800 from December 31, 2001 to
December 31, 2002.

Noninterest Expense.  Noninterest expense increased by $348,000 to $2.6 million
for the three months ended December 31, 2002 compared to the same period last
year. Compensation and benefits increased by $262,000 to $1.5 million compared
to the same period last year due to the addition of twelve full time equivalent
employees to staff new branches opened in December 10, 2001 and December 18,
2002 and annual salary increases. Miscellaneous expense decreased by $18,000
to $438,000 during the December 31, 2002 quarter compared to the December 31,
2001 quarter. The decrease in miscellaneous expenses is attributable to
decreases in the cost of outsourcing of check processing.

Taxes.  Taxes increased by $20,000 to $360,000 for the three months ended
December 31, 2002, from $340,000 for the three months ended December 31, 2001.
The effective tax rate decreased from 33.4% for the December 31, 2001 quarter
to 30.7% for the December 31, 2002 quarter.

Nine Months Ended December 31, 2002 and 2001

General.  Net income for the nine months ended December 31, 2002 increased
$283,000 to $2.3 million compared to $2.0 million for the nine months ended
December 31, 2001 due primarily to an increase in net interest income. Net
interest income increased $790,000, while non-interest income increased
$199,000 during the nine months ended December 31, 2002 compared to the same
period in 2001. Return on equity for the nine months ended December 31, 2002
was 11.80% compared to 10.53% for the nine month period ended December 31,
2001. Return on assets was 1.13% for nine months ended December 31, 2002
compared to 1.09% for the same period in the previous fiscal year.

Interest Income.  Total interest income decreased by $1.3 million to $13.3
million for the nine months ended December 31, 2002, from $14.6 million for the
nine months ended December 31, 2001, due primarily to a decrease in the yield
on loans and securities during the period. The yield on loans and securities
decreased from 7.77% to 6.65% for the same periods.

Interest Expense.  Total interest expense decreased by $2.1 million to $5.2
million for the nine months ended December 31, 2002, from $7.3 million for the
nine months ended December 31, 2001.  Interest on deposits decreased by $1.0
million to $4.8 million for the nine months ended December 31, 2002, from $5.8
million for the same period last year due to a decrease in the average rate on
interest bearing liability balances. The average rate paid on deposits
decreased 136 basis points from 4.27% for the nine months ended December 31,
2001 to 2.91% for the same period in the current fiscal year. Interest expense
on borrowed money decreased to $380,000 for the nine months ended December 31,
2002 from $1.4 million for the nine months ended December 31, 2001, due
primarily to a decrease in the average outstanding balance on borrowings. The
average rate paid on borrowings decreased from 3.87% for the nine months ended
December 31, 2001 to 1.84% for the nine month period ended December 31, 2002.

Provision for Loan Losses.  The provision for loan losses decreased by $17,000
to $232,000 for the nine months ended December 31, 2002, from $249,000 for the
same period last year.

Noninterest Income.  Noninterest income increased to $2.7 million for the nine
months ended December 31, 2002, from $2.5 million for the nine months ended
December 31, 2001, due primarily to an increase in service charges and fees on
transactions accounts in the Company's subsidiary, Community Bank.

Noninterest Expenses.  Noninterest expenses increased $661,000 for the nine
months ended December 31, 2002, compared to the same period last year.
Compensation and benefits increased by $731,000 to $4.3 million compared to the
same period last year due to the addition of twelve full time equivalent
employees to staff new branches opened in December 10, 2001 and December 18,
2002 and annual salary increases. Miscellaneous expenses decreased by $223,000
to $1.1 million for the nine month period ended December 31, 2002 compared to
the same period last year. The decrease in miscellaneous expenses was due a
decrease in professional expenses and expenses related to the outsourcing of
check processing.

Taxes.  Taxes increased to $1,027,000 for the nine months ended December 31, 2002, from $965,000 for the nine months ended December 31, 2001. The effective
tax rate decreased from 32.1% for the December 31, 2001 period to 30.6% for the
same period ended December 31, 2002.

**Recent Accounting Pronouncements**

In December 31, 2001, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 01-6, *Accounting by Certain
Entities (Including Entities with Trade Receivables) That Lend to or Finance
the Activities of Others,*to reconcile and conform the accounting and financial
reporting provisions established by various AICPA industry audit guides.  This
Statement is effective for annual and interim financial statements issued for
fiscal years beginning after December 15, 2002, and did not have a material
impact on the Corporation's consolidated financial statements.

