EXHIBIT 13
                 PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 1999

Financial Summary*

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                                    ------------------------
                                                               1999           1998            1997            1996            1995
                                                               ----           ----            ----            ----            ----
                                                                         (Dollars in thousands, except per share data)
Financial Condition
<S>                                                         <C>             <C>             <C>             <C>             <C>
     Securities ....................................        $ 54,178        $ 38,284        $ 25,510        $ 26,525        $ 22,962
     Allowance for loan losses .....................             943             955             890             705             575
     Net loans .....................................          75,215          66,938          64,948          53,953          43,600
     Premises and equipment - net ..................           4,264           2,871           1,675           1,782           1,562
     Total assets ..................................         153,583         127,127         104,968          98,673          83,995
     Noninterest bearing deposits ..................          16,909          14,798          16,501          10,352          10,534
     Interest bearing deposits .....................         121,709          97,698          75,790          77,108          63,406
     Total deposits ................................         138,618         112,496          92,291          87,460          73,940
     Total liabilities .............................         139,847         113,524          93,118          88,338          74,770
     Total shareholders' equity ....................          13,736          13,603          11,850          10,335           9,225

Results of Operations
     Interest income ...............................        $ 10,402        $  8,904        $  7,578        $  6,928        $  5,919
     Interest expense ..............................           5,687           4,518           3,664           3,695           3,171
                                                            --------        --------        --------        --------        --------
     Net interest income ...........................           4,715           4,386           3,914           3,233           2,748
     Provision for loan losses .....................             300             213             315             223             153
                                                            --------        --------        --------        --------        --------
     Net interest income after provision ...........           4,415           4,173           3,599           3,010           2,595
     Other income ..................................             662             574             522             342             287
     Other expenses ................................           2,542           2,155           1,909           1,559           1,549
                                                            --------        --------        --------        --------        --------
     Income before income taxes ....................           2,535           2,592           2,212           1,793           1,333
     Income tax expense ............................             909             928             807             641             476
                                                            --------        --------        --------        --------        --------
     Net income ....................................        $  1,626        $  1,664        $  1,405        $  1,152        $    857
                                                            ========        ========        ========        ========        ========

Per Share Data**
     Net income ....................................        $   0.82        $   0.85        $   0.73        $   0.60        $   0.45
     Net income, assuming dilution .................            0.76            0.80            0.70            0.58            0.44
     Period end book value .........................            6.86            6.89            6.08            5.35            4.81
</TABLE>
___________________________
*    Community First Bancorporation became the bank holding company of Community
     First Bank effective October 16, 1997 as part of a corporate reorganization
     which  was  accounted  for  as  if  it  were  a  pooling-of-interests.  The
     consolidated  financial  statements  and related  information  for the year
     ended December 31, 1997 are presented as if the reorganization had occurred
     on January 1, 1997. The financial  statements and related  information  for
     the years  ended  December  31,  1996 and 1995 are the same as the  amounts
     reported previously by Community First Bank, adjusted for a stock split and
     stock dividends.
**   Per share amounts have been  retroactively  adjusted to reflect a 10% stock
     dividend  effective  December 15, 1999, a two-for-one stock split effective
     July 31,  1998,  a 15% stock  dividend  effective  December 30, 1997 and 5%
     stock dividends effective May 1, 1996 and May 1, 1995.



                                       13
<PAGE>

Market for Common Stock and Dividends

         Although a limited number of shares of common stock of Community  First
Bancorporation  (the  "Company")  are traded from time to time on an  individual
basis,  no  established  trading  market has  developed  and none is expected to
develop  in the near  future.  The  common  stock is not  traded  on the  NASDAQ
National  Market  System,  nor are there any market makers known to  management.
During 1999,  management was aware of a few  transactions in which the Company's
common  stock traded in a price range from $18.18 to $22.00 per share (per share
prices have been adjusted to reflect a 10% stock dividend effective December 15,
1999).  However,  management has not ascertained that these transactions are the
result of arm's length negotiations between the parties involved, and because of
the limited number of shares involved, these prices may not be indicative of the
market value of the common stock.

         As of February 29, 2000, there were approximately 784 holders of record
of the Company's  common stock,  excluding  individual  participants in security
position listings.

         There have been no cash dividends  declared or paid since the Company's
inception.  In order to support  the  Company's  continuing  need for capital to
support  anticipated  asset  growth and market  expansion,  management  does not
expect to declare or pay cash dividends in 2000.

         The Board of Directors declared a 10% stock dividend effective December
15, 1999, a two-for-one  stock split  effective  July 31, 1998,  and a 15% stock
dividend effective December 30, 1997.

Management's Discussion and Analysis

         This discussion is intended to assist in understanding the consolidated
financial condition and results of operations of Community First  Bancorporation
and its wholly-owned  subsidiary,  Community First Bank (the "Bank"),  which are
collectively  referred to as the "Company".  This information should be reviewed
in  conjunction  with the  consolidated  financial  statements and related notes
contained  elsewhere  in this  report.  Per share  net  income  and net  income,
assuming dilution,  have been adjusted to reflect a 10% stock dividend effective
December 15, 1999, a two-for-one  stock split effective July 31, 1998, and a 15%
stock dividend effective December 30, 1997.

Forward Looking Statements

         Statements  included in Management's  Discussion and Analysis which are
not  historical  in nature are  intended  to be, and are  hereby  identified  as
"forward looking statements" for purposes of the safe harbor provided by Section
21E of the  Securities  Exchange Act of 1934, as amended.  The Company  cautions
readers that forward looking  statements,  including without  limitation,  those
relating to the Company's recent and continuing  expansion into Anderson County,
including its proposed  expansion into Williamston,  South Carolina,  its future
business  prospects,   revenues,  working  capital,  liquidity,  capital  needs,
interest costs, and income,  are subject to certain risks and uncertainties that
could cause  actual  results to differ  materially  from those  indicated in the
forward looking statements,  due to several important factors herein identified,
among others,  and other risks and factors  identified  from time to time in the
Company's reports filed with the Securities and Exchange Commission.

                                       14
<PAGE>

Earnings Performance

1999 Compared with 1998

         For the year ended December 31, 1999,  the Company  recorded net income
of $1,626,000, a decrease of $38,000, or 2.3%, from net income of $1,664,000 for
1998.  Net income per share for 1999 was $.82 compared  with $.85 for 1998.  Per
share net income,  assuming dilution for unexercised stock options, was $.76 for
1999  compared with $.80 for 1998.  Return on average  assets was 1.09% for 1999
compared with 1.38% for 1998. Return on average  shareholders'  equity decreased
to 11.86% for 1999 from 13.06% for 1998.

         Net  income  declined  slightly  in 1999 from its  year-earlier  level,
primarily  resulting from the Company's  initial branch  expansion into Anderson
County,  South  Carolina.  The  expenses  related  to this  strategic  move  are
reflected throughout the consolidated  statement of income and include increased
interest  expenses,  salaries  and  employee  benefits,  depreciation  and other
occupancy and furniture and equipment  expenses,  and higher postage,  telephone
and other ancillary  expenses.  These  increased  expenses were greater than the
income produced by the new branch.  The Company expects that, as it continues to
conduct  marketing  activities  in this new area,  loan  growth  and the  income
associated  with these assets will follow and other income sources will begin to
offset some of the increased expenses. However, the Company already has received
approval from  regulatory  authorities to open another branch office in the Town
of  Williamston,  also  in  Anderson  County,  South  Carolina.  This  continued
expansion  is further  expected to impact  negatively  the  Company's  near-term
earnings performance.

         The  ratios of return on average  assets  and return on average  equity
were  affected  negatively in 1999 by the slight  decline in net income  coupled
with increased amounts of average assets and average equity.

         The Company adopted Statement of Accounting Standards ("SFAS") No. 130,
"Reporting  Comprehensive  Income," as of January 1, 1998. Accounting principles
generally  require  that  recognized  revenue,  expenses,  gains  and  losses be
included  in net  income.  Certain  changes in assets and  liabilities,  such as
unrealized  holding  gains and  losses  on  available-for-sale  securities,  are
reported as a separate  component  of the  shareholders'  equity  section of the
consolidated balance sheet. Such items, along with net income, are components of
comprehensive income.  Comprehensive income for 1999, 1998 and 1997 was $14,000,
$1,664,000  and  $1,467,000,  respectively.  Comprehensive  income  for 1999 was
reduced  significantly  by the change in unrealized  holding gains and losses on
available-for-sale  securities, net of tax effects, of $1,612,000. The Company's
deposits grew rapidly in 1999,  primarily because of its territorial  expansion.
Loan growth,  as expected,  did not keep pace with the  acquisition of deposits.
Management,   therefore,   invested   the   majority   of  these  new  funds  in
available-for-sale  securities  to effect an adequate  net interest  margin.  As
market  rates of interest  increased  during  1999,  the market  values of these
securities declined and caused the lower  comprehensive  income figure for 1999.
However,  the adoption of SFAS No. 130 had no effect on the Company's net income
or total shareholders' equity.

1998 Compared with 1997

         For the year ended December 31, 1998,  the Company  recorded net income
of $1,664,000,  an increase of $259,000, or 18.4%, over net income of $1,405,000
for 1997.  Net income per share for 1998 was $.85  compared  with $.73 for 1997.
Per share net income,  assuming dilution for unexercised stock options, was $.80
for 1998  compared  with $.70 for 1997.  Return on average  assets was 1.38% for
both 1998 and 1997. Return on average  shareholders'  equity increased to 13.06%
for 1998 from 12.64% for 1997

         Net income increased, primarily because of the $472,000 increase in net
interest income and a $102,000 decrease in the provision for loan losses charged
to expense.  The increase in net interest  income  resulted  from the  Company's
rapid  deposit  growth  and  its  ability  to  invest  those  funds  profitably.
Interest-bearing deposit liabilities at the end of 1998 increased $21,908,000 or
28.9%  compared  with  the end of  1997  amount,  and  interest  earning  assets
increased $22,479,000 or 22.9% over the same period.

                                       15
<PAGE>

         Other  income  increased  by $52,000 to $574,000 in 1998,  largely as a
result of continued  increases in deposit account  service  charges  assessed to
customers.  These  charges  increased by $62,000 in 1998 to $369,000.  Partially
offsetting the increase in net interest  income and other income was an increase
of  $246,000 in other  expenses  resulting  mainly  from  hiring new  employees,
expenses relating to upgrading the Bank's computer hardware and software systems
that  were  placed  in  service  for a part of 1997,  and  higher  expenses  for
repairing and maintaining the Bank's equipment and facilities.

Net Interest Income

         Net interest income,  comprising the difference between interest income
earned and interest expense  incurred,  is the principal source of the Company's
earnings.  Net interest  income is affected by changes in the levels of interest
rates and by  changes  in the  volume  and mix of  interest  earning  assets and
interest bearing liabilities.

         Net interest income was $4,715,000, $4,386,000 and $3,914,000 for 1999,
1998 and 1997, respectively. The $329,000 growth in net interest income for 1999
resulted  primarily  from the  positive  effects  of higher  levels of  interest
earning assets which were partially  offset by the negative effects of increased
levels of interest bearing  liabilities.  During 1999,  average interest earning
assets  increased  by  $26,436,000,  or  22.8%,  and  average  interest  bearing
liabilities  increased  by  $28,458,000,  or  31.8%.  Although  market  rates of
interest increased  generally during 1999, the Company's yield on earning assets
decreased  by 37  basis  points  to  7.31%  and  its  rate on  interest  bearing
liabilities  decreased by 22 basis points to 4.82%. Interest income increased by
$1,498,000 to $10,402,000 in 1999 and interest  expense  increased by $1,169,000
to $5,687,000.

         The table,  "Average Balances,  Yields and Rates",  provides a detailed
analysis of the effective yields and rates on the categories of average interest
earning assets and interest bearing liabilities for the years ended December 31,
1999, 1998 and 1997.


                                       16
<PAGE>

                       Average Balances, Yields and Rates

<TABLE>
<CAPTION>
                                                                        Years ended December 31,
                                                                        ------------------------
                                                    1999                          1998                             1997
                                                    ----                          ----                             ----
                                        Average   Income/  Yields/     Average    Income/   Yields/     Average     Income/  Yields/
                                     Balances(1)  Expense   Rates    Balances(1)  Expense    Rates    Balances(1)   Expense   Rates
                                     ------------ -------   -----    -----------  -------    -----    ------------  -------   -----
                                                                          (Dollars in thousands)
Assets
<S>                                   <C>         <C>        <C>     <C>         <C>          <C>     <C>          <C>         <C>
Taxable securities ................   $ 49,767    $ 3,045    6.12%   $ 30,142    $  1,841     6.11%   $  27,024    $ 1,646     6.09%
Tax exempt securities(2) ..........         82          4    4.88%          -           -     0.00%           -          -     0.00%
Federal funds sold ................     20,135        995    4.94%     16,882         926     5.49%      10,001        534     5.34%
Other investments .................        374         28    7.49%        343          21     6.12%          19          -     0.00%
Loans(2),(3) ......................     71,944      6,330    8.80%     68,499       6,116     8.93%      60,707      5,398     8.89%
                                      --------    -------            --------    --------             ---------    -------
      Total interest
        earning assets ............    142,302     10,402    7.31%    115,866       8,904     7.68%      97,751      7,578     7.75%
Cash and due from banks ...........      3,365                          2,791                             2,088
Allowance for loan losses .........       (955)                          (975)                             (790)
Unrealized securities
  gains (losses) ..................     (1,075)                             6                              (131)
Premises and equipment ............      3,251                          2,116                             1,725
Other assets ......................      1,904                          1,176                             1,113
                                      --------                       --------                         ---------
     Total assets .................   $148,792                       $120,980                         $ 101,756
                                      ========                       ========                         =========

Liabilities and
  shareholders' equity
Interest bearing deposits
  Interest bearing
    transaction accounts ..........   $ 17,711    $   541    3.05%   $ 13,778    $    575     4.17%   $  10,639    $   414     3.89%
  Savings .........................     20,063        704    3.51%     20,443         779     3.81%      16,448        596     3.62%
  Time deposits $100M and over ....     37,977      2,015    5.31%     24,977       1,391     5.57%      21,889      1,201     5.49%
  Other time deposits .............     42,330      2,427    5.73%     30,428       1,773     5.83%      26,065      1,452     5.57%
                                      --------    -------            --------    --------             ---------    -------
     Total interest bearing
      deposits ....................    118,081      5,687    4.82%     89,626       4,518     5.04%      75,041      3,663     4.88%
Short-term borrowings .............          3          -    0.00%          -           -     0.00%           7          1    14.29%
                                      --------    -------            --------    --------             ---------    -------
    Total interest bearing
      liabilities .................    118,084      5,687    4.82%     89,626       4,518     5.04%      75,048      3,664     4.88%
Noninterest bearing demand deposits     15,703                         17,599                            14,790
Other liabilities .................      1,297                          1,018                               799
Shareholders' equity ..............     13,708                         12,737                            11,119
                                      --------                       --------                         ---------
    Total liabilities and
     shareholders' equity .........   $148,792                       $120,980                         $ 101,756
                                      ========                       ========                         =========
Interest rate spread(4) ...........                          2.49%                            2.64%                            2.87%
Net interest income and net
     yield on earning assets(5) ...                $ 4,715   3.31%               $  4,386     3.79%                $ 3,914     4.00%
Interest free funds supporting
     earning assets(6) ............   $ 24,218                       $ 26,240                         $  22,703
</TABLE>

--------------------------
(1)  Average balances are computed on a daily basis.
(2)  No taxable  equivalent  adjustment has been made because the Company has no
     material amounts of non-taxable interest income.
(3)  Nonaccrual  loans are included in the average  loan  balances and income on
     such loans is recognized on a cash basis.
(4)  Total  interest  bearing  assets  yield  less the  total  interest  bearing
     liabilities rate.
(5)  Net interest income divided by total interest earning assets.
(6)  Total interest earning assets less total interest bearing liabilities.


