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

FORM 10-QSB

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

For the quarterly period ended June 30, 2001

[  ]       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 July 30, 2001:
2,297,362.

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





|PART I.  | FINANCIAL INFORMATION                                                                             |  
|-------- | ------------------------------------------------------------------------------------------------- | -
|Item 1.  | Consolidated Financial Statements                                                                 |  
|         | Consolidated Statements of Financial Conditionat June 30, 2001 (unaudited) and March 31, 2001     | 1
|         | Consolidated Statements of Income for theThree Months Ended June 30, 2001 and 2000 (unaudited)    | 2
|         | Consolidated Statements of Cash Flows for theThree Months Ended June 30, 2001 and2000 (unaudited) | 3
|         | Notes to Unaudited Interim ConsolidatedFinancial Statements                                       | 4
|Item 2.  | Management's Discussion and Analysis of FinancialCondition and Results of Operations              | 6
|PART II. | OTHER INFORMATION                                                                                 | 9



|                                                                                                                                                   | June 30,2001   | March 31, 2001
|-------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------------
|                                                                                                                                                   | (Unaudited)    |               
|                                                                                                                                                   |                |               
|ASSETS                                                                                                                                             |                |               
|Cash (including interest-bearing deposits of approximately
  $2,795,000 at June 30, 2001 and $2,697,000 at March 31, 2001)                         | $    5,264,713 | $    5,168,499
|Securities                                                                                                                                         |                |               
|Held to maturity                                                                                                                                   | 29,538,145     | 29,905,180    
|Available for sale                                                                                                                                 | 8,453,425      | 8,421,433     
|Investment in Federal Home Loan Bank stock, at cost                                                                                                | 3,250,000      | 3,150,000     
|Loans receivable, net                                                                                                                              | 211,529,855    | 214,557,798   
|Real estate owned                                                                                                                                  | 624,689        | 451,310       
|Property and equipment, net                                                                                                                        | 5,655,234      | 5,827,020     
|Accrued interest receivable                                                                                                                        |                |               
|Loans                                                                                                                                              | 1,360,927      | 1,421,726     
|Investments                                                                                                                                        | 601,504        | 239,696       
|Prepaid expenses and other assets                                                                                                                  | 1,007,378      | 1,032,871     
|                                                                                                                                                   |                |               
|Total Assets                                                                                                                                       | $267,285,870   | $270,175,533  
|                                                                                                                                                   |                |               
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                               |                |               
|                                                                                                                                                  
|Liabilities                                                                                                                                        |                |               
|Deposits                                                                                                                                           | $175,888,660   | $174,307,472  
|Advances from Federal Home Loan Bank                                                                                                               | 60,000,000     | 63,000,000    
|Securities sold under agreement to repurchase                                                                                                      | 2,830,257      | 4,422,389     
|Advance payments by borrowers for taxes and insurance                                                                                              | 119,143        | 293,168       
|Other liabilities                                                                                                                                  | 2,502,198      | 2,347,815     
|                                                                                                                                                   |                |               
|Total Liabilities                                                                                                                                  | 241,340,258    | 244,370,844   
|                                                                                                                                                   |                |               
|Stockholders' Equity                                                                                                                               |                |               
|Preferred stock $.01 par value, authorized 3,000,000 shares,
    none outstanding                                                                  |                |               
|Common stock, $.01 par value, authorized 10,000,000 shares,
    2,304,562 and 2,348,832 shares outstanding at June 30, 2001
    and March 31, 2001 | 23,045         | 23,488        
|Additional paid in capital                                                                                                                         | 4,416,337      | 4,500,450     
|Retained earnings                                                                                                                                  | 19,334,682     | 19,144,552    
|Net unrealized gain on securities available for sale                                                                                               | 2,171,548      | 2,136,199     
|Total Stockholders' Equity                                                                                                                         | 25,945,612     | 25,804,689    
|                                                                                                                                                   |                |               
|Total Liabilities and Stockholders' Equity                                                                                                         | $267,285,870   | $270,175,533  



