<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
TRI-COUNTY FINANCIAL CORPORATION
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which
transaction applies:
________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________
5. Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
<PAGE>
<PAGE>
April 13, 1998
Dear Stockholder:
I am pleased to invite you to attend the Annual Meeting of
the Stockholders of Tri-County Financial Corporation (the
"Corporation") to be held in the second floor Board Room at the
main office of Community Bank of Tri-County, 3035 Leonardtown
Road, Waldorf, Maryland on Wednesday, May 13, 1998 at 10:00 a.m.
The attached Notice and Proxy Statement describe the formal
business to be transacted at the meeting. Directors and
officers of the Corporation as well as a representative of
Stegman & Company will be present to respond to any questions
the stockholders may have.
Your vote is important, regardless of the number of shares
you own. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE, EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. This will not prevent you from voting in person, but
will assure that your vote is counted if you are unable to
attend the meeting.
Sincerely,
/s/ Michael L. Middleton
------------------------
Michael L. Middleton
President
<PAGE>
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Meeting") of Tri-County Financial Corporation
(the "Corporation") will be held in the second floor Board Room
at the main office of Community Bank of Tri-County, 3035
Leonardtown Road, Waldorf, Maryland on Wednesday, May 13, 1998,
at 10:00 a.m.
A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. The election of three directors of the Corporation; and
2. Such other matters as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on any one of the foregoing
proposals at the Meeting on the date specified above, or on any
date or dates to which, by original or later adjournment, the
Meeting may be adjourned. The Board of Directors has fixed the
close of business on March 13, 1998, as the record date for
determination of the stockholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of
proxy which is solicited by the Board of Directors and to mail
it promptly in the enclosed envelope. The proxy will not be
used if you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Henry A. Shorter, Jr.
-------------------------
HENRY A. SHORTER, JR.
SECRETARY
Waldorf, Maryland
April 13, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE
CORPORATION THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER
TO ENSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.<PAGE>
<PAGE>
PROXY STATEMENT
OF
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Tri-County
Financial Corporation ("Tri-County Financial" or the
"Corporation") to be used at the Annual Meeting of Stockholders
of the Corporation (the "Meeting"), which will be held in the
second floor Board Room at the main office of Community Bank of
Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on
Wednesday, May 13, 1998 at 10:00 a.m. The accompanying notice
of meeting and this Proxy Statement are being first mailed to
stockholders on or about April 13, 1998.
________________________________________________________________
REVOCATION OF PROXIES
________________________________________________________________
Stockholders who execute proxies retain the right to revoke
them at any time. Unless so revoked, the shares represented by
such proxies will be voted at the Meeting and all adjournments
thereof. Proxies may be revoked by written notice delivered in
person or mailed to the Secretary of the Corporation at the
address shown above or by the filing of a later proxy prior to a
vote being taken on a particular proposal at the Meeting. A
proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors of
the Corporation will be voted in accordance with the directions
given therein. Where no instructions are indicated, proxies
will be voted for the nominees for director set forth below and
in favor of each of the other proposals set forth in this Proxy
Statement for consideration at the Meeting.
________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________
Stockholders of record as of the close of business on March
13, 1998 are entitled to one vote for each share then held. As
of March 13, 1998, the Corporation had 782,866 shares of common
stock par value $.01 (the "Common Stock") issued and
outstanding.