                                       17
<PAGE>

            Year-over-year  growth  in loans  was  moderately  strong  for 1999,
totaling  $8,265,000 and representing a growth rate of 12.2%.  However,  average
loans for the year increased by only $3,445,000,  or 5.0%. The Company's average
investment in investment  securities increased by $19,707,000,  or 65.4%, during
1999, and the 1999 year-end amount was $15,894,000,  or 41.5%,  greater than the
1998 year-end  amount.  Average  federal funds sold increased by $3,253,000,  or
19.3%, during 1999, but decreased on a year-end to year-end basis by $1,740,000,
or 12.3%. Since the largest increases in average earning assets during 1999 were
in the  lower-yielding  categories,  the decline in the average yield on earning
assets resulted.

            Growth in  interest-bearing  deposits was the primary funding source
during  1999.   Strong  growth  was   experienced  in  all  categories  of  such
liabilities,  except savings deposits, during the year. Average interest bearing
deposits  increased during 1999 by $28,455,000,  or 31.7%, over the 1998 average
amounts. The average rate paid on interest bearing liabilities in 1999 decreased
by 22 basis points from the average rate paid in 1998.

            Because  growth in funding  sources  was greater  than loan  demand,
primarily due to the Anderson County branch expansion,  the Company has invested
relatively larger amounts in investment securities and federal funds sold during
1999. If loan demand becomes stronger in 2000, the Company  possesses sources of
funds to  accommodate  it.  However,  to the extent that the Company has to rely
upon the liquidation of available-for-sale securities as a source of funding for
such hypothetical loan growth or a reduction in deposit liabilities, significant
realized losses on securities sales could occur,  given current or higher levels
of market rates of interest.

            The $472,000 increase in net interest income for 1998, compared with
1997, resulted from positive effects of higher levels of interest earning assets
which were partially offset by higher rates paid on increased levels of interest
bearing  liabilities.  A relatively stable interest rate environment during 1998
further  strengthened the Company's results in this area.  During 1998,  average
interest earning assets increased by $18,115,000, or 18.5%, and average interest
bearing  liabilities  increased  by  $14,578,000,   or  19.4%.  Interest  income
increased by $1,326,000 to $8,904,000 in 1998 and interest expense  increased by
$854,000 to $4,518,000.

            The table,  "Volume and Rate Variance Analysis",  provides a summary
of changes in net interest income  resulting from changes in volumes of interest
earning assets and interest bearing  liabilities,  and the rates earned and paid
on such assets and  liabilities.  As reflected in the table,  increased  volumes
accounted for $175,000 of the growth in net interest income for 1999,  which was
enhanced by a $154,000  increase  primarily  due to lower rates paid on interest
bearing  funding  sources.  For 1998,  increased  volumes were  responsible  for
$582,000 of the growth in net interest  income,  which was partially offset by a
$151,000 decrease due to higher rates paid.

                        Volume and Rate Variance Analysis
<TABLE>
<CAPTION>
                                                                 1999 Compared with 1998               1998 Compared with 1997
                                                                 -----------------------               -----------------------
                                                           Volume (1)       Rate (1)    Total       Volume (1)   Rate (1)     Total
                                                           -------          -----       -----       -------      -----        -----
                                                                             (Dollars in thousands)
<S>                                                        <C>          <C>          <C>          <C>          <C>          <C>
Taxable securities ...................................     $ 1,201      $     3      $ 1,204      $   191      $     4      $   195
Tax exempt securities(2) .............................           4            -            4            -            -            -
Federal funds sold ...................................         167          (98)          69          377           15          392
Other investments ....................................           2            5            7           21            -           21
Loans(2) .............................................         304          (90)         214          696           22          718
                                                           -------      -------      -------      -------      -------      -------
               Total interest income .................       1,678         (180)       1,498        1,285           41        1,326
                                                           -------      -------      -------      -------      -------      -------
Interest bearing deposits
      Interest bearing transaction accounts ..........         141         (175)         (34)         129           32          161
      Savings ........................................         (14)         (61)         (75)         151           32          183
      Time deposits $100M and over ...................         693          (69)         624          172           18          190
      Other time deposits ............................         683          (29)         654          252           69          321
Short-term borrowings ................................           -            -            -           (1)           -           (1)
                                                           -------      -------      -------      -------      -------      -------
               Total interest expense ................       1,503         (334)       1,169          703          151          854
                                                           -------      -------      -------      -------      -------      -------
               Net interest income ...................     $   175      $   154      $   329      $   582      $  (110)     $   472
                                                           =======      =======      =======      =======      =======      =======
</TABLE>

                                       18
<PAGE>

-------------------------------
(1)  The  rate/volume  variance  for  each  category  has  been  allocated  on a
     consistent  basis between rate and volume variances based on the percentage
     of rate or volume variance to the sum of the two absolute  variances except
     in categories having balances in only one period. In such cases, the entire
     variance is attributed to volume variances.
(2)  No taxable  equivalent  adjustment has been made because the Company has no
     material amounts of non-taxable interest income.

            During 2000, management expects that interest rates will move within
a narrow range,  but  management has not identified any factors that might cause
interest  rates to increase or decrease  sharply in a short period of time.  Any
improvements  in net interest  income for 2000 are  expected,  therefore,  to be
largely the result of  increases  in the volume of interest  earning  assets and
liabilities.   Management  expects  to  continue  to  use  aggressive  marketing
strategies to increase the Company's  market share for both deposits and quality
loans  within  its  service  areas in  Oconee  and  Anderson  counties  of South
Carolina.   These  strategies   involve   continuing  to  expand  the  Company's
geographical  territory,  offering  attractive  interest  rates  for  loans  and
deposits and  continuing  the  Company's  commitment  to  providing  outstanding
customer service.

Interest Rate Sensitivity

            Interest rate  sensitivity  measures the timing and magnitude of the
repricing  of  assets  compared  with the  repricing  of  liabilities  and is an
important  part of  asset/liability  management.  The objective of interest rate
sensitivity  management is to generate stable growth in net interest income, and
to  control  the risks  associated  with  interest  rate  movements.  Management
constantly  monitors interest rate risk exposures and the expected interest rate
environment so that adjustments in interest rate sensitivity can be timely made.

            The table,  "Interest  Sensitivity  Analysis",  indicates that, on a
cumulative basis through twelve months, rate sensitive liabilities exceeded rate
sensitive  assets at the end of 1999 by  $84,046,000,  resulting in a cumulative
gap ratio of .28.  When interest  sensitive  assets  exceed  interest  sensitive
liabilities for a specific repricing  "horizon," a positive interest sensitivity
gap results.  The gap is negative when  interest  sensitive  liabilities  exceed
interest  sensitive  assets,  as was the case at the end of 1999 with respect to
the one-year time  horizon.  For a bank with a negative  gap,  falling  interest
rates  would be expected to have a positive  effect on net  interest  income and
rising rates would be expected to have the opposite effect.

            The table, "Interest Sensitivity Analysis", reflects the balances of
interest earning assets and interest bearing liabilities at the earlier of their
repricing or maturity  dates.  Amounts of fixed rate loans are  reflected at the
loans' final maturity dates. Variable rate loans are reflected at the earlier of
their  contractual  maturity date or the date at which the loans may be repriced
contractually.   Taxable  securities  are  reflected  at  the  earlier  of  each
instrument's  ultimate maturity or contractual repricing date. Overnight federal
funds sold are reflected in the earliest  contractual  repricing interval due to
the immediately  available nature of these funds.  Interest bearing  liabilities
with no contractual maturity,  such as interest bearing transaction accounts and
savings  deposits  are  reflected  in the  earliest  repricing  interval  due to
contractual arrangements which give management the opportunity to vary the rates
paid on these  deposits  within a thirty-day  or shorter  period.  However,  the
Company is not  obligated  to vary the rates paid on those  deposits  within any
given period. Fixed rate time deposits, principally certificates of deposit, are
reflected at their  contractual  maturity  dates.  Variable rate time  deposits,
principally  individual  retirement  accounts,  are  reflected at the earlier of
their next repricing or maturity dates.

            During  2000,  management  plans,  where  possible,  to  reduce  the
Company's  liability  sensitive  position by  attempting  to increase the mix of
variable  versus fixed rate loans and by extending the  maturities of fixed rate
time deposits. This strategy, if successful, would help to provide a more stable
net interest spread and soften the negative  effects of any increase in interest
rates that might occur.



                                       19
<PAGE>

                          Interest Sensitivity Analysis

<TABLE>
<CAPTION>
                                                                                            December 31, 1999
                                                                                            -----------------
                                                                   Within            4-12       Over 1-5      Over 5
                                                                  3 Months          Months        Years        Years          Total
                                                                  --------          ------        -----        -----          -----
                                                                                           (Dollars in thousands)
Interest earning assets
<S>                                                               <C>            <C>            <C>           <C>           <C>
      Securities available-for-sale ........................      $      -       $     16       $ 25,847      $ 28,315      $ 54,178
      Other investments ....................................           382              -              -             -           382
      Federal funds sold ...................................        12,410              -              -             -        12,410
      Loans (1) ............................................        11,787          8,589         49,100         6,473        75,949
                                                                  --------       --------       --------      --------      --------
                Total interest earning assets ..............        24,579          8,605       $ 74,947      $ 34,788      $142,919
                                                                  --------       --------       ========      ========      ========

Interest bearing liabilities
      Interest bearing deposits
           Interest bearing transaction accounts ...........      $ 17,894       $      -       $      -      $      -      $ 17,894
           Savings .........................................        17,304              -              -             -        17,304
           Time deposits $100M and over ....................        26,633         13,855            446             -        40,934
           Other time deposits .............................        12,143         29,401          3,993            40        45,577
                                                                  --------       --------       --------      --------      --------
                Total interest bearing liabilities .........        73,974         43,256       $  4,439      $     40      $121,709
                                                                  --------       --------       ========      ========      ========

Interest sensitivity gap ...................................      $(49,395)      $(34,651)
Cumulative interest sensitivity gap ........................      $(49,395)      $(84,046)
Gap ratio ..................................................          0.33          0.20
Cumulative gap ratio .......................................          0.33          0.28
</TABLE>
(1)  Loans are net of nonaccruing loans totaling $209,000.

Provision for Loan Losses

         The  provision  for  loan  losses  is  charged  to  earnings  based  on
management's  continuing review and evaluation of the loan portfolio and general
economic  conditions.  Provisions  for loan losses were  $300,000,  $213,000 and
$315,000 for the years ended December 31, 1999, 1998 and 1997, respectively. The
increased  provision in 1999 is attributable to higher levels of net charge-offs
in 1999,  particularly  in the  commercial and  industrial  loan  category.  Net
charge-offs in this category for 1999 totaled $222,000,  an increase of $178,000
over the amount for 1998. The allowance for loan losses as a percentage of total
loans at year end was 1.24%  for 1999  compared  with  1.41% at the end of 1998.
Total net loan  charge-offs  were  $312,000 in 1999  compared  with $148,000 and
$130,000 for 1998 and 1997,  respectively.  See "Impaired  Loans" and "Allowance
for Loan Losses" for a  discussion  of the factors  management  considers in its
review of the adequacy of the allowance and provision for loan losses.


Other Income

         Noninterest income for 1999 increased $88,000 or 15.3% compared with an
increase  of $52,000  or 10.0% for 1998.  Service  charges  on deposit  accounts
increased  $60,000 in 1999 and $62,000 in 1998.  These  increases were primarily
due to increased  chargeable account activity.  Credit life insurance commission
decreased  $1,000 for 1999,  while such income in 1998 was unchanged  from 1997.
There were no realized  securities  gains or losses in 1999, 1998 or 1997. Other
noninterest income increased by $29,000 in 1999 after decreasing $10,000 in 1998
compared with the previous year. In 1999, the Company recorded a $10,000 gain on
the sale of foreclosed real estate. There were no such gains in 1998.