|                                                    | Three Months Ended
June 30,
|--------------------------------------------------- | ---------------------------
|                                                    | 2001                       
|                                                    | (Unaudited)                
|                                                    |                            
|INTEREST INCOME                                     |                            
|Loans                                               | $4,488,763                 
|Investment securities                               | 560,694                    
|Other                                               | 154,498                    
|Total interest income                               | 5,203,955                  
|                                                    |                            
|INTEREST EXPENSE                                    |                            
|Deposits                                            | 2,043,791                  
|Borrowed money                                      | 723,479                    
|Total interest expense                              | 2,767,270                  
|                                                    |                            
|NET INTEREST INCOME                                 | 2,436,685                  
|                                                    |                            
|PROVISION FOR LOAN LOSSES                           | 57,750                     
|                                                    |                            
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 2,378,935                  
|                                                    |                            
|NONINTEREST INCOME                                  |                            
|Service charges, fees and commissions               | 795,039                    
|Miscellaneous                                       | 13,997                     
|Total noninterest income                            | 809,036                    
|                                                    |                            
|NONINTEREST EXPENSE                                 |                            
|Compensation & benefits                             | 1,145,335                  
|Occupancy                                           | 310,294                    
|Data processing                                     | 210,174                    
|Federal insurance premium                           | 7,996                      
|Miscellaneous                                       | 455,693                    
|Total noninterest expense                           | 2,129,492                  
|                                                    |                            
|INCOME BEFORE TAXES                                 | 1,058,479                  
|                                                    |                            
|INCOME TAXES                                        | 336,047                    
|                                                    |                            
|NET INCOME                                          | $    722,432               
|                                                    |                            
|BASIC EARNINGS PER SHARE                            | $          0.31            
|DILUTED EARNINGS PER SHARE                          | $          0.31            
|DIVIDENDS PER SHARE                                 | $          0.08            

See accompanying notes to consolidated financial statements.



|                                                                                                | Three Months Ended
June 30,
|----------------------------------------------------------------------------------------------- | ---------------------------
|                                                                                                | 2001                       
|                                                                                                | (Unaudited)                
|                                                                                               
|OPERATING ACTIVITIES                                                                            |                            
|Net income                                                                                      | $          722,432         
|Adjustments to reconcile net income to
    net cash provided (absorbed) by operating activities |                            
|Provision for loan losses                                                                       | 57,750                     
|Depreciation                                                                                    | 180,812                    
|Amortization of premium and accretion of discount on securities, net                            | (72,981)                   
|Increase (decrease) in net deferred loan fees                                                   | (24,794)                   
|Increase in deferred income taxes                                                               | 17,951                     
|(Increase) decrease in other assets                                                             | 25,493                     
|Increase (decrease) in other liabilities                                                        | (80,925)                   
|(Gain) loss on sale of loans                                                                    | 61,578                     
|Proceeds from sale of loans                                                                     | 19,125,222                 
|Loans originated for resale                                                                     | (19,320,420)               
|                                                                                                |                            
|Net cash provided (absorbed) by operating activities                                            | 692,118                    
|                                                                                                |                            
|INVESTING ACTIVITIES                                                                            |                            
|Proceeds from maturities of held to maturity securities                                         | 2,065,000                  
|Purchases of investment securities                                                              | (1,697,965)                
|Net (increase) decrease in loans                                                                | 2,947,165                  
|Purchases of property and equipment                                                             | (8,923)                    
|(Purchase) of FHLB stock                                                                        | (100,000)                  
|(Increase) decrease in real estate owned                                                        | (173,379)                  
|Net cash provided (absorbed) by investing activities                                            | 3,031,898                  
|                                                                                                |                            
|FINANCING ACTIVITIES                                                                            |                            
|Dividends paid                                                                                  | (185,778)                  
|Net increase (decrease) in deposits                                                             | 1,581,188                  
|Proceeds from advances and other borrowed money                                                 | 134,209,904                
|Repayments of advances and other borrowed money                                                 | (138,802,036)              
|Repurchase of common stock                                                                      | (431,080)                  
|Net cash provided (absorbed) by financing activities                                            | (3,627,802)                
|                                                                                                |                            
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                | 96,214                     
|                                                                                                |                            
|CASH AND CASH EQUIVALENTS-beginning of period                                                   | 5,168,499                  
|                                                                                                |                            
|CASH AND CASH EQUIVALENTS-end of period                                                         | $       5,264,713          

See accompanying notes to consolidated financial statements.