The following table sets forth, as of April 6, 1998, certain
information as to those persons who were beneficial owners of
more than 5% of the Corporation's outstanding shares of Common
Stock and as to the shares of Common Stock beneficially owned by
each director, each officer named in the summary compensation
table and by all executive officers and directors of the
Corporation as a group. Persons and groups owning in excess of
5% of the Common Stock are required to file certain reports
regarding such ownership with the Corporation and the Securities
and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended. Based upon such reports, management knows
of no person, other than those set forth in the table below, who
owned more than 5% of the Corporation's outstanding shares of
Common Stock at April 6, 1998. All beneficial owners listed in
the table have the same address as the Corporation.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Shares of
Name of Beneficial Common Stock
Beneficial Owners Ownership (1) Outstanding
- ----------------- ------------- ------------
<S> <C> <C>
Community Bank of Tri-County 56,740 (2) 7.2%
Employee Stock Ownership Plan
("ESOP")
Michael L. Middleton 76,243 (3) 9.4%
C. Marie Brown 23,900 (4) 3.0%
Herbert N. Redmond, Jr. 10,092 (6) 1.3%
Henry A. Shorter, Jr. 25,234 (5) 3.2%
Gordon A. O'Neill 38,428 (5)(6) 4.9%
W. Edelen Gough, Jr. 11,463 (5) 1.5%
H. Beaman Smith 27,743 (5) 3.5%
All Executive Officers and 235,771 (7) 27.6%
Directors as a Group
(9 persons)
</TABLE>
[FN]
_______________
(1) Includes certain shares owned by spouses, or as custodian
or trustee for minor children over which shares all
officers and directors as a group effectively exercise sole
or shared voting and investment power, unless otherwise
indicated.
(2) These shares are currently held in a suspense account for
future allocation and/or distribution among participants as
the loan used to purchase the shares is repaid. The ESOP
trustees vote all allocated shares in accordance with the
instructions of the participating employees. Unallocated
shares and shares for which no instructions have been
received are voted by the trustees in the manner directed
by the ESOP committee.
(3) Includes 25,735 shares of Common Stock which may be
received upon the exercise of stock options. Also includes
7,431 shares of Common Stock allocated to Mr. Middleton
under the ESOP.
(4) Includes 10,167 shares of Common Stock which may be
received upon the exercise of stock options and 4,671
shares of Common Stock allocated to Ms. Brown under the
ESOP.
(5) Includes 7,554, 7,554, 1,928 and 7,554 shares that may be
received upon the exercise of options by Directors Shorter,
O'Neill, Gough and Smith, respectively.
(6) Includes 9,572 shares of Common Stock held by the ESOP
which have not been allocated to the accounts of
participants; these shares are deemed to be under the
control of the Director in connection with his service as
Trustee of the ESOP.
(7) Includes 70,587 shares of Common Stock which may be
received upon the exercise of stock options. Also includes
16,894 shares of Common Stock allocated to all executive
officers and directors as a group under the ESOP and 9,572
shares held by the ESOP that are not allocated to the
accounts of participants and are deemed to be under the
control of two Directors in connection with their service
as Trustees of the ESOP.
</FN>
2<PAGE>
<PAGE>
________________________________________________________________
PROPOSAL I - ELECTION OF DIRECTORS
________________________________________________________________
Tri-County Financial's Board of Directors currently consists
of seven members. The Corporation's Articles of Incorporation
provide that directors are to be elected for terms of three
years, approximately one-third of whom are to be elected
annually.
The Board of Directors has nominated for election as
directors Michael L. Middleton, Gordon A. O'Neill and C. Marie
Brown to serve for three year terms and until their successors
are elected and qualified. It is intended that the persons
named in the proxies solicited by the Board will vote for the
election of the named nominees. The Corporation's Articles of
Incorporation provide that stockholders may not cumulate their
votes for the election of directors.
If any nominee is unable to serve, the shares represented by
all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this
time, the Board knows of no reason why any nominee might be
unavailable to serve.
Under the Corporation's Bylaws, directors shall be elected
by a majority of those votes cast by stockholders at the
Meeting. Votes which are not cast at the Meeting, either
because of abstentions or broker non-votes, are not considered
in determining the number of votes which have been cast for or
against the election of a nominee.
The following table sets forth certain information for each
nominee and director continuing in office.
<TABLE>
<CAPTION>
AGE AT FIRST YEAR
DECEMBER ELECTED TERM TO
NAME 31, 1997 DIRECTOR(1) EXPIRE
---- -------- ----------- --------
<S> <C> <C> <C>
BOARD NOMINEES:
Michael L. Middleton 50 1979 2001 (2)
Gordon A. O'Neill 72 1968 2001 (2)
C. Marie Brown 55 1991 2001 (2)
DIRECTORS CONTINUING IN OFFICE:
W. Edelen Gough, Jr. 69 1970 1999
Beaman Smith 52 1986 1999
Herbert N. Redmond, Jr. 57 1997 2000
Henry A. Shorter, Jr. 67 1966 2000
</TABLE>
[FN]
_______________
(1) Reflects the year first elected as a director of Community
Bank of Tri-County (the "Bank"). With the exception of Ms.