                                       20
<PAGE>


Other Expenses

         Noninterest  expenses for 1999  increased  $387,000 or 18.0%,  compared
with an increase of $246,000 or 12.9% for 1998.  Salaries and employee  benefits
increased $240,000 in 1999 and $130,000 in 1998. The 1999 increase resulted from
the first full-year employment of employees of the new Anderson Branch, and from
the hiring of additional management personnel to oversee the Company's expanding
operations. The 1998 increase resulted primarily from personnel added during the
year in anticipation of the opening of the Bank's new branch office in Anderson,
South  Carolina.  Hiring for this branch  began in 1998 so that  training in the
Company's  systems and  procedures  could be completed  well before the branch's
opening date on January 4, 1999.

         Net  occupancy  and  furniture  and  equipment  expenses  increased  by
$38,000,  or 12.3%,  for 1999,  and by  $43,000,  or 16.1%,  for 1998.  The 1999
increase  primarily was caused by expenses  associated with the operation of the
Anderson Branch.  The 1998 increase resulted  principally from a $9,000 increase
in building  maintenance and repair  expenses,  a $7,000 increase in expenses of
equipment  maintenance  contracts and a $22,000 increase in depreciation expense
associated  with the new computer  system  placed in service only during part of
1997.

         Other expense increased $109,000, or 15.4%, for 1999. This increase was
primarily  caused by higher  expenses such as printing and postage,  advertising
and promotion,  telephone,  and other expenses that would be expected to rise in
an organization  extending its geographic  territory and branch  network.  Costs
directly  associated  with the  Company's  Year 2000  Preparedness  Program were
insignificant  in 1999, and there have been no significant  problems  within the
Company,  or among its suppliers or customers,  caused by the date change to the
year 2000.

         Other expense increased $73,000, or 11.5%, for 1998.  Increases in many
categories of other expense were related to an increasing  customer base and the
associated processing of larger transaction volumes. In addition,  the Company's
product lines have been broadened in an attempt to make banking more  convenient
and  accessible  to the Bank's  customers  through  electronic,  card-based  and
telebanking  transaction  services.  Some categories with significant  increases
were stationery, printing and postage (up $14,000) and advertising and promotion
(up  $13,000).  Data  processing  expenses  were up  $40,000,  primarily  due to
increased costs associated with operating the Bank's ATM, providing for disaster
recovery  contingencies  and  amortization  of  software  costs.  Some  expenses
decreased,  however,  including  professional  service  fees (down  $23,000) and
expenses associated with other real estate (down $31,000).  Professional service
fees were higher in 1997 because of the corporate  reorganization  and formation
of the bank holding company.  During 1998, the Company held no significant other
real estate.

         Noninterest  overhead  expenses  for 2000 are  expected  to increase as
compared  with 1999  because  of the  Company's  continuing  expansion  into the
adjacent Anderson County market. As mentioned  earlier,  the Company has secured
regulatory  approval  to open and  operate a new branch  office in  Williamston,
South Carolina.  It is expected that this office will open in temporary quarters
during the second  quarter of 2000.  Plans for the  construction  of a permanent
office have not yet been completed.

         In 2000,  the  Company  intends  to market  approximately  $600,000  of
surplus  land  adjacent  to  the  Anderson  Branch  office.  This  property  was
associated with the original  property  acquisition  and its  disposition  would
reduce the overall cost of the project.  However,  the processes of  subdividing
and marketing the land have not been completed,  and no contracts for sales have
been entered into.

         Until  the  new  Anderson  and  proposed  Williamston  offices  acquire
sufficiently  large  customer  bases and attain volumes of deposits and interest
earning   assets  that  would  enable  them  to   contribute  to  the  Company's
profitability,  management expects that these expansions will continue to affect
net income  negatively.  In addition,  the success of these projects may also be
affected  adversely  if the costs of  facilities  or  personnel  are higher than
projected.

         The Company's  FDIC  insurance  rates are assessed  based on the lowest
rate available under  regulations and are expected to continue at relatively low
levels for the near  future.  Increases  in  noninterest  expenses  are  closely
monitored and cost control will  continue to be  emphasized by management  where
possible  in order to achieve  profitability  objectives  and attain the goal of
growth in the Company's market share in Oconee and Anderson counties.

                                       21
<PAGE>

Income Taxes

         For 1999,  federal and state income tax expenses  decreased to $909,000
from  $928,000 in 1998 and  $807,000  in 1997.  The  fluctuations  in income tax
expense are due to changing  amounts of earnings.  The effective income tax rate
(income tax expense  divided by income  before income taxes) was 35.9% for 1999,
35.8% for 1998, and 36.5% for 1997. The Company has never had significant income
from nontaxable sources,  such as nontaxable  investment  securities or loans to
local governments.

Securities

         The following table summarizes the carrying value amounts of securities
held by the Company at each of the dates indicated.

                        Securities Portfolio Composition

                                                       December 31,
                                                       ------------
                                              1999         1998          1997
                                              ----         ----          ----
                                           Available-   Available-    Available-
                                            for-Sale     for-Sale      for-Sale
                                            --------     --------      --------
                                                 (Dollars in thousands)
           U. S. Treasury ...............   $ 1,969      $     -        $ 2,003
           U. S. Government agencies ....    45,675       30,919         18,932
           State, county and municipal ..       193            -              -
           Mortgage-backed securities ...     6,341        7,365          4,575
                                            -------      -------        -------
               Total ....................   $54,178      $38,284        $25,510
                                            =======      =======        =======

         The following table presents  maturities and weighted average yields of
securities at December 31, 1999.

                   Securities Portfolio Maturities and Yields

                                                            December 31, 1999
                                                            -----------------
                                                        Available-
                                                         for-Sale          Yield
                                                         --------          -----
                                                          (Dollars in thousands)
      U. S. Treasuries
          After one through five years .........         $ 1,969          5.25%
                                                         -------
      U. S. Government agencies
          After one through five years .........          19,475          6.01%
          After five through ten years .........          25,312          6.31%
          After ten years ......................             888          6.40%
                                                         -------
                                                          45,675          6.18%
                                                         -------
      State, county and municipal (1)
          After ten years ......................             193          4.95%
                                                         -------
      Mortgage-backed securities
          Within one year ......................              16          6.61%
          After one through five years .........           4,403          6.04%
          After five through ten years .........           1,922          5.34%
                                                         -------
                                                           6,341          5.83%
                                                         -------
      Total
          Within one year ......................              16          6.61%
          After one through five years .........          25,847          5.96%
          After five through ten years .........          27,234          6.24%
          After ten years ......................           1,081          7.48%
                                                         -------
               Total ...........................         $54,178          6.13%
                                                         =======
----------------------------
(1) Not adjusted for taxable equivalency.

                                       22
<PAGE>


         On an ongoing basis,  management  assigns securities upon purchase into
one of three categories (trading,  available-for-sale or held-to-maturity) based
on intent,  taking into consideration  other factors including  expectations for
changes in market rates of interest, liquidity needs, asset/liability management
strategies, and capital requirements.  The Company has never held securities for
trading  purposes.  During  1999,  1998 and  1997,  there  have been no sales of
securities or any transfers of available-for-sale or held-to-maturity securities
to other categories.

         All  mortgage-backed  securities held by the Company were issued by the
Federal  Home  Loan  Mortgage  Corporation  or  the  Federal  National  Mortgage
Association.

Loan Portfolio

         Management believes the loan portfolio is adequately diversified. There
are  no  significant  concentrations  of  loans  in any  particular  individual,
industry  or groups  of  related  individuals  or  industries,  and there are no
foreign loans.

         The amounts of loans  outstanding  at December 31, 1999,  1998 and 1997
are shown in the following  table  according to type of loan, and the percentage
of each category to total loans:

                           Loan Portfolio Composition

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                             ------------
                                                                          1999                   1998                   1997
                                                                          ----                   ----                   ----
                                                               Amount           %       Amount           %      Amount          %
                                                               ------           -       ------           -      ------          -
                                                                                      (Dollars in thousands)
Commercial, financial and industrial
<S>                                                            <C>          <C>        <C>          <C>        <C>          <C>
      Commercial and industrial .........................      $11,964        15.7%    $ 9,255        13.6%    $ 9,685        14.7%
      Purchasing or carrying securities .................        1,998         2.6%        282          .4%         79          .1%
Real estate - construction ..............................           28          .1%         51          .1%         78          .1%
Real estate - mortgage
      1-4 family residential ............................       31,853        41.8%     30,187        44.5%     29,835        45.3%
      Multifamily (5 or more) residential ...............          182          .2%         90          .1%        104          .2%
      Nonfarm, nonresidential ...........................       12,919        17.0%     11,376        16.8%     11,357        17.2%
Consumer installment
      Credit card and checking credit ...................        1,046         1.4%      1,022         1.5%        838         1.3%
      Other .............................................       16,168        21.2%     15,630        23.0%     13,862        21.1%
                                                               -------     -------     -------     -------     -------     -------
                            Total loans .................      $76,158       100.0%    $67,893       100.0%    $65,838       100.0%
                                                               =======     =======     =======     =======     =======     =======
</TABLE>

         A certain degree of risk taking is inherent in the extension of credit.
Management has established loan and credit policies designed to control both the
types and  amounts of risks  assumed,  and to  minimize  losses.  Such  policies
include   limitations  on   loan-to-collateral   values  for  various  types  of
collateral,  requirements for appraisals of real estate collateral, problem loan
management  practices and collection  procedures,  and nonaccrual and charge-off
guidelines.

         Commercial  and  industrial  loans  primarily  represent  loans made to
businesses,  and may be made on either a secured  or an  unsecured  basis.  When
taken,  collateral  consists of liens on  receivables,  equipment,  inventories,
furniture and fixtures.  Unsecured business loans are generally  short-term with
emphasis on repayment strengths and low debt-to-worth ratios. During 1999, total
commercial and industrial loans increased  $4,425,000 or 46.4%. Loans mainly for
business  and  investment  purposes  that are secured by real  estate  (nonfarm,
nonresidential) increased by $1,543,000 or 13.6% during 1999. Commercial lending
involves  significant risk because  repayment  usually depends on the cash flows
generated by a borrower's business,  and the debt service capacity of a business
can deteriorate because of downturns in national and local economic  conditions.
To control risk, more in-depth  initial and continuing  financial  analysis of a
borrower's  cash flows and other  financial  information is generally  required.
During 1999, a senior commercial lending  officer/administrator was added to the
lending staff to enhance expertise and supervision in this area.

                                       23
<PAGE>


         Real estate  construction  loans  generally  consist of  financing  the
construction  of 1-4 family  dwellings  and some  nonfarm,  nonresidential  real
estate. Usually,  loan-to-cost ratios are limited to 75% and permanent financing
commitments are usually required prior to the advancement of loan proceeds.

         Loans secured by real estate mortgages comprised  approximately 59% and
61% of the Company's loan  portfolio at the end of 1999 and 1998,  respectively.
Real  estate  mortgage  loans of all types grew  $3,301,000  during  1999 and by
$357,000 during 1998.  Residential real estate loans consist mainly of first and
second  mortgages  on  single  family  homes,   with  some  multifamily   loans.
Loan-to-value  ratios  for  these  instruments  are  generally  limited  to 80%.
Nonfarm,  nonresidential loans are secured by business and commercial properties
with  loan-to-value  ratios  generally  limited to 70%.  The  repayment  of both
residential and business real estate loans is dependent  primarily on the income
and cash flows of the borrowers,  with the real estate serving as a secondary or
liquidation source of repayment.

Maturity and Interest Sensitivity Distribution of Loans

         The  following  table  sets  forth  the  maturity  distribution  of the
Company's  loans,  by type,  as of  December  31,  1999,  as well as the type of
interest requirement on such loans.

<TABLE>
<CAPTION>
                                                                                                  December 31, 1999
                                                                                                  -----------------
                                                                            One Year           One to        Five Years
                                                                             or Less         Five Years        or More         Total
                                                                             -------         ----------        -------         -----
                                                                                           (Dollars in thousands)

<S>                                                                          <C>             <C>             <C>             <C>
Commercial, financial and industrial ...............................         $ 8,446         $ 5,447         $    69         $13,962
Real estate - construction .........................................               -              28               -              28
Real estate - mortgage .............................................           8,771          30,225           5,958          44,954
Consumer installment ...............................................           4,359          12,437             418          17,214
                                                                             -------         -------         -------         -------
                  Total loans ......................................         $21,576         $48,137         $ 6,445         $76,158
                                                                             =======         =======         =======         =======


Predetermined rate, maturity greater than one year .................                         $30,910         $ 6,409         $37,319
                                                                                             =======         =======         =======

Variable rate or maturity within one year ..........................         $21,576         $17,227         $    36         $38,839
                                                                             =======         =======         =======         =======
</TABLE>

Impaired Loans

         Impaired loans are those loans on which,  based on current  information
and  events,  it is  probable  that the  Company  will be unable to collect  all
amounts due  according to the  contractual  terms of the loan  agreement.  Loans
which management has identified as impaired  generally are nonperforming  loans.
Nonperforming  loans include nonaccrual loans or loans which are 90 days or more
delinquent as to principal or interest  payments.  Following is a summary of the
Company's impaired loans:

                          Nonaccrual and Past Due Loans

                                                            December 31,
                                                            ------------
                                                      1999      1998        1997
                                                      ----      ----        ----
                                                        (Dollars in thousands)

    Nonaccrual loans ..........................      $209       $366       $163
    Accruing loans 90 days or more past due ...        20         10          1
                                                     ----       ----       ----
                    Total .....................      $229       $376       $164
                                                     ====       ====       ====

    Percent of total loans ....................       0.3%       0.6%       0.2%


                                       24
<PAGE>


         When an  impaired  loan is 90 days or more past due as to  interest  or
principal or there is serious doubt as to ultimate  collectibility,  the accrual
of interest income is generally  discontinued.  Previously  accrued  interest on
loans placed in a nonaccrual  status is reversed  against  current  income,  and
subsequent interest income is recognized on a cash basis when received. When the
collectibility  of a  significant  amount  of  principal  is in  serious  doubt,
collections  are credited  first to the  remaining  principal  balance on a cost
recovery  basis.  An impaired  nonaccrual loan is not returned to accrual status
unless  principal and interest are current and the borrower has demonstrated the
ability to continue  making  payments as agreed.  The effects of interest income
accrued and  collected on impaired  loans were  immaterial  to the  consolidated
financial statements for 1999, 1998 and 1997.