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 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 months ended June 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending March 31, 2002.

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
|----------------------------------------- | --------------------------
|                                          |                           
|                                          | June 30, 2001             
|                                          | Income                    
|                                          |                           
|Basic EPS                                 |                           
|                                          |                           
|Income available to
  common stockholders | $722,432                  
|                                          |                           
|Effect of Dilutive Securities             |                           
|                                          |                           
|Options                                   | ---                       
|                                          |                           
|Diluted EPS                               |                           
|                                          |                           
|Income available to
  common stockholders | $722,432                  

NOTE 3 - STOCKHOLDERS' EQUITY

The following table presents the Bank's regulatory capital levels at June 30, 2001:

|                   | AmountRequired | PercentRequired | ActualAmount | ActualPercent | ExcessAmount
|------------------ | -------------- | --------------- | ------------ | ------------- | ------------
|                   |                |                 |              |               |             
|Tangible Capital   | $  4,000,000   | 1.50%           | $22,903,000  | 8.59%         | $18,903,000 
|Core Capital       | 10,667,000     | 4.00            | 22,903,000   | 8.59          | 12,236,000  
|Risk-based Capital | 15,659,000     | 8.00            | 25,941,000   | 14.63         | 10,282,000  

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 requires 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 three months ended June 30, 2001 and 2000 was $2,609,022 and $2,661,233,
respectively. Income taxes paid for the three months ended June 30, 2001 and 2000 were $320,000 and $226,380,
respectively.

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 three-month periods ended June 30, 2001 and
2000:

|                                                                                                                                            | Three Months Ended June 30
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------
|                                                                                                                                            | 2001                      
|                                                                                                                                            | (Amounts in thousands)    
|                                                                                                                                            |                           
|Net income                                                                                                                                  | $ 722,432                 
|Other comprehensive income, net of tax
    Unrealized gains on securities:
      Unrealized holding gains(losses) arising during the period | 35,349                    
|                                                                                                                                            |                           
|Less: Reclassification
        adjustment for gains(losses) included in net income                                                          | ---                       
|                                                                                                                                            | $ 757,781                 

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

FINANCIAL CONDITION

The Company's total assets decreased $2.9 million to $267.3 million at June 30, 2001 from $270.2 million at March
31, 2001 due primarily to a decrease in loans receivable of $3.0 million. The Company had one loan of
approximately $2.0 million that was repaid during the quarter ended June 30, 2001. Deposits increased $1.6 million
to $175.9 million at June 30, 2001, from $174.3 million at March 31, 2001. The increase in deposits was due
primarily to increases in transaction and passbook accounts offset by a decrease in time deposit accounts.
Stockholders' equity increased $141,000 to $25.9 million at June 30, 2001, from $25.8 million at March 31, 2001,
due primarily to earnings for the three month period ended June 30, 2001 and an increase in the net unrealized gain
on securities available for sale, which was partially offset by the Company's stock repurchase of $431,000 and a
payment of $0.08 per share in cash dividends.

At June 30, 2001, non-performing assets totaled approximately $1.1 million or .40% of assets compared to $1.2
million or .43% of assets at March 31, 2001.  Non-performing assets at June 30, 2001 were comprised primarily
nonaccrual loans 90 days or more delinquent. At June 30, 2001, our allowance for loan losses to non-performing
assets was 139% and to total assets was .56%.  Based on current market values of the properties securing these
loans, management anticipates no significant losses in excess of the reserves for losses previously recorded.

As of June 30, 2001, there were also $4.8 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 and residential real estate loans.  Included in the commercial real estate loans of concern is one loan in
the amount of $1.5 million, which at the present time is current as to interest and principal payments.