Brown, who was appointed in October 1991, and Mr. Redmond,
who was appointed in May 1997, each director became a
director of the Corporation on the date of its
incorporation in September 1989.
(2) Assuming the individual is elected.
</FN>
3<PAGE>
<PAGE>
The principal occupation of each director of Tri-County
Financial is set forth below. Unless otherwise noted, all
directors have held the position described below for at least
the past five years and reside in southern Maryland.
MICHAEL L. MIDDLETON is President and Chief Executive
Officer of the Corporation and the Bank. Mr. Middleton joined
the Bank in 1973 and served in various management positions
until 1979 when he became President of the Bank. Mr. Middleton
is a Certified Public Accountant and holds a Masters of Business
Administration. As President and Chief Executive Officer of the
Bank, Mr. Middleton is responsible for the overall operation of
the Bank pursuant to the policies and procedures established by
the Board of Directors. Mr. Middleton is a member of the Rotary
Club of Waldorf and is a Paul Harris Fellow. Since December
1995, Mr. Middleton has served on the Board of Directors of the
Federal Home Loan Bank of Atlanta.
GORDON A. O'NEILL is a partner in the insurance agency of
Alger & O'Neill located in La Plata, Maryland. He is a member
of the Charles County Chamber of Commerce and the La Plata
Business Association.
C. MARIE BROWN has been associated with the Bank for 21
years and serves as its Senior Vice President of Human Resources
and Data Processing. Ms. Brown is an alumnus of Charles County
Community College with an associates of arts degree in
management development. She is a supporter of the Handicapped
and Retarded Citizens of Charles County, of Zonta and of various
administrative committees of the Hughesville Baptist Church.
W. EDELEN GOUGH, JR. retired from his position as senior
vice president in charge of administration of the Corporation
and the Bank in May 1994. He had served in this capacity with
the Bank since 1970. He is a member and director of the Rotary
Club of Leonardtown, Maryland and a member and Vice President of
the Literary Council of St. Mary's County.
BEAMAN SMITH is the Treasurer of the Corporation, President
of Accosystems, Inc., a computer software company, and Vice
President of Fry Plumbing Company of Washington, D.C. Prior to
that time, Mr. Smith was a majority owner of the Smith's Family
Honey Company in Bryans Road, Maryland. Mr. Smith is a Trustee
of the Ferguson Foundation, a member of the Bryans Road Sports
Council and the Treasurer of the Mayaone Association.
HERBERT N. REDMOND, JR. is the Senior Vice President and
Manager of the St. Mary's County office of the D.H. Steffens
Company, which provides civil engineering, land planning and
land surveying services. He is a member and director of the
Leonardtown Rotary, serves on the boards of Health Share of St.
Mary's County and the St. Mary's County Building Officials and
Code Administrators Appeals Board, participates in the St.
Mary's County Development Review Forum and is a member of the
St. Mary's County Historical Society.
HENRY A. SHORTER, JR. is the Secretary of the Corporation
and the Bank, and has served in this capacity with the Bank
since 1968. Mr. Shorter is a member of the American Legion and
is a retired restaurant owner.
________________________________________________________________
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
________________________________________________________________
The Board of Directors conducts its business through
meetings of the Board and through activities of its committees.
No director of the Corporation attended fewer than 75% of the
total meetings of the Board of Directors and committees on which
such Board member served during this period. <PAGE>
The Corporation's audit committee, consisting of the full
Board of Directors of the Corporation, meets with the
Corporation's independent auditors in connection with its annual
audit and to review the Corporation's accounting and financial
reporting policies and practices. The Board of Directors met
once in its capacity as audit committee during 1997.
4<PAGE>
<PAGE>
The Corporation's full Board of Directors acts as a
nominating committee for the annual selection of its nominees
for election as directors. While the Board of Directors will
consider nominees recommended by stockholders, it has not
actively solicited recommendations from the Corporation's
stockholders for nominees nor established any procedures for
this purpose. The Board of Directors met once in its capacity
as nominating committee during 1997.