         As of December 31, 1999,  there were no commitments to lend  additional
funds to debtors owing amounts on nonaccrual loans.

Potential Problem Loans

         Management  has  identified  and maintains a list of potential  problem
loans.  These are loans that are not included in impaired  loans  (nonaccrual or
past due 90 days or more and still  accruing).  A loan is added to the potential
problem list when management  becomes aware of information about possible credit
problems of borrowers  that causes doubts as to the ability of such borrowers to
comply  with the  current  loan  repayment  terms.  The  total  amount  of loans
outstanding  at December  31, 1999  determined  by  management  to be  potential
problem loans was $210,000. This amount does not represent management's estimate
of potential losses since a large proportion of such loans is secured by various
types  of  collateral.  The  following  table  presents  information  about  the
categories and types of collateral with respect to potential problem loans as of
December 31, 1999.

                                                           December 31, 1999
                                                           -----------------
                                                          Amount           %
                                                          ------           -
                                                         (Dollars in thousands)

           Commercial and industrial
                Unsecured .........................        $ 15           7.2%
           Real estate - mortgage
                1-4 family residential ............          33          15.7%
                Nonfarm, nonresidential ...........          74          35.2%
           Consumer installment
                Vehicles ..........................          22          10.5%
                Other secured .....................           4           1.9%
                Unsecured .........................          62          29.5%
                                                          -----          -----
                           Total ..................       $ 210         100.0%
                                                          =====         ======

Allowance for Loan Losses

         The  allowance  for loan  losses  is  increased  by direct  charges  to
operating  expense.  Losses on loans are charged  against the  allowance  in the
period in which  management  has determined it is more likely than not that such
loans have become uncollectible.  Recoveries of previously charged off loans are
credited  to the  allowance.  The  table,  "Summary  of Loan  Loss  Experience",
summarizes loan balances at the end of each period indicated,  averages for each
period, changes in the allowance arising from charge-offs and recoveries by loan
category, and additions to the allowance which have been charged to expense.

         In reviewing the adequacy of the allowance for loan losses at each year
end,  management took into  consideration the historical loan losses experienced
by the Company,  current economic conditions affecting the borrowers' ability to
repay, the volume of loans, the trends in delinquent, nonaccruing, and potential
problem loans, and the quality of collateral securing  nonperforming and problem
loans. After charging off all known losses,  management  considers the allowance
for loan losses  adequate to cover its  estimate of possible  future loan losses
inherent in the loan portfolio as of December 31, 1999.


                                       25
<PAGE>

         In  calculating  the amount  required in the allowance for loan losses,
management  applies  a  consistent  methodology  that is  updated  monthly.  The
methodology  utilizes a loan risk grading  system and  detailed  loan reviews to
assess credit risks and the overall  quality of the loan  portfolio,  as well as
other  off-balance-sheet  credit  risks  such as loan  commitments  and  standby
letters of credit.  In  addition,  the  calculation  provides  for  management's
assessment of trends in national and local economic conditions that might affect
the  general  quality of the loan  portfolio.  Management's  calculation  of the
allowance  for loan losses does not provide an  allocation  by  individual  loan
categories.

         The Company  has not  historically  allocated  its  allowance  for loan
losses to individual  loan  categories.  Management  believes that its stringent
loan  charge-off  policy,   along  with  its  limited  historic  net  charge-off
experience,  makes an aggregate evaluation that emphasizes  individual loan risk
grades and  specific  problem loan  allocations  more  meaningful.  Management's
analysis of historical net charge-offs and the composition of the loan portfolio
at the end of 1999 did not  reflect  any  material  change  from the prior years
other than the unusually high net charge-offs in the commercial loan category in
1999 caused by the bankruptcies of a few customers.  In addition,  management is
not aware of any significant degree of increased exposure, risk of collection or
other adverse  features toward any particular  category of loans.  Consequently,
management  has not estimated  future  charge-offs  related to  individual  loan
categories or subcategories.

    Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                        ------------------------
                                                                          1999        1998         1997        1996          1995
                                                                          ----        ----         ----        ----          ----
                                                                                          (Dollars in thousands)

<S>                                                                     <C>          <C>          <C>          <C>          <C>
Total loans outstanding at end of period ..........................     $76,158      $67,893      $65,838      $54,658      $44,175
Average amount of loans outstanding ...............................      71,944       68,499       60,707       49,952       40,956

Balance of allowance for loan losses - beginning ..................     $   955      $   890      $   705      $   575      $   460
                                                                        -------      -------      -------      -------      -------
Loans charged off
     Commercial and industrial ....................................         234           44           37           11           14
     Real estate - mortgage .......................................           -            9           31           29            -
     Consumer installment .........................................          99          116           72           69           26
                                                                        -------      -------      -------      -------      -------
           Total charge-offs ......................................         333          169          140          109           40
                                                                        -------      -------      -------      -------      -------
Recoveries of loans previously charged off
     Commercial and industrial ....................................          12            -            3            1            -
     Real estate - mortgage .......................................           -           15            -            5            -
     Consumer installment .........................................           9            6            7           10            2
                                                                        -------      -------      -------      -------      -------
           Total recoveries .......................................          21           21           10           16            2
                                                                        -------      -------      -------      -------      -------
Net charge-offs ...................................................         312          148          130           93           38
                                                                        -------      -------      -------      -------      -------
Additions to allowance charged to expense .........................         300          213          315          223          153
                                                                        -------      -------      -------      -------      -------
Balance of allowance for loan losses - ending .....................     $   943      $   955      $   890      $   705      $   575
                                                                        =======      =======      =======      =======      =======

Ratios
     Net charge-offs to average loans .............................        0.43%        0.22%        0.21%        0.19%        0.09%
     Net charge-offs to loans at end of period ....................        0.41%        0.22%        0.20%        0.17%        0.09%
     Allowance for loan losses to average loans ...................        1.31%        1.39%        1.47%        1.41%        1.40%
     Allowance for loan losses to loans at end of period ..........        1.24%        1.41%        1.35%        1.29%        1.30%
     Net charge-offs to allowance for loan losses .................       33.09%       15.50%       14.61%       13.19%        6.61%
     Net charge-offs to provision for loan losses .................      104.00%       69.48%       41.27%       41.70%       24.84%
</TABLE>


                                       26
<PAGE>


Deposits

         The average amounts and percentage  composition of deposits held by the
Company for the years ended  December 31, 1999,  1998 and 1997,  are  summarized
below:

                                Average Deposits

<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                                                ------------------------
                                                                 1999                      1998                         1997
                                                                 ----                      ----                         ----
                                                        Amount           %         Amount           %          Amount           %
                                                        ------           -         ------           -          ------           -
                                                                                 (Dollars in thousands)

<S>                                                    <C>             <C>        <C>             <C>        <C>             <C>
Noninterest bearing demand .....................       $ 15,703         11.7%     $ 17,599         16.4%     $ 14,790         16.5%
Interest bearing transaction accounts ..........         17,711         13.2%       13,778         12.8%       10,639         11.8%
Savings ........................................         20,063         15.0%       20,443         19.1%       16,448         18.3%
Time deposits $100M and over ...................         37,977         28.4%       24,977         23.3%       21,889         24.4%
Other time deposits ............................         42,330         31.7%       30,428         28.4%       26,065         29.0%
                                                       --------        -----      --------        -----      --------        -----
             Total deposits ....................       $133,784        100.0%     $107,225        100.0%     $ 89,831        100.0%
                                                       ========        =====      ========        =====      ========        =====
</TABLE>

         As of December 31, 1999,  there were  $40,934,000  in time  deposits of
$100,000  or  more.  Approximately   $26,268,000  mature  within  three  months,
$7,050,000  mature over three  through six  months,  $6,937,000  mature over six
through  twelve months and $679,000  mature after one year.  This level of large
time  deposits,  as well as the growth in other  deposits,  can be attributed to
growth  planned by management.  The vast majority of time deposits  $100,000 and
over are acquired  within the Company's  service areas in the ordinary course of
business.  The Company does not purchase  brokered  deposits.  Most of the large
time deposits are acquired from customers with standing  banking  relationships.
However, it is a common industry practice to not consider these deposits as core
deposits  since their  retention  can be  influenced  heavily by rates  offered.
Therefore,  such deposits have the  characteristics  of  shorter-term  purchased
funds.  Certificates  of deposit  $100,000  and over  require  that the  Company
achieve and maintain an  appropriate  matching of maturity  distributions  and a
diversification of sources to achieve an appropriate level of liquidity.


Return on Equity and Assets

         The following  table shows the return on assets (net income  divided by
average total assets),  return on equity (net income divided by average equity),
dividend  payout ratio  (dividends  declared per share divided by net income per
share),  and equity to assets ratio  (average  equity  divided by average  total
assets) for each period indicated.

                                                 Years Ended December 31,
                                                 ------------------------
                                            1999           1998          1997
                                            ----           ----          ----

           Return on assets                1.09%          1.38%          1.38%
           Return on equity               11.86%         13.06%         12.64%
           Dividend payout ratio           0.00%          0.00%          0.00%
           Equity to assets ratio          9.21%         10.53%         10.93%


                                       27
<PAGE>


Liquidity

         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals  in the most timely and  economical
manner.  Some liquidity is ensured by maintaining  assets which are  convertible
immediately  into cash at minimal cost (amounts due from banks and federal funds
sold).  However,  the most  manageable  sources of  liquidity  are  composed  of
liabilities, with the primary focus on liquidity management being on the ability
to obtain  deposits  within the Company's  service areas.  Core deposits  (total
deposits less time  deposits of $100,000 and over)  provide a relatively  stable
funding base,  and the average of these  deposits  represented  64.4% of average
total assets during 1999  compared  with 68.0% during 1998.  Deposits of several
local governmental entities comprised approximately 27% of total deposits at the
end of 1999 and 1998. Because of the potentially volatile nature of this funding
source, management maintains the Bank's membership in the Federal Home Loan Bank
of Atlanta  (the "FHLB") in order to gain access to its credit  programs.  As of
December  31,  1999,  the  banking  subsidiary  is  eligible  to  borrow  up  to
$21,707,000 from the FHLB. Such borrowings,  if utilized,  would be secured by a
lien  on its  investment  in  FHLB  stock  and  all  qualifying  first  mortgage
residential  loans  held.  Assets  potentially  subject  to  this  lien  totaled
approximately  $28,815,000  as of December  31, 1999.  In addition,  the banking
subsidiary  has available  unused  short-term  lines of credit to purchase up to
$2,500,000 of federal funds from unrelated correspondent institutions. The lines
are generally available on a one to seven day basis. Asset liquidity is provided
from several sources,  including  amounts due from banks and federal funds sold.
Securities available-for-sale,  particularly those maturing within one year, and
funds available from maturing loans provide secondary sources of liquidity.

         Community First  Bancorporation's  ability to meet its cash obligations
or to pay any  possible  future cash  dividends  to  shareholders  is  dependent
primarily on the successful  operation of the subsidiary bank and its ability to
pay cash dividends to the parent company.  Any of the banking  subsidiary's cash
dividends  in excess  of the  amount of the  subsidiary's  current  year-to-date
earnings are subject to the prior approval of the South Carolina Commissioner of
Banking and are generally payable only from its undivided  profits.  At December
31,  1999,  the  banking   subsidiary's   available  undivided  profits  totaled
$6,474,000.  Under Federal  Reserve Board  regulations,  the amounts of loans or
advances from the banking  subsidiary to the parent company are also restricted.
During 1999 and 1998,  the parent  company  received no cash  dividends from its
banking  subsidiary.  However,  the parent  company  received  a  $250,000  cash
dividend from the bank subsidiary during 1997.

         Management  believes  that the  overall  liquidity  sources of both the
Company and its banking subsidiary are adequate to meet their operating needs.

Capital Resources

         Shareholders'  equity increased by $133,000 and $1,753,000  during 1999
and 1998,  respectively.  During 1999, net income increased shareholders' equity
$1,626,000,  and the  exercise of  employee  stock  options  provided a $125,000
increase. Other comprehensive income or loss, consisting solely of the change in
unrealized  holding  gains or losses on  available-for-sale  securities,  net of
deferred tax effects,  reduced  shareholders'  equity by $1,612,000 for the year
ended  December  31,  1999.  In  addition,  $6,000  was paid in lieu of  issuing
fractional   shares  with  respect  to  the  10%  stock  dividend  declared  and
distributed  during  1999.  Management  continues  to use  retained  earnings to
provide adequate capital for expected growth.

         In  1999,  the  Company's  Board  of  Directors  declared  a 10%  stock
dividend.  During 1998, the Company's Board of Directors  declared a two-for-one
stock split, and in 1997, declared a 15% stock dividend.  These actions resulted
in the  issuance  of  180,155,  889,198  and  228,902  additional  shares of the
Company's common stock to its shareholders, respectively.

         The Company and its banking  subsidiary  are each subject to regulatory
risk-based  capital  adequacy  standards.  Under these  standards,  bank holding
companies and banks are required to maintain  certain  minimum ratios of capital
to  risk-weighted  assets and average total assets.  Under the provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),  federal


                                       28
<PAGE>

bank  regulatory  authorities  are  required  to  implement  prescribed  "prompt
corrective  actions" upon the deterioration of the capital position of a bank or
bank holding company. If the capital position of an affected institution were to
fall below certain levels,  increasingly stringent regulatory corrective actions
are  mandated.   Unrealized  holding  gains  and  losses  on  available-for-sale
securities are generally excluded for purposes of calculating regulatory capital
ratios.  However,  the extent of any unrealized  appreciation or depreciation on
securities  will continue to be a factor that regulatory  examiners  consider in
their overall assessment of capital adequacy.