We maintain an allowance for loan losses to provide for estimated potential 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 loan loss reserve is adequate at June
30, 2001.  Although management believes it uses the best information available, future adjustments to reserves 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, and 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 June 30, 2001, the Bank's liquidity ratio (liquid assets as
a percentage of net withdrawable savings and current borrowings) was 32.0%.

At June 30, 2001, we had commitments to purchase or originate $15.5 million of loans. Certificates of deposit
scheduled to mature in one year or less at June 30, 2001, totaled $100.6 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 June 30, 2001 and 2000.

General.  Net income for the three months ended June 30, 2001 was $722,000 compared to $437,000 for the three
months ended June 30, 2000 an increase of $285,000. Net interest income increased $519,000, while non-interest
income increased $61,000 during the three months ended June 30, 2001 compared to the same period in 2000.
Income before taxes increased by $374,000 to $1,058,000 for the three months ended June 30, 2001 from $685,000
for the three months ended June 30, 2000.

Interest Income.   Total interest income increased by $544,000 to $5.2 million for the three months ended June 30,
2001, from $4.7 million for the three months ended June 30, 2000, due primarily to increases in both the average
balance of investment securities and loans for the three months ended June 30, 2001 as compared to the period
ended June 30,2000.  The average yield earned on interest-earning assets was 8.06% for the three months ended
June 30, 2001 compared to 7.96% for the three months ended June 30, 2000.

Interest Expense.  Total interest expense increased by $25,000 to $2.8 million for the quarter ended June 30, 2001,
from $2.7 million for the quarter ended June 30, 2000. Interest on deposits increased by $344,000 to $2.0 million
for the quarter ended June 30, 2001 from $1.7 million for the quarter ended June 30, 2000 due primarily to an
increase in average outstanding deposit balances. Interest expense on borrowed money decreased by $318,000 to
$723,000 for the quarter ended June 30, 2001, from $1.0 million for the quarter ended June 30, 2000, due primarily
to a decrease in the rate paid on borrowings.  The average rate paid on interest-bearing liabilities was 4.64% during
the three months ended June 30, 2001 compared to 4.95% for the three months ended June 30, 2000 due to an
decrease in the level of interest rates, primarily on borrowings.

Provision for Loan Losses.  The provision for loan losses decreased by $8,000 to $58,000 for the three months
ended June 30, 2001, from $66,000 for the three months ended June 30, 2000.

Noninterest Income.  Noninterest income increased by $61,000 to $809,000 for the three months ended June 30,
2001, from $748,000 for the three months ended June 30, 2000 due primarily to an increase in fees on the sale of
mortgage loans in the secondary market by our mortgage-banking subsidiary, during the June 30, 2001 quarter.

Noninterest Expense.  Noninterest expense increased by $214,000 to $2.1 million for the three months ended June
30, 2001 compared to the same period last year. Data processing expense increased by $42,000 to $210,000 during
the June 30. 2001 quarter compared to the June 30, 2000 quarter due to purchases of additional equipment and
increased processing volumes. Compensation and benefits increased by $123,000 to $1.1 million compared to the
same period last year due to annual salary increases and commission increases related to increased secondary market
loan originations.

Taxes.  Taxes increased by $88,000 to $336,000 for the three months ended June 30, 2001, from $248,000 for the
three months ended June 30, 2000 due to increased income before taxes. The effective tax rate decreased from
36.2% for the June 30, 2000 quarter to 31.7% for the June 30, 2001 quarter.

Disclosure Regarding Forward-Looking Statements

This document, including information incorporated by reference, and future filings by Community on Form 10-KSB, Form 10-QSB and Form 8-K and future oral and written statements by Community and its management may
contain, forward-looking statements about the corporation 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 Community and its management are based on beliefs, plans, objectives, goals, expectations,

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;
- inflation, interest rate, market and monetary fluctuations;
- 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 success of the Bank in gaining regulatory approval of its products and services, when required;
- the impact of changes in financial services' laws and regulations (including laws concerning taxes,
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.