________________________________________________________________
EXECUTIVE COMPENSATION
________________________________________________________________
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash
compensation awarded to or earned in the last three years by the
chief executive officer of the Corporation and the only other
executive officer who earned in excess of $100,000 in salary and
bonus in 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Name and ------------------- Awards All Other
Principal Position Year Salary Bonus(1) Option/SAAs(2) Compensation
- ------------------ ---- ------ -------- -------------- ------------
<S> <C> <C> <C> <C>
Michael L. Middleton 1997 $ 138,867 $ 78,540 -- $ 39,196 (3)
President 1996 134,588 79,945 -- 25,328
1995 130,600 90,627 3,077/7,693 (4) 16,985
C. Marie Brown 1997 $ 86,154 $ 38,982 -- $ 30,008 (5)
Senior Vice President 1996 83,500 39,679 -- 22,202
1995 80,000 44,411 1,508/3,770 (4) 14,447
Gregory C. Cockerham 1997 76,959 32,645 -- 14,914 (6)
Senior Vice President 1996 73,446 21,812 -- 8,908
1995 71,000 24,634 836/2,091 5,471
</TABLE>
[FN]
_______________
(1) Represents bonuses paid pursuant to the Bank's Executive
Incentive Compensation Plan (the "Incentive Plan"), adopted
by the Board of Directors in February 1992. Pursuant to
the Incentive Plan, the Bank, for each year in which the
Incentive Plan is in effect, pays each participant a
year-end bonus equal to a percentage of his compensation
times the "Multiplier," as defined below. The percentage
of compensation taken into account for Mr. Middleton, Ms.
Brown and Mr. Cockerham for this purpose is 10%, 8% and
7.5%, respectively. The multiplier equals (i) the sum of
(a) 80% of the percentage by which the Corporation's return
on average equity ("ROE") exceeds the median ROE of other
members of a peer group comprised of all other savings
associations headquartered in the State of Maryland, and
(b) 20% of the percentage by which the Corporation's ROE
exceeds the median ROE of other members of a peer group
comprised of all other Federal Reserve member banks
headquartered in the State of Maryland, plus (ii) the sum
of (a) 80% of the percentage by which the Bank's
nonperforming loans (loans over 90 days delinquent and
other real estate owned) as a percentage of gross loans
("NPL") betters the median NPL of other members of the
Maryland savings association peer group, and (b) 20% of the
percentage by which the Bank's NPL betters the median NPL
of other members of the Federal Reserve member bank peer
group.
(2) Consists of awards under the Incentive Plan.
(3) Consists of $10,300 in directors' fees, $18,491 in
contributions under the ESOP, matching contributions under
the 401(k) Plan of $4,750, split-dollar life insurance
premiums of $1,075 and disability insurance premiums of
$4,580.
(4) On December 31, 1996, Mr. Middleton, Ms. Brown and Mr.
Cockerham waived the right to receive payments related to
1996 appreciation and all future payments related to
outstanding previously issued SAAs.
(5) Consists of $10,300 in directors' fees, $15,173 in
contributions under the Bank's ESOP, matching contributions
under the 401(k) Plan of $3,775 and split-dollar life
insurance premiums of $760.
(6) Consists of $11,951 in contributions under the Bank's ESOP
and matching contributions under the 401(k) Plan of $2,963.
</FN>
5<PAGE>
<PAGE>
________________________________________________________________
AGGREGATED OPTION/SAA EXERCISES IN 1997 AND YEAR-END
OPTION/SAA VALUES
________________________________________________________________
The following table sets forth information concerning
exercises of options/SAAs by the named executive officers during
the year ended December 31, 1997, as well as the value of
options/SAAs held by such persons at the end of the fiscal year.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNEXERCISED UNEXERCISED
OPTIONS/SAAS AT OPTIONS/SAAS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED VALUE (ALL IMMEDIATELY (ALL IMMEDIATELY
NAME ON EXERCISE REALIZED EXERCISABLE) EXERCISABLE)
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Michael L. Middleton 4,123 $ 66,961 25,735 $ 310,058
C. Marie Brown 2,248 29,755 10,167 118,852
Gregory C. Cockerham 0 0 7,746 96,064
</TABLE>
EMPLOYMENT AGREEMENTS
The Bank maintains an employment agreement with Michael L.