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require both the Company and the Bank to maintain  minimum amounts and
ratios, as set forth in the table below, of Total and Tier 1 Capital, as defined
in the regulation,  to risk weighted assets, as defined,  and of Tier 1 Capital,
as defined, to average assets, as defined.  Management believes,  as of December
31, 1999 and 1998,  that the Company and the Bank exceeded all capital  adequacy
minimum requirements to which they were subject.

         To be  categorized as well  capitalized,  the Company and the Bank must
maintain minimum Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the table below. The federal  regulators may also categorize the
Company or the Bank as less than well capitalized based on subjective  criteria.
There are no  conditions  or events  that  management  believes  would cause the
Company's or the Bank's  category to be other than that  resulting  from meeting
the minimum ratio requirements.

<TABLE>
<CAPTION>
                                                                                                 Minimum for       Minimum to be
                                                                              Actual          Capital Adequacy    Well Capitalized
                                                                              ------          ----------------    ----------------
                                                                        Amount       Ratio    Amount      Ratio   Amount     Ratio
                                                                        ------       -----    ------      -----   ------     -----
December 31, 1999                                                                          (Dollars in thousands)
      The Company
<S>                                                                     <C>          <C>     <C>          <C>    <C>          <C>
          Total Capital to risk weighted assets ...................     $16,308      19.4%   $ 6,716      8.0%   $ 8,394      10.0%
          Tier 1 Capital to risk weighted assets ..................     $15,365      18.3%   $ 3,358      4.0%   $ 5,037       6.0%
          Tier 1 Capital to average assets (leverage) .............     $15,365      10.0%   $ 4,625      3.0%   $ 7,709       5.0%
      Community First Bank
          Total Capital to risk weighted assets ...................     $15,900      18.9%   $ 6,716      8.0%   $ 8,394      10.0%
          Tier 1 Capital to risk weighted assets ..................     $14,957      17.8%   $ 3,358      4.0%   $ 5,037       6.0%
          Tier 1 Capital to average assets (leverage) .............     $14,957       9.7%   $ 4,625      3.0%   $ 7,709       5.0%

December 31, 1998
      The Company
          Total Capital to risk weighted assets ...................     $14,497      20.7%   $ 5,615      8.0%   $ 7,019      10.0%
          Tier 1 Capital to risk weighted assets ..................     $13,620      19.4%   $ 2,807      4.0%   $ 4,211       6.0%
          Tier 1 Capital to average assets (leverage) .............     $13,620      11.0%   $ 3,703      3.0%   $ 6,172       5.0%
      Community First Bank
          Total Capital to risk weighted assets ...................     $14,197      20.2%   $ 5,615      8.0%   $ 7,019      10.0%
          Tier 1 Capital to risk weighted assets ..................     $13,320      19.0%   $ 2,807      4.0%   $ 4,211       6.0%
          Tier 1 Capital to average assets (leverage) .............     $13,320      10.8%   $ 3,703      3.0%   $ 6,172       5.0%
</TABLE>

Inflation

         Since the assets and  liabilities  of a bank are primarily  monetary in
nature (payable in fixed,  determinable  amounts),  the performance of a bank is
affected  more by changes in interest  rates than by inflation.  Interest  rates
generally increase as the rate of inflation increases,  but the magnitude of the
change in rates may not be the same.

         While the effect of inflation  on banks is normally not as  significant
as is its influence on those  businesses  having large  investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally  corresponding  increases in the money supply,  and banks will normally
experience  above-average  growth in assets,  loans and deposits.  Also, general
increases in the prices of goods and services will result in increased operating
expenses.



                                       29
<PAGE>

Independent Auditors' Report




The Shareholders and Board of Directors
    of Community First Bancorporation

         We  have  audited  the  accompanying   consolidated  balance  sheet  of
Community First  Bancorporation and subsidiary as of December 31, 1999 and 1998,
and the related  consolidated  statements  of income,  changes in  shareholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Community First  Bancorporation and subsidiary as of December 31, 1999 and 1998,
and the  consolidated  results of their operations and their  consolidated  cash
flows for each of the three years in the period  ended  December  31,  1999,  in
conformity with generally accepted accounting principles.


                                        s/Donald G. Jones and Company, P.A.


Donald G. Jones and Company, P.A.
Certified Public Accountants
Columbia, South Carolina
February 8, 2000











                                       30
<PAGE>

Consolidated Balance Sheet
Community First Bancorporation

<TABLE>
<CAPTION>
                                                                                                           December 31,
                                                                                                           ------------
                                                                                                 1999                       1998
                                                                                                 ----                       ----
Assets
<S>                                                                                         <C>                       <C>
     Cash and due from banks (Note C) ..........................................            $   4,554,811             $   3,319,892
     Federal funds sold ........................................................               12,410,000                14,150,000
     Securities available-for-sale (Note D) ....................................               54,178,048                38,284,136
     Other investments .........................................................                  382,000                   345,400
     Loans (Note E) ............................................................               76,157,943                67,893,169
         Allowance for loan losses .............................................                 (942,950)                 (954,788)
                                                                                            -------------             -------------
            Loans - net ........................................................               75,214,993                66,938,381
     Premises and equipment - net (Note F) .....................................                4,263,580                 2,871,156
     Accrued interest receivable ...............................................                1,192,396                   829,201
     Other assets ..............................................................                1,387,632                   388,610
                                                                                            -------------             -------------

            Total assets .......................................................            $ 153,583,460             $ 127,126,776
                                                                                            =============             =============

Liabilities
     Deposits (Note G)
         Noninterest bearing ...................................................            $  16,908,526             $  14,797,785
         Interest bearing ......................................................              121,709,720                97,698,387
                                                                                            -------------             -------------
            Total deposits .....................................................              138,618,246               112,496,172
     Accrued interest payable ..................................................                1,179,891                   965,653
     Other liabilities .........................................................                   49,033                    61,991
                                                                                            -------------             -------------
            Total liabilities ..................................................              139,847,170               113,523,816
                                                                                            -------------             -------------

     Commitments and contingent liabilities (Note L)

Shareholders' equity (Notes B and H)
     Common stock - no par  value; 10,000,000
         shares  authorized;  issued  and
         outstanding - 2,002,699 for 1999 and
         1,793,792 for 1998 ....................................................               14,254,918                10,568,522
     Retained earnings .........................................................                1,110,371                 3,051,399
     Accumulated other comprehensive income (loss) .............................               (1,628,999)                  (16,961)
                                                                                            -------------             -------------
            Total shareholders' equity .........................................               13,736,290                13,602,960
                                                                                            -------------             -------------

            Total liabilities and shareholders' equity .........................            $ 153,583,460             $ 127,126,776
                                                                                            =============             =============
</TABLE>














See accompanying notes to consolidated financial statements.


                                       31
<PAGE>


Consolidated Statement of Income
Community First Bancorporation

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                            ------------------------
                                                                              1999                    1998                  1997
                                                                              ----                    ----                  ----
Interest Income
<S>                                                                        <C>                    <C>                    <C>
     Loans, including fees ....................................            $ 6,330,466            $ 6,116,208            $ 5,397,962
     Securities
         Taxable ..............................................              3,044,216              1,841,050              1,645,718
         Tax-exempt ...........................................                  4,119                      -                      -
     Federal funds sold .......................................                994,827                926,264                534,153
     Other investments ........................................                 28,267                 20,797                      -
                                                                           -----------            -----------            -----------
         Total interest income ................................             10,401,895              8,904,319              7,577,833
                                                                           -----------            -----------            -----------

Interest expense
     Time deposits $100,000 and over ..........................              2,015,117              1,390,866              1,201,135
     Other deposits ...........................................              3,671,647              3,127,035              2,462,426
     Short-term borrowings ....................................                    148                      -                    649
                                                                           -----------            -----------            -----------
         Total interest expense ...............................              5,686,912              4,517,901              3,664,210
                                                                           -----------            -----------            -----------

Net interest income ...........................................              4,714,983              4,386,418              3,913,623
Provision for loan losses (Note E) ............................                300,009                213,486                315,183
                                                                           -----------            -----------            -----------
Net interest income after provision ...........................              4,414,974              4,172,932              3,598,440
                                                                           -----------            -----------            -----------

Other income
     Service charges on deposit accounts ......................                428,733                368,777                306,435
     Credit life insurance commissions ........................                 38,042                 39,189                 38,827
     Other income .............................................                195,244                166,766                176,753
                                                                           -----------            -----------            -----------
         Total other income ...................................                662,019                574,732                522,015
                                                                           -----------            -----------            -----------

Other expenses (Notes I and K)
     Salaries and employee benefits ...........................              1,378,965              1,138,752              1,008,265
     Net occupancy expense ....................................                129,225                115,789                100,605
     Furniture and equipment expense ..........................                218,800                194,429                166,612
     Other expense ............................................                814,664                706,289                633,020
                                                                           -----------            -----------            -----------
         Total other expenses .................................              2,541,654              2,155,259              1,908,502
                                                                           -----------            -----------            -----------

Income before income taxes ....................................              2,535,339              2,592,405              2,211,953
Income tax expense (Note J) ...................................                909,041                928,127                806,903
                                                                           -----------            -----------            -----------
Net income ....................................................            $ 1,626,298            $ 1,664,278            $ 1,405,050
                                                                           ===========            ===========            ===========

Per share (Note H)
     Net income ...............................................            $      0.82            $      0.85            $      0.73
     Net income, assuming dilution ............................                   0.76                   0.80                   0.70
</TABLE>








See accompanying notes to consolidated financial statements.


                                       32
<PAGE>

Consolidated Statement of Changes in Shareholders' Equity
Community First Bancorporation

<TABLE>
<CAPTION>
                                                         Common Stock
                                                         ------------                                     Accumulated
                                                    Number of                 Capital       Retained   Other Comprehensive
                                                     Shares*       Amount     Surplus       Earnings         Income         Total
                                                     -------       ------     -------       --------         ------         -----

<S>              <C>                                 <C>        <C>          <C>           <C>           <C>           <C>
Balance, January 1, 1997 ..........................  1,529,108  $ 3,822,770  $ 4,658,603   $ 1,932,061   $   (78,747)  $ 10,334,687
                                                                                                                       ------------

Comprehensive income:
  Net income ......................................          -            -            -     1,405,050             -      1,405,050
  Change in unrealized holding gains
    and losses on available-for-sale
    securities, net of income tax effects .........          -            -            -             -        62,210         62,210
                                                                                                                       ------------
       Total comprehensive income .................          -            -            -             -             -      1,467,260
                                                                                                                       ------------
Issuance of 15% stock dividend,
  including cash payment for
  fractional shares ...............................    228,902    1,945,667            -    (1,949,990)            -         (4,323)
Exercise of employee stock options ................     14,270       50,767        1,330             -             -         52,097
Exchange of no par value common stock
   of Community First Bancoporation
   for all of the outstanding shares
   of Community First Bank (Note B) ...............          -    4,659,933   (4,659,933)            -             -              -
                                                     ---------  -----------  -----------   -----------   -----------   ------------
Balance, December 31, 1997 ........................  1,772,280   10,479,137            -     1,387,121       (16,537)    11,849,721

Comprehensive income:
  Net income ......................................          -            -            -     1,664,278             -      1,664,278
  Change in unrealized holding gains
     and losses on available-for-sale
     securities, net of income tax effects ........          -            -            -             -          (424)          (424)
                                                                                                                       ------------
       Total comprehensive income .................          -            -            -             -             -      1,663,854
                                                                                                                       ------------
Exercise of employee stock options ................     21,512       89,385            -             -             -         89,385
                                                     ---------  -----------  -----------   -----------   -----------   ------------
Balance, December 31, 1998 ........................  1,793,792   10,568,522            -     3,051,399       (16,961)    13,602,960

Comprehensive income:
  Net income ......................................          -            -            -     1,626,298             -      1,626,298
  Change in unrealized holding gains
     and losses on available-for-sale
     securities, net of income tax effects ........          -            -            -             -    (1,612,038)    (1,612,038)
                                                                                                                       ------------
       Total comprehensive income .................          -            -            -             -             -         14,260
                                                                                                                       ------------
Issuance of 10% stock dividend,
  including cash payment for
  fractional shares ...............................    180,155    3,561,672            -    (3,567,326)            -         (5,654)
Exercise of employee stock options ................     28,752      124,724            -             -             -        124,724
                                                     ---------  -----------  -----------   -----------   -----------   ------------
Balance, December 31, 1999 ........................  2,002,699  $14,254,918  $         -   $ 1,110,371   $(1,628,999)  $ 13,736,290
                                                     =========  ===========  ===========   ===========   ===========   ============
</TABLE>


* Adjusted for a two-for-one stock split effective July 31, 1998.





See accompanying notes to consolidated financial statements.


