8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 21, 2010

TRI-COUNTY FINANCIAL CORPORATION
(Exact Name Of Registrant As Specified In Charter)
Maryland	0-18279	52-1652138
(State Or Other Jurisdiction of Incorporation)	Commission File Number	IRS Employer Identification No.
3035 Leondardtown Road, Waldorf, Maryland   20601
(Address Of Principal Executive Offices)(Zip Code)
(301) 645-5601
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name Or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]  Pre-commencment communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencment communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.13e-(c))

Item 2.02                      Results of Operations and Financial Condition.

On May 21, 2010, Tri-County Financial Corporation (the “Company”), the holding company for Community Bank of Tri-County, disseminated a letter to shareholders that reported the Company’s results of operations and financial condition for the three months ended March 31, 2010.  A copy of the letter to shareholders is attached as Exhibit 99.1 and incorporated herein by reference.

Item 9.01                      Financial Statements and Exhibits.

(a)   Financial Statements of Businesses Acquired:  Not applicable

(b)   Pro Forma Financial Information:  Not applicable

(c)   Shell Company Transactions:  Not applicable

(d)   Exhibits

Number Description

99.1  Letter to Shareholders

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 hereunto duly authorized.

	Tri-County Financial Corporation
Date:  May 21, 2010	By:	/s/ William J. Pasenelli
		William J. Pasenelli
		Executive Vice President and Chief Financial Officer

EX-99.1

Dear Shareholder:

As we return our Company toward its pre-recession performance trends, I am pleased to report the results of operations of Tri-County Financial Corporation and its banking subsidiary, Community Bank of Tri-County (the “Bank”), for the three months ended March 31, 2010.  Net income available to common shareholders was $1,152,691 for the three months ended March 31, 2010, an increase of $594,584 compared to $558,107 for the same three months in 2009.  For the three months ended March 31, 2010, diluted earnings per common share were $0.38, compared to $0.19 for the three months ended March 31, 2009.  Total assets increased to $819,175,061, up $4,132,527, or 0.51%, from December 31, 2009.  The Company’s annualized returns on average assets and equity for the quarter ended March 31, 2 010 were 0.67% and 7.85%, respectively, compared to 0.43% and 4.49%, respectively, for the same period in 2009.

The 107% increase in net income available to common shareholders was primarily due to an increase of $1,541,631 or 31.19%, in net interest income over the previous year.  The improvement in net interest income was sparked by the Company’s success in increasing its earning assets and core customer deposits.  The Company’s interest rate margin increased to 3.40% for the three months ended March 31, 2010 from 2.89% for the three months ended March 31, 2009.  The Bank is continuing its strategy of attracting more transactional accounts that typically carry a lower interest rate and produce more fee income than time deposits.  This growth in retail deposits has facilitated the replacement of wholesale funding sources and reduced our cost of funds.  Total deposits increased $21,61 2,021, or 3.37%, to $662,030,810 at March 31, 2010 from $640,418,789 at December 31, 2009.  Deposits increased $107,762,319 or 19.44% since March 31, 2009.  Long-term debt and short-term borrowings decreased by $17,840,660 or 20.10% from $88,750,160 at December 31, 2009 to $70,909,500 at March 31, 2010.

The Board and management continues to carefully monitor asset quality and the Bank’s portfolio of loans remains strong with 89.91% of its non-performing loans concentrated among four customers at March 31, 2010.  The provision for loan losses increased to $858,374 for the three months ended March 31, 2010 compared to $532,885 for the comparable period in the prior year.  This increase was a result of the Company’s continuing prudent evaluation of its loan portfolio during the recovery phase of this economic cycle.  The allowance for loan losses decreased $225,684 to $7,245,630 at March 31, 2010 from $7,471,314 at December 31, 2009.  Non-performing loans as a percentage of total loans improved to 2.29% at March 31, 2010 compared to 3.09% at December 31, 2009.

Non-interest income increased over the comparable period by $174,768 or 29.80%.  The Company’s non-interest expense increased by $424,247 or 11.12% from the comparable period in the prior year due to costs associated with the asset growth of the Bank, the rising cost of regulatory compliance and increasing FDIC assessments.

Common stockholders’ equity of $53,142,891 resulted in a book value of $17.82 per common share at March 31, 2010, an increase of $0.39 per share from December 31, 2009.  Throughout the financial crisis and its aftermath, we have adhered to our mission of exceeding the expectations of the Southern Maryland community and our sharp focus on relationship banking with local decision making capabilities.  On behalf of your Board of Directors and management, I look forward to our continued success in 2010 and the creation of additional shareholder value.  Your continued support and advocacy are vital to our success.