Middleton which currently provides for an annual salary of
$142,097. The agreement provides for Mr. Middleton's employment
for a period of five years, subject to an automatic annual
one-year extension. The agreement provides for termination for
cause or upon certain events specified in the agreement. The
agreement is also terminable by the Bank without cause, in which
case Mr. Middleton would be entitled to three full year's
compensation as in effect on the date of termination payable in
a lump sum, plus full life, health, disability and other
benefits as in effect on the date of termination for a period of
three years. If, following a change in control of the
Corporation or the Bank, the Bank terminates Mr. Middleton's
employment for any reason other than (i) just cause, as defined
in the agreement or if the Bank otherwise changes the capacity
or circumstances in which Mr. Middleton is employed or causes a
reduction in his responsibilities, authority, compensation or
other benefits provided under the agreement without Mr.
Middleton's consent, then Mr. Middleton shall be entitled to
receive an amount equal to 2.99 times the average annual
compensation payable by the Bank and includable in Mr.
Middleton's gross income for the most recent five taxable years.
Control refers to the ownership of 25% or more of the Bank's or
Corporation's Common Stock by any person or group. The
agreement provides, among other things, for annual review of
compensation, for participation in an equitable manner in any
stock option plan or incentive plan to the extent authorized by
the Bank's Board of Directors for its key management employees
and for participation in pension, group life insurance, medical
coverage and in other employee benefits applicable to executive
personnel.
The Bank maintains a similar employment agreement with C.
Marie Brown, Senior Vice President of Human Resources and Data
Processing. Ms. Brown's agreement has a three-year term and
provides for a current annual salary of $88,158 and a change in
control payment equal to 2.00 times Ms. Brown's five-year
average annual compensation.
The Bank maintains a similar employment agreement with
Gregory C. Cockerham, Senior Vice President of Lending. Mr.
Cockerham's agreement has a three year term and provides for a
current annual salary of $78,796 and a change in control payment
equal to 2.00 times Mr. Cockerham's five-year average annual
compensation.
The aggregate payment that would be made to Mr. Middleton,
Ms. Brown and Mr. Cockerham assuming the termination of their
employment under the foregoing circumstances at December 31,
1997 would be approximately $410,000, $168,000 and $150,000,
respectively.
6<PAGE>
<PAGE>
________________________________________________________________
DIRECTORS' COMPENSATION
________________________________________________________________
BOARD FEES
Directors of the Corporation receive fees of $300 per
meeting attended. Members of the Bank's Board of Directors
currently receive fees of $375 per meeting attended and an
annual retainer of $3,500. Members of the Bank's executive
committee receive a fee of $375 per meeting attended. Members
of the Bank's audit committee receive fees of $375 per meeting
attended.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Corporation maintains a stock option plan for
non-employee directors, adopted by the Board of Directors in
December 1995. Under that plan, the Corporation granted to
non-employee directors options to purchase an aggregate of 8,750
shares of the Common Stock during 1995. No options were granted
to directors under this plan during 1997.
DIRECTOR RETIREMENT PLAN
The Bank's Board of Directors has adopted a retirement plan
for members of the Board of Directors of the Bank (the
"Directors' Plan"), effective January 1, 1995. Under the
Directors' Plan, each non-employee Directors of the Bank will
receive an annual retirement benefit for ten years following his
termination of service on the Bank's Board in an amount equal to
the product of his "Benefit Percentage," his "Vested
Percentage," and $3,500. A participant's "Benefit Percentage"
is based on his overall years of service as a non-employee
director of the Bank, and increases in increments of 33-1/3%
from 0% for less than five years of service, to 33-1/3% for five
to nine years of service, to 66-2/3% for 10 to 14 years of
service, and to 100% for 15 or more years of service. A
participant's "Vested Percentage" equals 33-1/3% if the
participant is serving on the Board on January 1, 1995 (the
"Effective Date"), increases to 66-2/3% if the participant
completes one year of service after the Effective Date, and
becomes 100% if the participant completes a second year of
service after the Effective Date. However, in the event a
participant retires from service on the Board due to
"disability" (as determined by the Board of Directors of the
Bank) or for any reason after attaining age 65, the
participant's Vested Percentage will become 100% regardless of
his years of service. A participant's vested percentage will
also become 100% in the event of a "change in control" (as
defined in the Directors' Plan). This provision may have the
effect of deferring a hostile change in control by increasing
the costs of acquiring control.