                                       33
<PAGE>

Consolidated Statement of Cash Flows
Community First Bancorporation

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                                                                             ------------------------
                                                                                      1999              1998               1997
                                                                                      ----              ----               ----
Operating Activities
<S>                                                                              <C>                <C>                <C>
      Net income ..........................................................      $  1,626,298       $  1,664,278       $  1,405,050
      Adjustments to reconcile net income to net
           cash provided by operating activities
                Provision for loan losses .................................           300,009            213,486            315,183
                Depreciation ..............................................           170,623            149,463            129,703
                Deferred income taxes .....................................            21,651              1,957            (49,529)
                Amortization of net loan fees and costs ...................            64,876             55,014             37,959
                Securities accretion and premium amortization .............           (16,944)           (98,401)           (14,705)
                Writedowns of other real estate ...........................                 -                  -             25,000
                Gain on sale of other real estate .........................            (9,684)                 -            (44,547)
                Loss on disposal of fixed assets ..........................             8,342                439                  -
                Increase in interest receivable ...........................          (363,195)           (36,486)           (74,475)
                Increase (decrease) in interest payable ...................           214,238            193,548            (46,600)
                Decrease (increase) in prepaid expenses ...................            24,230            (27,364)           (94,750)
                (Decrease) increase in other accrued expenses .............           (12,958)             6,250             (4,370)
                                                                                 ------------       ------------       ------------
                     Net cash provided by operating activities ............         2,027,486          2,122,184          1,583,919
                                                                                 ------------       ------------       ------------

Investing activities
      Purchases of available-for-sale securities ..........................       (26,347,189)       (60,961,204)        (7,999,531)
      Maturities of available-for-sale securities .........................         7,955,341         48,285,332          9,125,412
      Purchases of other investments ......................................           (36,600)           (10,400)          (335,000)
      Net increase in loans made to customers .............................        (8,783,558)        (2,259,098)       (11,347,996)
      Proceeds from sale of other real estate .............................             9,684                  -             44,547
      Purchases of premises and equipment .................................        (1,571,389)        (1,345,566)           (22,770)
                                                                                 ------------       ------------       ------------
                     Net cash used by investing activities ................       (28,773,711)       (16,290,936)       (10,535,338)
                                                                                 ------------       ------------       ------------

Financing activities
      Net increase in demand deposits, interest
           bearing transaction accounts and savings accounts ..............         3,197,622          6,111,490          1,442,368
      Net increase in certificates of deposit and other
           time deposits ..................................................        22,924,452         14,094,110          3,388,290
      Payment of cash in lieu of fractional shares
           for stock dividend .............................................            (5,654)                 -             (4,323)
      Exercise of employee stock options, net
           of issuance costs of $15,953 in 1999 ...........................           124,724             89,385             52,097
                                                                                 ------------       ------------       ------------
                     Net cash provided by financing activities ............        26,241,144         20,294,985          4,878,432
                                                                                 ------------       ------------       ------------
(Decrease) increase in cash and cash equivalents ..........................          (505,081)         6,126,233         (4,072,987)
Cash and cash equivalents, beginning ......................................        17,469,892         11,343,659         15,416,646
                                                                                 ------------       ------------       ------------
Cash and cash equivalents, ending .........................................      $ 16,964,811       $ 17,469,892       $ 11,343,659
                                                                                 ============       ============       ============
</TABLE>







See accompanying notes to consolidated financial statements.



                                       34
<PAGE>

Notes to Consolidated Financial Statements
Community First Bancorporation

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization.  Community First  Bancorporation  (the "Company"),  a bank holding
company, and its wholly-owned  subsidiary,  Community First Bank, are engaged in
providing domestic commercial banking services from their headquarters office in
Walhalla, and other offices in Seneca and Anderson,  South Carolina. The Company
is a South Carolina  corporation and its banking subsidiary is a state chartered
commercial  bank with its  deposits  insured by the  Federal  Deposit  Insurance
Corporation (the "FDIC"). Therefore, the Company and its bank subsidiary operate
under the supervision,  rules and regulations of the Federal Reserve Board, FDIC
and South Carolina State Board of Financial  Institutions.  The holding  company
was  incorporated  on May 23,  1997,  pursuant  to a plan of  reorganization  as
described in Note B to the consolidated  financial  statements.  Community First
Bank was  organized on December 1, 1988,  and received its charter and commenced
operations on March 12, 1990.

The  subsidiary,  Community  First  Bank,  is a  community-oriented  institution
offering a full range of  traditional  banking  services,  with the exception of
trust  services.  Substantially  all of its  loans are made to  individuals  and
business within markets in Oconee and Anderson counties of South Carolina. Also,
substantially all of its deposits are acquired within its local market areas and
no brokered deposits are accepted.

Principles  of  Consolidation  and  Basis  of  Presentation.   The  consolidated
financial  statements include the accounts of the parent company and its banking
subsidiary  after  elimination  of all  significant  intercompany  balances  and
transactions.  The  accounting  and  reporting  policies  of the Company and its
subsidiary are in conformity with generally accepted  accounting  principles and
general practices within the banking industry.

Securities. Equity securities that have readily determinable fair values and all
debt  securities  are  classified  generally at the time of purchase into one of
three  categories:   held-to-maturity,   trading  or  available-for-sale.   Debt
securities  which the  Company  has the  positive  intent and ability to hold to
ultimate  maturity are  classified  as  held-to-maturity  and  accounted  for at
amortized  cost.  Debt and equity  securities that are bought and held primarily
for sale in the near term are  classified as trading and are accounted for on an
estimated fair value basis,  with unrealized  gains and losses included in other
income. However, the Company has never held any securities for trading purposes.
Securities not classified as either  held-to-maturity  or trading are classified
as available-for-sale and are accounted for at estimated fair value.  Unrealized
holding gains and losses on available-for-sale  securities are excluded from net
income and recorded as other comprehensive  income, net of applicable income tax
effects.  Dividend and interest income, including amortization of any premium or
accretion of discount  arising at  acquisition,  is included in earnings for all
three  categories of securities.  Realized gains and losses on all categories of
securities are included in other operating  income,  based on the amortized cost
of the specific certificate on a trade date basis.

Other Investments.  Other investments consist of restricted securities which are
carried  at  cost.  Management   periodically  evaluates  these  securities  for
impairment,  with any appropriate downward valuation adjustments being made when
necessary.  Other investments at December 31, 1999 and 1998 consisted of Federal
Home  Loan  Bank  of  Atlanta  (the  "FHLB")  stock  with  the  carrying  amount
approximating estimated fair value.

Loans and Interest Income.  Loans are carried at principal amounts  outstanding,
increased  or reduced by  deferred  net loan costs or fees.  Interest  income on
loans is recognized  using the interest method based upon the principal  amounts
outstanding.  Loan  origination  and  commitment  fees and  certain  direct loan
origination  costs  (principally  salaries  and  employee  benefits)  are  being
deferred and amortized as an adjustment of the related loan's yield.  Generally,
these amounts are being amortized over the contractual life of the related loans
or commitments.

A loan is considered  to be impaired  when, in  management's  judgment  based on
current  information and events, it is probable that the obligation's  principal
or interest will not be collectible in accordance with the terms of the original
loan agreement.  Impaired loans,  when not material,  are carried in the balance
sheet at a value not to exceed their  observable  market price or the fair value
of the collateral if the repayment of the loan is expected to be provided solely
by the underlying  collateral.  The carrying value of any material impaired loan
is measured based on the present value of expected future cash flows  discounted
at the loan's effective  interest rate,  which is the contractual  interest rate

                                       35
<PAGE>

adjusted for any deferred  loan fees or costs,  premium or discount  existing at
the inception or acquisition of the loan. Generally,  the accrual of interest is
discontinued on impaired loans and any previously accrued interest on such loans
is reversed against current income. Any subsequent interest income is recognized
on a cash basis when received unless  collectibility of a significant  amount of
principal is in serious doubt. In such cases,  collections are credited first to
the remaining  principal  balance on a cost recovery  basis. An impaired loan is
not returned to accrual status unless principal and interest are current and the
borrower has demonstrated the ability to continue making payments as agreed.

Allowance  for Loan Losses.  An allowance for possible loan losses is maintained
at a level deemed  appropriate by management to provide adequately for known and
inherent risks in the loan  portfolio.  When  management  determines that a loan
will not perform  substantially  as agreed, a review of the loan is initiated to
ascertain whether it is more likely than not that a loss has occurred.  If it is
determined  that a loss is likely,  the estimated  amount of the loss is charged
off and deducted from the allowance.  The provision for possible loan losses and
recoveries  on  loans  previously  charged  off  are  added  to  the  allowance.
Determining  the amount and adequacy of the allowance  for loan losses  involves
estimating  uncertain  future events and their effects based on judgment applied
to currently known facts and circumstances.  Changes in the estimated  allowance
for loan losses necessitated as new events occur or more information is obtained
are accounted for as changes in accounting estimates in the accounting period in
which the change occurs.

Management  considers the Company's  historical  loan loss  experience,  current
national and local  economic  conditions  affecting  the  borrowers'  ability to
repay,  the volume of loans,  the trends in  delinquent,  impaired and potential
problem loans,  and the amount and quality of collateral  securing such loans in
reviewing  the adequacy of the  allowance for loan losses.  In  calculating  its
estimate,  management applies a consistent  methodology that is updated monthly.
The calculation  involves applying various estimated  percentage  factors to the
loan  portfolio  categorized  into assessed risk grades  utilizing the Company's
ongoing  system of detailed loan  reviews.  For some loans,  particularly  those
identified as impaired or potential  problem,  specific  allocations are made in
the  calculation.  The methodology  also includes  assessing the risk associated
with off-balance-sheet extensions of credit such as loan commitments and standby
letters of credit.

Premises  and  Equipment.  Premises  and  equipment  are  stated  at cost,  less
accumulated  depreciation.  The provision for depreciation is computed using the
straight-line method. Rates of depreciation are generally based on the following
estimated  useful lives:  buildings - 40 years;  land  improvements  - 15 years;
furniture  and  equipment - 5 to 25 years.  The cost of assets sold or otherwise
disposed of, and the related  allowance for  depreciation is eliminated from the
accounts and the  resulting  gains or losses are  reflected in the  consolidated
income  statement.  Maintenance  and repairs  are charged to current  expense as
incurred and the costs of major renewals and improvements are capitalized.

Other Real  Estate.  Other real  estate  includes  properties  acquired  through
foreclosure or acceptance of a deed in lieu of foreclosure. Other real estate is
initially recorded at the lower of cost or the estimated fair market value, less
estimated  selling  costs.  Loan losses  arising  from the  acquisition  of such
property are charged to the allowance  for loan losses.  An allowance for losses
on  other  real  estate  is  maintained   for  subsequent   downward   valuation
adjustments.

Retirement Plan. The Company has a salary reduction profit sharing plan pursuant
to Section 401(k) of the Internal  Revenue Code as more fully  described in Note
K. The Company does not sponsor any postretirement or postemployment benefits.

Deferred  Income  Taxes.  The Company uses an asset and  liability  approach for
financial accounting and reporting of deferred income taxes. Deferred tax assets
and  liabilities  are determined  based on the difference  between the financial
statement  and income tax bases of assets and  liabilities  as  measured  by the
currently  enacted  tax rates  which are  assumed  will be in effect  when these
differences reverse. If it is more likely than not that some portion or all of a
deferred tax asset will not be realized,  a valuation  allowance is  recognized.
Deferred  income tax expense or credit is the result of changes in deferred  tax
assets and liabilities.

Stock-Based Compensation.  The Company applies only the disclosure provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation",  but applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", for recording compensation cost

                                       36
<PAGE>

for stock options granted. Accordingly,  compensation expense is measured as the
excess, if any, of the estimated fair value of the Company's common stock at the
date of grant over the amount the grantee  must pay to acquire the shares  under
option. Refer to Note H for further information.

Earnings  Per Share.  Basic net income per share is  calculated  by dividing net
income by the weighted  average  number of shares of the Company's  common stock
outstanding  during the  period.  Net income per share,  assuming  dilution,  is
calculated by dividing net income by the total of the weighted average number of
shares  outstanding  during the period and the  weighted  average  number of any
dilutive  potential  common  shares  and  stock  options  that  would  have been
outstanding if the dilutive  potential shares and stock options had been issued.
In computing the number of dilutive  potential common shares, it is assumed that
all dilutive  stock options are exercised at the beginning of each year and that
the proceeds are used to purchase  shares of the  Company's  common stock at the
average market price during the year. See Note H.

Comprehensive  Income. In June, 1997, the Financial  Accounting  Standards Board
issued SFAS No. 130, "Reporting  Comprehensive Income". As required, the Company
adopted  the   provisions  of  this  SFAS  beginning   January  1,  1998,   with
reclassifications  included  for  any  earlier  comparative  accounting  periods
presented.  Comprehensive  income consists of net income or loss for the current
period and other comprehensive income,  defined as income,  expenses,  gains and
losses  that  bypass  the  consolidated  statement  of income  and are  reported
directly in a separate component of shareholders'  equity. SFAS No. 130 provides
that the  Company  classify  and  report  items of  other  comprehensive  income
according  to their  nature,  report total  comprehensive  income in a financial
statement  and display the  accumulated  balance of other  comprehensive  income
separately  in the  shareholders'  equity  section of the  consolidated  balance
sheet.  However, the adoption of SFAS No. 130 had no effect on the Company's net
income or shareholders' equity. See Note H.

The components of other comprehensive income or loss and related tax effects are
as follows:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                                 ------------------------
                                                         1999               1998                1997
                                                         ----               ----                ----
<S>                                                   <C>               <C>               <C>
Change in unrealized holding gains and
     losses on available-for-sale securities .....    $(2,514,880)      $      (661)      $    97,051
Income tax expense (benefit) on other
     comprehensive income (loss) .................       (902,842)             (237)           34,841
                                                      -----------       -----------       -----------
         Net-of-tax amount .......................    $(1,612,038)      $      (424)      $    62,210
                                                      ===========       ===========       ===========
</TABLE>

Consolidated  Statement of Cash Flows. The consolidated  statement of cash flows
reports  net  cash  provided  or  used by  operating,  investing  and  financing
activities and the net effect of those flows on cash and cash equivalents.  Cash
equivalents  include  amounts due from banks,  federal funds sold and securities
purchased under agreements to resell.

During  1999,  1998 and 1997,  interest  paid on deposits  and other  borrowings
amounted to $5,543,362,  $4,348,010  and  $3,710,810,  respectively.  Income tax
payments of  $865,800,  $958,200 and  $864,056  were made during 1999,  1998 and
1997, respectively.  In 1999, a noncash transfer of $142,061 was made from loans
to other real estate.  Noncash  transfers from retained earnings to common stock
in the amounts of  $3,561,672  and  $1,945,667  were made as the result of stock
dividends declared in 1999 and 1997,  respectively.  Effective October 16, 1997,
Community First  Bancorporation  acquired all of the then outstanding  shares of
Community  First  Bank's  $5.00 par value common stock in exchange for shares of
Community  First  Bancorporation's  no par value common  stock.  As a result,  a
noncash  transfer of $4,659,933  was made from capital  surplus to common stock.
During 1999, 1998 and 1997, noncash valuation  adjustments  totaling $2,514,880,
$661  and  $97,051  were  made  which   decreased,   decreased  and   increased,
respectively,  the carrying amount of  available-for-sale  securities.  In 1999,
accumulated  other  comprehensive  income decreased  $1,612,038 and deferred tax
assets increased  $902,842;  in 1998,  accumulated  other  comprehensive  income
decreased $424 and deferred tax assets increased $237; and, in 1997, accumulated
other  comprehensive  income increased $62,210 and deferred tax assets decreased
$34,841.