On March 13, 2002, the Financial Accounting Standard Board determined
that commitments for the origination of mortgage loans that will be held for
sale must be accounted for as derivatives instruments, effective for fiscal
quarters beginning after April 10, 2002. The Bank enters into commitments to
originate loans whereby the interest rate on the loan is determined prior to
funding.  Such rate lock commitments on mortgage loans to be sold in the
secondary market are considered derivatives.  Accordingly, these commitments
including any fees received from the potential borrower are recorded at fair
value in derivative assets or liabilities, with changes in fair value recorded
in the net gain or loss on sale of mortgage loans.  Fair value is based on fees
currently charged to enter into similar agreements, and for fixed-rate
commitments also considers the difference between current levels of interest
rates and the committed rates.  The cumulative effect of adopting Statement No.
133 for rate lock commitments as of December 31, 2002, was not material.  The
Corporation originally adopted Statement No. 133, *Accounting for Derivative
Instruments and Hedging Activities*on January 1, 2001.

In April 2002, the Financial Accounting Standards Board issued Statement
145, *Rescission of FASB No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections.*The amendment to Statement 13 eliminates an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions.  This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions.  The provisions of this Statement related to the rescission of
Statement 4 shall be applied in fiscal years beginning after May 15, 2002.  The
provisions of this Statement related to Statement 13 are effective for
transactions occurring after May 15, 2002, with early application encouraged.
We expect to adopt Statement No. 145 in fiscal year ended March 31, 2004 and
the effect of adopting Statement No. 145 is not anticipated to be material.

In June 2002, the Financial Accounting Standards Board issued Statement
146, *Accounting for Costs Associated with Exit or Disposal Activities.*This
Statement requires recognition of a liability, when incurred, for costs
associated with an exit or disposal activity.  The liability should be measured
at fair value.  The provisions of the Statement are effective for exit or
disposal activities initiated after December 31, 2002.

Effective January 1, 2002, the Corporation adopted Financial Accounting
Standards Board Statement No. 142, *Goodwill and Other Intangible Assets.*Accordingly, goodwill is no longer subject to amortization over its estimated
useful life, but is subject to at least an annual assessment for impairment by
applying a fair value based test.  Additionally, the Statement 142 requires
that acquired intangible assets (such as core deposit intangibles) be
separately recognized if the benefit of the asset can be sold, transferred,
licensed, rented, or exchanged, and amortized over their estimated useful life.
Branch acquisition transactions were outside the scope of the Statement and
therefore any intangible asset arising from such transactions remained subject
to amortization over their estimated useful life.

In October 2002, the Financial Accounting Standards Board issued
Statement No. 147, *Acquisitions of Certain Financial Institutions.*  The
Statement amends previous interpretive guidance on the application of the
purchase method of accounting to acquisitions of financial institutions, and
requires the application of Statement No. 141, *Business Combinations,*and
Statement No. 142 to branch acquisitions if such transactions meet the
definition of a business combination.  The provisions of the Statement do not
apply to transactions between two or more mutual enterprises.  In addition, the
Statement amends Statement No. 144, *Accounting for the Impairment of Long-Lived
Assets,*to include in its scope core deposit intangibles of financial
institutions.  Accordingly, such intangibles are subject to a recoverability
test based on undiscounted cash flows, and to the impairment recognition and
measurement provisions required for other long-lived assets held and used.

The adoption of Statement No. 141, 142, 144, 145, 146 and 147 did not
have a material impact on the Corporation's consolidated financial statements.

The Financial Accounting Standards Board issued Statement No. 148,
*Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of Statement No. 123,*in December 2002.  The Statement amends
Statement No. 123 to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation.  In addition, the Statement amends the disclosure requirements
of Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.  Finally,
this Statement amends APB Opinion No. 28, *Interim Financial Reporting,*to
require disclosure about the effects of stock options in interim financial
information.  The amendments to Statement No. 123 are effective for financial
statements for fiscal years ending after December 15, 2002.  The amendments to
APB No. 28 are effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002.  Early
application is encouraged for both amendments.  The Corporation continues to
record stock options under APB Opinion No. 25, *Accounting for Stock Issued to
Employees,*and has not adopted the alternative methods allowable under
Statement No. 148.**