If a participant terminates service on the Board due to
disability, the Bank will pay the participant each year for ten
years an amount equal to the product of his Benefit Percentage
and $3,500. The Directors' Plan also provides death benefits to
a participant's surviving spouse under certain conditions.
The Directors' Plan also establishes a deferred compensation
program for members of the Board of Directors of the Bank.
Under the Directors' Plan, directors of the Bank may elect to
defer all or any portion of the fees and/or salary otherwise
payable to him or her in cash for any calendar year in which the
Directors' Plan is in effect. Deferred amounts will be credited
to a bookkeeping account in the participant's name, which will
also be credited annually with: (a) the investment return which
would have resulted if such deferred amounts had been invested
in savings accounts having a return equal to the highest
interest rate which the Bank pays on certificates of deposit,
regardless of their term, and (b) a deemed matching contribution
by the Bank in an amount equal to the product of the
"Multiplier" (as defined below) for the calendar year, and 1.5%
of the participant's aggregate fee deferrals for the year. The
multiplier equals (i) the sum of (a) 80% of the percentage by
which the Corporation's return on average equity ("ROE") exceeds
the median ROE of other members of a peer group comprised of all
other savings associations headquartered in the State of
Maryland, and (b) 20% of the percentage by which the
Corporation's ROE exceeds the median ROE of other members of a
peer group comprised of all other Federal Reserve member banks
headquartered in the State of Maryland, plus (ii) the sum of (a)
80% of the percentage by which the Bank's nonperforming loans
(loans over 90 days delinquent
7<PAGE>
<PAGE>
and other real estate owned) as a percentage of gross loans
("NPL") betters the median NPL of other members of the Maryland
savings association peer group, and (b) 20% of the percentage by
which the Bank's NPL betters the median NPL of other members of
the Federal Reserve member bank peer group. Participants may
determine the time and form of benefit payments and may cease
future deferrals any time. Changes in participant elections
generally become effective only as of the following January 1st,
except that (i) elections designating a beneficiary or ceasing
future contributions will be given immediate effect, and (ii)
participants may change elections as to the timing or form of
distributions only with respect to subsequently deferred
compensation.
________________________________________________________________
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the Securities
Exchange Act of 1934, the Corporation's officers, directors and
persons who own more than 10% of the outstanding Common Stock
are required to file reports detailing their ownership and
changes of ownership in such Common Stock, and to furnish the
Corporation with copies of all such reports. Based solely on
its review of the copies of such reports received during the
past fiscal year or with respect to the last fiscal year, the
Corporation believes that during 1997, all of its officers,
directors and all of its stockholders owning in excess of 10% of
the outstanding Common Stock have complied with the reporting
requirements.
________________________________________________________________
TRANSACTIONS WITH THE CORPORATION AND THE BANK
________________________________________________________________
The Bank has followed a policy of offering loans to its
officers, directors and employees for the financing and
improvement of their personal residences as well as consumer
loans. These loans are made in the ordinary course of business
and upon substantially the same terms, including collateral,
interest rate and origination fees, as those prevailing at the
time for comparable transactions, and do not involve more than
the normal risk of collectibility or present any unfavorable
features.