                                       37
<PAGE>

Fair Value Estimates.  Fair value estimates are made at a specific point in time
based on relevant  market  information  about the  financial  instrument.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the  Company's  entire  holdings of a particular  financial
instrument. Because no active trading market exists for a significant portion of
the  Company's  financial  instruments,   fair  value  estimates  are  based  on
management's  judgments  regarding  future  expected  loss  experience,  current
economic conditions, risk characteristics of various financial instruments,  and
other   factors.   These   estimates  are   subjective  in  nature  and  involve
uncertainties  and  matters of  significant  judgment  and  therefore  cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.

Fair value  estimates are based on existing  on-and-off  balance sheet financial
instruments  without  attempting  to estimate  the value of  anticipated  future
business  and the  value of  assets  and  liabilities  that  are not  considered
financial   instruments.   Significant  assets  and  liabilities  that  are  not
considered  financial assets or liabilities  include net deferred tax assets and
premises and equipment. In addition, the income tax ramifications related to the
realization for the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.

For cash and due from banks,  federal funds sold and accrued interest receivable
and  payable,   the  carrying  amount  approximates  fair  value  because  these
instruments generally mature in 90 days or less and do not present unanticipated
credit concerns.

NOTE B - CORPORATE REORGANIZATION

On May 20, 1997,  the  shareholders  of Community  First Bank approved a plan of
corporate  reorganization  under  which  Community  First  Bank  would  become a
wholly-owned  subsidiary  of  Community  First  Bancorporation.   As  a  result,
Community First Bancorporation was organized on May 23, 1997 at the direction of
Community  First Bank's  management.  The  authorized  common stock of Community
First  Bancorporation  at that time was  5,000,000  shares with no par value per
share.  Pursuant  to the  reorganization,  the  parent  company  issued  764,702
(unadjusted  for stock  dividend and stock splits) shares of its common stock in
exchange for all of the 764,702  outstanding  common  shares of Community  First
Bank. The  reorganization  was effected on October 16, 1997 and accounted for as
if it were a  pooling-of-interests.  As a  result,  the  consolidated  financial
statements  for the  year  ended  December  31,  1997  are  presented  as if the
reorganization had occurred on January 1, 1997.

                                       38
<PAGE>

NOTE C - CASH AND DUE FROM BANKS

Banks are  generally  required by regulation to maintain an average cash reserve
balance  based on a  percentage  of  deposits.  The  average  amount of the cash
reserve balances at December 31, 1999 and 1998, were approximately  $638,000 and
$697,000, respectively.


NOTE D - SECURITIES

The aggregate amortized cost and estimated fair values of securities, as well as
gross unrealized gains and losses of securities were as follows:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                            ------------
                                                  1999                                                     1998
                                                  ----                                                     ----
                                          Gross        Gross                                       Gross        Gross
                                        Unrealized   Unrealized     Estimated                   Unrealized   Unrealized   Estimated
                           Amortized     Holding      Holding         Fair         Amortized      Holding      Holding         Fair
                             Cost         Gains        Losses         Value           Cost         Gains       Losses         Value
                             ----         -----        ------         -----           ----         -----       ------         -----
Available-for-sale
<S>                        <C>           <C>       <C>           <C>           <C>           <C>           <C>           <C>
U.S. Treasury ..........   $ 1,991,048   $     -   $    22,298   $ 1,968,750   $         -   $         -   $         -   $         -
U.S. Government
    agencies ...........    47,975,198         -     2,299,562    45,675,636    30,971,303        58,970       111,202    30,919,071
Mortgage-backed
    securities .........     6,555,924         -       215,073     6,340,851             -             -             -             -
State, county and
    municipal ..........       197,218         -         4,407       192,811     7,339,293        54,007        28,235     7,365,065
                           -----------   -------   -----------   -----------   -----------   -----------   -----------   -----------
      Total ............   $56,719,388   $     -   $ 2,541,340   $54,178,048   $38,310,596   $   112,977   $   139,437   $38,284,136
                           ===========   =======   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>

The  amortized  cost and  estimated  fair  value of  securities  by  contractual
maturity are shown below:

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                           ------------
                                                                          1999                                   1998
                                                                          ----                                   ----
                                                               Amortized         Estimated             Amortized         Estimated
                                                                 Cost            Fair Value              Cost            Fair Value
                                                                 ----            ----------              ----            ----------
Available-for-sale
<S>                                                          <C>                 <C>                 <C>                 <C>
Due after one through five years ...................         $22,009,558         $21,444,378         $ 7,990,095         $ 8,034,377
Due after five through ten years ...................          26,956,688          25,311,883          21,981,208          21,900,007
Due after ten years ................................           1,197,218           1,080,936           1,000,000             984,687
                                                             -----------         -----------         -----------         -----------
                                                              50,163,464          47,837,197          30,971,303          30,919,071
Mortgage-backed securities .........................           6,555,924           6,340,851           7,339,293           7,365,065
                                                             -----------         -----------         -----------         -----------
    Total ..........................................         $56,719,388         $54,178,048         $38,310,596         $38,284,136
                                                             ===========         ===========         ===========         ===========
</TABLE>


The fair value of U.S. Treasury and U.S.  Government agencies debt securities is
estimated based on published closing quotations.  Fair value for mortgage-backed
securities is estimated primarily using dealers' quotes.

There  were no sales or  transfers  to other  categories  of  available-for-sale
securities in 1999, 1998 and 1997.


                                       39
<PAGE>

At December 31, 1999,  securities  with an amortized cost of $39,186,397  and an
estimated fair value of $37,129,288  were pledged as collateral to secure public
deposits. The amortized cost and estimated fair value of such pledged securities
were $36,246,811 and $36,219,904, respectively, at the end of 1998.

NOTE E - LOANS

Loans consisted of the following:

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                         ------------
                                                                            1999                                1998
                                                                            ----                                ----
                                                               Carrying           Estimated           Carrying           Estimated
                                                                Amount            Fair Value           Amount            Fair Value
                                                                ------            ----------           ------            ----------

<S>                                                          <C>                 <C>                <C>                 <C>
Commercial, financial and industrial .................       $ 13,962,418        $ 13,735,734       $  9,537,226        $  9,430,082
Real estate- construction ............................             27,808              27,475             50,820              50,471
Real estate - mortgage ...............................         44,954,510          44,356,723         41,653,728          41,254,837
Consumer installment .................................         17,213,207          16,990,119         16,651,395          16,607,402
                                                             ------------        ------------       ------------        ------------
     Total ...........................................         76,157,943          75,110,051         67,893,169          67,342,792
Allowance for loan losses ............................           (942,950)                  -           (954,788)                  -
                                                             ------------        ------------       ------------        ------------
     Loans - net .....................................       $ 75,214,993        $ 75,110,051       $ 66,938,381        $ 67,342,792
                                                             ============        ============       ============        ============

</TABLE>
Net  deferred  loan costs of $53,365  and  $35,576  have been  allocated  to the
various loan categories as of December 31, 1999 and 1998, respectively.

Fair  values  are  estimated  for  loan   categories   with  similar   financial
characteristics.  Within each category, the fair value of loans is calculated by
discounting  estimated cash flows through the estimated maturity using estimated
market discount rates that reflect the credit and interest rate risk inherent in
the loan. For certain  categories of loans, such as variable rate loans,  credit
card receivables,  and other lines of credit, the carrying amount,  adjusted for
credit  risk,  is a  reasonable  estimate  of fair  value  because  there  is no
contractual maturity or because the Company has the ability to reprice the loans
as interest  rate shifts  occur.  Since the discount  rates are based on current
loan rates offered as well as management's estimates,  the fair values presented
may not necessarily be indicative of the value negotiated in an actual sale.

Loans which  management has identified as impaired  generally are  nonperforming
loans.  Nonperforming  loans include nonaccrual loans or loans which are 90 days
or more delinquent as to principal or interest payments.  Following is a summary
of activity regarding the Company's impaired loans:

                                                                 December 31,
                                                                 ------------
                                                               1999        1998
                                                               ----        ----
Investment in impaired loans
     Nonaccrual ..........................................   $208,792   $365,626
     Accruing 90 days and over past due ..................     19,890     10,575
                                                             --------   --------
         Total ...........................................   $228,682   $376,201
                                                             ========   ========

Average total investment in impaired loans
   during the year .......................................   $254,000   $184,800
Allowance for loan losses on impaired loans ..............     38,224     29,347

The average total  investment in impaired loans during 1997 was $303,875.  There
were no outstanding commitments at December 31, 1999 to lend additional funds to
debtors owing amounts on impaired loans.

                                       40
<PAGE>

As of December 31, 1999 and 1998,  there were no significant  concentrations  of
credit risk in any single  borrower or groups of borrowers.  The Company's  loan
portfolio   consists  primarily  of  extensions  of  credit  to  businesses  and
individuals in its Oconee and Anderson County,  South Carolina market areas. The
economy of these areas is diversified and does not depend on any one industry or
group of related  industries.  Management  has  established  loan  policies  and
practices that include set limitations on loan-to-collateral value for different
types of collateral,  requirements  for  appraisals,  obtaining and  maintaining
current credit and financial information on borrowers, and credit approvals.

Transactions in the allowance for loan losses are summarized below:

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                         ------------------------
                                                                           1999                     1998                     1997
                                                                           ----                     ----                     ----

<S>                                                                     <C>                      <C>                      <C>
Balance at January 1 ....................................               $ 954,788                $ 890,125                $ 705,000
Provision charged to expense ............................                 300,009                  213,486                  315,183
Recoveries ..............................................                  21,465                   20,915                   10,146
Charge-offs .............................................                (333,312)                (169,738)                (140,204)
                                                                        ---------                ---------                ---------
Balance at December 31 ..................................               $ 942,950                $ 954,788                $ 890,125
                                                                        =========                =========                =========
</TABLE>

Certain  officers  and  directors  of the  Company  and  its  subsidiary,  their
immediate  families and business interests were loan customers of, and had other
transactions  with the  banking  subsidiary  in the normal  course of  business.
Related party loans are made on substantially the same terms, including interest
rates  and   collateral,   and  do  not   involve   more  than  normal  risk  of
collectibility.  The aggregate  dollar amount of these loans was  $4,268,490 and
$3,288,367 at December 31, 1999 and 1998, respectively.  During 1999, $3,453,203
of new loans were made and repayments totaled $2,473,080.


NOTE F - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                             December 31,
                                                             ------------
                                                        1999               1998
                                                        ----               ----

Land .............................................   $1,670,670      $  384,773
Buildings and land improvements ..................    1,946,097         972,836
Furniture and equipment ..........................    1,101,865         894,822
Construction in progress .........................      315,078       1,233,175
                                                     ----------      ----------
              Total ..............................    5,033,710       3,485,606
Accumulated depreciation .........................      770,130         614,450
                                                     ----------      ----------
              Premises and equipment - net .......   $4,263,580      $2,871,156
                                                     ==========      ==========

Depreciation  expense for the years ended  December 31, 1999,  1998 and 1997 was
$170,623 $149,463 and $129,703, respectively.

Construction  in progress at December  31,  1999,  consists  primarily  of costs
incurred for the acquisition of land for the Company's proposed branch office in
Williamston,  South Carolina.  Management has not yet completed plans or entered
into contracts for the construction of the office.


                                       41
<PAGE>

NOTE G - DEPOSITS

A summary of deposits follows:

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                           ------------
                                                                            1999                                 1998
                                                                            ----                                 ----
                                                                Carrying          Estimated           Carrying           Estimated
                                                                 Amount          Fair Value            Amount            Fair Value
                                                                 ------          ----------            ------            ----------

<S>                                                         <C>                 <C>                 <C>                 <C>
Noninterest bearing demand .........................        $ 16,908,526        $ 16,908,526        $ 14,797,785        $ 14,797,785
Interest bearing transaction accounts ..............          17,894,447          17,894,447          17,239,636          17,239,636
Savings ............................................          17,304,086          17,304,086          16,872,016          16,872,016
Time deposits $100,000 and over ....................          40,934,288          40,936,034          29,057,397          29,061,084
Other time deposits ................................          45,576,899          45,567,529          34,529,338          34,576,445
                                                            ------------        ------------        ------------        ------------
     Total deposits ................................        $138,618,246        $138,610,622        $112,496,172        $112,546,966
                                                            ============        ============        ============        ============
</TABLE>



As of  December  31,  1999  and  1998,  local  governmental  deposits  comprised
approximately 27% of total deposits.

The fair value of deposits with no stated maturity  (noninterest bearing demand,
interest  bearing  transaction  accounts  and  savings)  is equal to the  amount
payable on demand,  or carrying  amount,  as of December 31, 1999 and 1998.  The
fair  value of time  deposits  is  estimated  based on the  discounted  value of
contractual  cash flows. The discount rate is estimated using the rate currently
offered as of December,  31, 1999 and 1998,  for  deposits of similar  remaining
maturities.

At December 31, 1999, the scheduled maturities of time deposits are as follows:

                     Year                                        Amount

                      2000                                     $ 81,998,924
                      2001                                        4,445,543
                      2002                                           27,074
                      2003                                           34,646
                      2004 and thereafter                             5,000


NOTE H - SHAREHOLDERS' EQUITY

Restrictions  on  Subsidiary  Dividends,   Loans  or  Advances.  South  Carolina
regulations restrict the amount of dividends that banks can pay to shareholders.
Any of the banking subsidiary's  dividends to the parent company which exceed in
amount the total amount of the subsidiary's  current  year-to-date  earnings are
subject to the prior approval of the South Carolina  Commissioner of Banking and
are generally payable only from its undivided profits. At December 31, 1999, the
banking  subsidiary's  available  undivided  profits totaled  $6,473,541.  Under
Federal  Reserve  Board  regulations,  the amounts of loans or advances from the
banking subsidiary to the parent company are also restricted.