Disclosure Regarding Forward-Looking Statements

This document, including information incorporated by reference, contains and
future filings by the Company on Form 10-KSB, Form 10-QSB and Form 8-K and
future oral and written statements by the Company and its management may
contain, forward-looking statements about the Company and its subsidiaries
which we believe are within the meaning of the Private Securities Litigation
Reform Act of 1995.  These forward-looking statements include, without
limitation, statements with respect to anticipated future operating and
financial performance, growth opportunities, interest rates, cost savings and
funding advantages expected or anticipated to be realized by management.  Words
such as may, could, should, would, believe, anticipate, estimate, expect,
intend, plan and similar expressions are intended to identify these forward-looking statements.  Forward-looking statements by the Company and its
management are based on beliefs, plans, objectives, goals, expectations,
anticipations, estimates and intentions of management and are not guarantees
of future performance. The Company disclaims any obligation to update or revise
any forward-looking statements based on the occurrence of future events, the
receipt of new information, or otherwise.  The important factors we discuss
below and elsewhere in this document, as well as other factors discussed under
the caption "Management's Discussion and Analysis or Plan of Operation in this
document and identified in our filings with the SEC and those presented
elsewhere by our management from time to time, could cause actual results to
differ materially from those indicated by the forward-looking statements made
in this document.

The following factors, many of which are subject to change based on
various other factors beyond our control, could cause our financial performance
to differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements:

- the strength of the United States economy in general and the strength
of the local economies in which we conduct our operations;
- the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve
Board;
- financial market, monetary and interest rate fluctuations,
particularly the relative relationship of short-term interest rate to
long-term interest rates;
- the timely development of and acceptance of new products and services
of the Bank and the perceived overall value of these products and
services by users, including the features, pricing and quality
compared to competitors' products and services;
- the willingness of users to substitute competitors' products and
services for our products and services;
- the impact of changes in financial services' laws and regulations
(including laws concerning taxes, accounting standards, banking,
securities and insurance);
- the impact of  technological changes;
- acquisitions;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in the foregoing.

Item 3.  Controls and Procedures

Under the supervision and with the participation of our management, including
our principal financial officer, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures within 90 days
of the filing date of this quarterly report. Based on the evaluation, our
principal executive officer and principal financial officer have concluded that
these controls and procedures are effective. There were no significant changes
in, or corrective action taken regarding, our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of their evaluation.

Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. While we believe the present design of our
disclosure controls and procedures is effective to achieve its goal, future
events affecting our business may cause us to modify our disclosure controls
and procedures.


12NEXT 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


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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 CORPORATIONDate: February 14, 2003
By:
/s/ R. Jerry GilesR. Jerry Giles
Chief Financial Officer
(Duly Authorized Officer)NEXT PAGE

**CERTIFICATIONS**

I, P. Douglas Richard, Principal Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Community Financial Corporation (the
"Registrant");

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 7, 2003

/s/ P. Douglas Richard
P. Douglas Richard
President and Chief Executive Officer

NEXT PAGE

I, R. Jerry Giles, Principal Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Community Financial Corporation (the "Registrant");

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this
quarterly report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 7, 2003

/s/ R. Jerry Giles
R. Jerry Giles
Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit
Number
Document
Reference to Prior Filing
or Exhibit Number
Attached Hereto3.1
Amended and Restated Articles of Incorporation
*3.2
Bylaws, as amended an currently in effect
**4
Form of Common Stock Certificate
***Material contracts:10.1
Stock Option and Incentive Plan
****10.2
Employment Agreement for P. Douglas Richard
**10.3
Amendment No. One and Two to the Employment
Agreement for P. Douglas Richard
*****10.4
Employment Agreement for Chris P. Kyriakides, as
amended
*****10.5
1996 Incentive Plan
*10.6
Supplemental Executive Retirement Plan
***11
Statement re computation of per share earnings
(See Note 2 to the Notes to
Unaudited Consolidated
Financial Statements)99.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*
Filed on July 5, 1996 as an exhibit to the Registrant's Definitive Proxy Statement (File
Number 000-18265) on Schedule 14A. Such previously filed document is hereby
incorporated herein by reference in accordance with Item 601 of Regulation S-B.**
Filed on November 14, 2000 as Exhibits to the Registrant's Quarterly Report on Form
10-QSB (file no, 000-18265) for the quarter ended September 30, 2000. Such
previously filed documents are hereby incorporated herein by reference in accordance
with Item 601 of Regulation S-B.***
Filed on June 29, 2000, as Exhibit 10 to the Annual Report on Form 10-KSB (file no,
000-18265) for the fiscal year ended March 31, 2000. Such previously filed document
is hereby incorporated herein by reference in accordance with Item 601 of Regulation
S-B.****
Filed on May 19, 1989 as Exhibits to the Registrant's Registration Statement No. 33-28817 on Form S-4. All of such previously filed documents are hereby incorporated
herein by reference in accordance with it.*****
Filed on August 14, 2002 as Exhibits to the Registrant's Quarterly Report on Form 10-QSB (file no, 000-18205), for the quarter ended June 30, 2002. Such previously filed
documents are hereby incorporated herein by reference in accordance with Item 601 of
Regulation S-B.