________________________________________________________________
RELATIONSHIP WITH INDEPENDENT AUDITORS
________________________________________________________________
Effective on September 19, 1997, the Corporation's Board of
Directors, acting as the Audit Committee, voted to replace the
Corporation's former independent auditors, Deloitte & Touche
LLP, with the Corporation's current independent auditors,
Stegman & Company. In connection with their audit of the fiscal
year ended December 31, 1996 and through the date of their
dismissal, there were no disagreements with Deloitte & Touche
LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of Deloitte & Touche
LLP, would have caused them to make reference to the subject of
such disagreement in connection with their reports. In
addition, during this period there was no adverse opinion or
disclaimer of opinion or any opinion qualified or modified as to
uncertainty, audit scope or accounting principles.
The Board of Directors presently intends to renew the
Company's arrangements with Stegman & Company to be its
independent auditors for the fiscal year ending December 31,
1998. A representative of Stegman & Company is expected to be
present at the Meeting to respond to appropriate questions and
to make a statement, if so desired.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to come
before the Meeting other than those matters described above in
this Proxy Statement. However, if any other matters should
properly come before the Meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof by the
person or persons voting the proxies as directed by the Board of
Directors.
8<PAGE>
<PAGE>
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of solicitation of proxies will be borne by the
Corporation. In addition to conducting solicitations by mail,
directors, officers, and regular employees of the Corporation
may solicit proxies personally or by telegraph or telephone
without additional compensation.
The Corporation's Annual Report to Stockholders, including
financial statements, accompanies this proxy statement. Such
Annual Report is not to be treated as a part of the proxy
solicitation material nor as having been incorporated herein by
reference.
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
To be eligible for inclusion in the Corporation's proxy
materials for next year's Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be
received at the Corporation's main office at 3035 Leonardtown
Road, Waldorf, Maryland 20601 no later than December 13, 1998.
Any such proposals shall be subject to the requirements of the
proxy rules adopted under the Securities Exchange Act of 1934,
as amended.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Henry A. Shorter, Jr.
-------------------------
HENRY A. SHORTER, JR.
SECRETARY
Waldorf, Maryland
April 13, 1998
________________________________________________________________
FORM 10-K
________________________________________________________________
A COPY OF THE CORPORATION'S FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT
CHARGE TO STOCKHOLDERS AS OF MARCH 13, 1998, UPON WRITTEN
REQUEST TO THE SECRETARY, TRI-COUNTY FINANCIAL CORPORATION, 3035
LEONARDTOWN ROAD, WALDORF, MARYLAND 20601
9<PAGE>
REVOCABLE PROXY
TRI-COUNTY FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
The undersigned hereby appoints W. Edelen Gough, Jr. and
Herbert N. Redmond, Jr., with full powers of substitution, to
act as attorneys and proxies for the undersigned to vote all
shares of Common Stock of Tri-County Financial Corporation (the
"Corporation") that the undersigned is entitled to vote at the
Annual Meeting of Stockholders (the "Meeting") to be held in the
second floor Board Room at the main office of Community Bank of
Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on
Wednesday, May 13, 1998 at 10:00 a.m. and at any and all
adjournments thereof, as follows:
VOTE
FOR WITHHELD
The election as directors of all [ ] [ ]
nominees listed below (except as
marked to the contrary).
Michael L. Middleton
Gordon A. O'Neill
C. Marie Brown
INSTRUCTION: To withhold your vote
for any nominee, write that nominee's
name on the line below.
_____________________________________
The Board of Directors recommends a vote "FOR" the listed
proposition.
________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DIRECTED BY THE
BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS
PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS
TO VOTE WITH RESPECT TO APPROVAL OF THE MINUTES OF THE PRIOR
MEETING OF STOCKHOLDERS, THE ELECTION OF ANY PERSON AS DIRECTOR
WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT
SERVE, AND MATTERS INCIDENT TO THE CONDUCT OF THE 1998 ANNUAL
MEETING.
________________________________________________________________
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Meeting or at any adjournment thereof and after notification to
the Secretary of the Corporation at the Meeting of the
stockholder's decision to terminate this proxy, then the power
of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt from the Corporation
prior to the execution of this proxy of notice of the Meeting, a
proxy statement dated April 13, 1998, and an annual report.
Dated: _______________, 1998
____________________________ ____________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
____________________________ ____________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed card.
When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held
jointly, each holder should sign.
________________________________________________________________
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
________________________________________________________________