Stock Split and Stock  Dividends.  The Company's  Board of Directors  declared a
two-for-one  stock split effective on July 31, 1998. At that time, the Company's
number of authorized  shares of its common stock was increased from 5,000,000 to
10,000,000  shares.  Effective  December 15, 1999 and  December  30,  1997,  the
Company  issued  stock  dividends  of 10% and 15%,  respectively.  All per share
information  has been  retroactively  adjusted to give effect to the stock split
and stock dividends.


                                       42
<PAGE>

Accumulated  Other  Comprehensive  Income.  As of  December  31,  1999 and 1998,
accumulated other comprehensive  income included as a reduction of shareholders'
equity  in  the  accompanying   consolidated  balance  sheet  consisted  of  the
accumulated   changes   in  the   unrealized   holding   gains  and   losses  on
available-for-sale securities amounting to $1,628,999 and $16,961, respectively.

Earnings  per Share.  Net  income  per share and net income per share,  assuming
dilution, were computed as follows:

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                      1999                 1998               1997
                                                                                      ----                 ----               ----
Net income per share, basic
<S>                                                                                 <C>                <C>                <C>
  Numerator - net income ..................................................         $1,626,298         $1,664,278         $1,405,050
                                                                                    ==========         ==========         ==========
  Denominator
    Weighted average common shares issued and outstanding .................          1,979,081          1,955,245          1,934,038
                                                                                    ==========         ==========         ==========
               Net income per share, basic ................................         $      .82         $      .85         $      .73
                                                                                    ==========         ==========         ==========

Net income per share, assuming dilution
  Numerator - net income ..................................................         $1,626,298         $1,664,278         $1,405,050
                                                                                    ==========         ==========         ==========
  Denominator
    Weighted average common shares issued and outstanding .................          1,979,081          1,955,245          1,934,038
    Effect of dilutive stock options ......................................            151,472            126,937             62,365
                                                                                    ----------         ----------         ----------
               Total shares ...............................................          2,130,553          2,082,182          1,996,403
                                                                                    ==========         ==========         ==========
               Net income per share, assuming dilution ....................         $      .76         $      .80         $      .70
                                                                                    ==========         ==========         ==========
</TABLE>

Regulatory Capital.  All bank holding companies and banks are subject to various
regulatory  capital  requirements  administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly  additional  discretionary,  actions by regulators that, if undertaken,
could have a direct  material  effect on the  Company's  consolidated  financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt  corrective  action,  bank holding companies and banks must meet specific
capital  guidelines  that  involve   quantitative   measures  of  their  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practices.  Capital amounts and  classification  are also subject to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and its banking  subsidiary to maintain  minimum amounts and
ratios set forth in the table  below of Total and Tier 1 Capital,  as defined in
the regulations,  to risk weighted assets, as defined, and of Tier 1 Capital, as
defined, to average assets, as defined.  Management believes, as of December 31,
1999 and 1998,  that the Company and its  subsidiary  bank  exceeded all capital
adequacy minimum requirements.

As of December 31, 1999, the most recent  notification from the FDIC categorized
Community  First Bank as well  capitalized  under the  regulatory  framework for
prompt corrective action. To be categorized as well capitalized, the Company and
its  banking   subsidiary  must  maintain  minimum  Total  risk-based,   Tier  1
risk-based,  and Tier 1 leverage ratios as set forth in the table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed  Community  First Bank's  category.  The Company's  and Community  First
Bank's actual capital amounts and ratios are also presented in the table.

                                       43
<PAGE>
<TABLE>
<CAPTION>
                                                                                               Minimum for          Minimum to be
                                                                                Actual       Capital Adequacy     Well Capitalized
                                                                                ------       ----------------     ----------------
                                                                         Amount      Ratio   Amount     Ratio     Amount      Ratio
                                                                         ------      -----   ------     -----     ------      -----
December 31, 1999                                                                         (Dollars in thousands)
      The Company
<S>                                                                     <C>          <C>     <C>          <C>    <C>          <C>
          Total Capital to risk weighted assets ...................     $16,308      19.4%   $ 6,716      8.0%   $ 8,394      10.0%
          Tier 1 Capital to risk weighted assets ..................     $15,365      18.3%   $ 3,358      4.0%   $ 5,037       6.0%
          Tier 1 Capital to average assets (leverage) .............     $15,365      10.0%   $ 4,625      3.0%   $ 7,709       5.0%
      Community First Bank
          Total Capital to risk weighted assets ...................     $15,900      18.9%   $ 6,716      8.0%   $ 8,394      10.0%
          Tier 1 Capital to risk weighted assets ..................     $14,957      17.8%   $ 3,358      4.0%   $ 5,037       6.0%
          Tier 1 Capital to average assets (leverage) .............     $14,957       9.7%   $ 4,625      3.0%   $ 7,709       5.0%

December 31, 1998
      The Company
          Total Capital to risk weighted assets ...................     $14,497      20.7%   $ 5,615      8.0%   $ 7,019      10.0%
          Tier 1 Capital to risk weighted assets ..................     $13,620      19.4%   $ 2,807      4.0%   $ 4,211       6.0%
          Tier 1 Capital to average assets (leverage) .............     $13,620      11.0%   $ 3,703      3.0%   $ 6,172       5.0%
      Community First Bank
          Total Capital to risk weighted assets ...................     $14,197      20.2%   $ 5,615      8.0%   $ 7,019      10.0%
          Tier 1 Capital to risk weighted assets ..................     $13,320      19.0%   $ 2,807      4.0%   $ 4,211       6.0%
          Tier 1 Capital to average assets (leverage) .............     $13,320      10.8%   $ 3,703      3.0%   $ 6,172       5.0%
</TABLE>

Stock  Options.  In 1998,  the  Company's  shareholders  approved the 1998 Stock
Option Plan under which an aggregate of 440,000 shares  (adjusted for subsequent
stock  dividend  and a stock  split) of the  Company's  authorized  but unissued
common  stock was reserved  for  possible  issuance  pursuant to the exercise of
stock  options.  Generally,  options may be granted to  directors,  officers and
employees under terms and conditions, including expiration date, exercise price,
and vesting as determined by the Board of Directors.  In 1990, the  shareholders
approved the 1989  Incentive  Stock Option Plan.  The 1989 plan provided for the
granting of options to certain  eligible  employees and reserved  307,512 shares
(adjusted for stock dividends and split) of authorized common stock for issuance
upon the exercise of such options.  For all stock options ever granted under the
two plans through the end of 1999,  the exercise price was the fair market value
of the  Company's  common stock on the date the option was granted as determined
by the Board of Directors.  Options terminate according to the conditions of the
grant,  not to exceed 10 years  from the date of grant.  The  expiration  of the
options  accelerates  upon the  optionee's  termination  of employment  with the
Company  or  death,  or if there is a  change  in  control  of the  Company,  in
accordance  with the provisions of the two plans.  Options  awarded during 1999,
1998 and 1997 provided for 20% vesting  immediately upon award, with 20% vesting
on the anniversary date of the award for each of the four subsequent years , and
ten year expiration dates.

As of January 1, 1996, the Company adopted only the disclosure provision of SFAS
No. 123,  "Accounting  for  Stock-Based  Compensation",  but applies  Accounting
Principles  Board Opinion No. 25 and related  interpretations  in accounting for
its plans.  Since the exercise  price of each option  equals the market price of
the  Company's  stock  on the  date of  grant,  no  compensation  cost  has been
recognized for the plan for any period. Had compensation cost for the plans been
determined  based on the fair value of the options at the grant dates consistent
with the method of SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                          ------------------------
                                                                              1999                 1998                     1997
                                                                              ----                 ----                     ----
Net income
<S>                                                                    <C>                     <C>                     <C>
     As reported ...........................................           $   1,626,298           $   1,664,278           $   1,405,050
     Pro forma .............................................               1,479,156               1,576,137               1,376,930
Net income per share
     As reported ...........................................           $        0.82           $        0.85           $        0.73
     Pro forma .............................................                    0.75                    0.81                    0.71
Net income per share, assuming dilution
     As reported ...........................................           $        0.76           $        0.80           $        0.70
     Pro forma .............................................                    0.69                    0.76                    0.69
</TABLE>

                                       44
<PAGE>

The fair values of options granted during 1999, 1998 and 1997 were $10.94, $5.39
and $3.68 per share.  Such fair value was  estimated as of the date of the grant
using the minimum value option pricing method.  The following  assumptions  were
used for grants in 1999,  1998 and 1997:  dividend yield of 0%, expected life of
10 years, and risk-free interest rates of 5.23%, 5.51% and 6.57%, respectively.

Transactions  under the plans for the years ended  December 31,  1999,  1998 and
1997 are summarized as follows:

                                                                       Weighted
                                                                        Average
                                                        Number of      Exercise
                                                         Shares          Price
                                                         ------          -----
Options oustanding January 1, 1997 ................     142,904        $  5.22
     Granted ......................................      14,500           8.00
     Exercised ....................................     (14,270)          3.65
     Canceled .....................................      (1,022)          7.61
     Stock dividend ...............................      23,540
                                                        -------
Options oustanding December 31, 1997 ..............     165,652           4.84
     Granted ......................................      78,600           9.19
     Exercised ....................................     (21,512)          4.16
     Canceled .....................................      (2,742)          7.30
                                                        -------
Options oustanding December 31, 1998 ..............     219,998           6.43
     Granted ......................................      37,500          20.00
     Exercised ....................................     (28,752)          4.89
     Canceled .....................................      (6,240)          8.60
     Stock dividend ...............................      24,048              -
                                                        -------
Options oustanding December 31, 1999 ..............     246,554           7.99
                                                        =======

Options exercisable at year end
     1999                                               158,025        $  5.88
     1998                                               155,980           4.74
     1997                                               147,176           4.08

<TABLE>
<CAPTION>
                                                                          Outstanding Options              Exercisable Options
                                                                          -------------------              -------------------
                                                                        Number             Exercise       Number           Exercise
                                                                       of Shares            Price        of Shares          Price
                                                                       ---------            -----        ---------          -----
Options at December 31, 1999 expire
<S>                                                                     <C>             <C>               <C>             <C>
    May 9, 2000 ............................................            11,061          $    3.25         11,061          $    3.25
    December 31, 2000 ......................................            15,381               3.25         15,381               3.25
    January 22, 2001 .......................................             2,775               3.53          2,775               3.53
    March 1, 2001 ..........................................             7,689               3.53          7,689               3.53
    April 27, 2002 .........................................            13,700               4.20         13,700               4.20
    October 1, 2002 ........................................             9,227               4.39          9,227               4.39
    January 25, 2003 .......................................             5,055               4.55          5,055               4.55
    January 18, 2004 .......................................            26,360               4.61         26,360               4.61
    June 1, 2004 ...........................................             1,398               4.83          1,398               4.83
    December 21, 2005 ......................................            11,026               5.64         11,026               5.64
    July 25, 2006 ..........................................            12,650               5.93         10,120               5.93
    January 16, 2007 .......................................            11,784               6.32          6,921               6.32
    February 19, 2008 ......................................            25,608               8.30         10,032               8.30
    June 1, 2008 ...........................................             3,960               8.41              -               8.41
    June 18, 2008 ..........................................            48,400               8.41         19,360               8.41
    January 21, 2009 .......................................             5,280              18.18            880              18.18
    February 26, 2009 ......................................            29,700              18.18          5,940              18.18
    April 30, 2009 .........................................             5,500              18.18          1,100              18.18
</TABLE>

                                       45
<PAGE>

Included  in the  246,554  outstanding  options as of December  31,  1999,  were
options to purchase  88,529  shares at an average price of $11.80 per share that
had not become  exercisable.  The number of shares,  average  exercise price and
years in which these options become exercisable are as follows: 29,291 shares at
$10.72 in 2000, 26,766 shares at $11.17 in 2001, 24,332 shares at $11.65 in 2002
and 8,140  shares at $18.18 in 2003.  Of the  747,523  authorized  shares of the
Company's  common stock  originally  reserved for issuance  upon the exercise of
options  under the two plans,  350,355 had not been  awarded as of December  31,
1999.

NOTE I - OTHER EXPENSES

Other expenses are summarized below:

<TABLE>
<CAPTION>
                                                                                               Years Ended December 31,
                                                                                               ------------------------
                                                                                     1999                1998                 1997
                                                                                     ----                ----                 ----

<S>                                                                             <C>                  <C>                  <C>
Salaries and employee benefits ......................................           $1,378,965           $1,138,752           $1,008,265
Net occupancy expense ...............................................              129,225              115,789              100,605
Furniture and equipment expense .....................................              218,800              194,429              166,612
Other expense
     Stationery, printing and postage ...............................              164,970              153,901              139,888
     Telephone ......................................................               44,321               22,828               20,578
     Advertising and promotion ......................................               63,759               41,134               27,654
     Professional services ..........................................               43,578               54,456               77,038
     Insurance ......................................................               14,021               19,052               26,651
     FDIC insurance assessment ......................................               13,977               11,565                7,760
     Directors' fees ................................................               57,500               34,200               31,200
     Other real estate costs and expenses, net ......................                4,998                  864               32,334
     Data processing expenses .......................................               77,807               92,841               52,748
     Other ..........................................................              329,733              275,448              217,169
                                                                                ----------           ----------           ----------
         Total ......................................................           $2,541,654           $2,155,259           $1,908,502
                                                                                ==========           ==========           ==========
</TABLE>


NOTE J - INCOME TAXES

Income tax expense consisted of:

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                            ------------------------
                                                                                1999                  1998                   1997
                                                                                ----                  ----                   ----
Current
<S>                                                                           <C>                   <C>                   <C>
     Federal ....................................................             $ 815,151             $ 849,500             $ 786,786
     State ......................................................                72,239                76,670                69,646
                                                                              ---------             ---------             ---------
               Total current ....................................               887,390               926,170               856,432
                                                                              ---------             ---------             ---------
Deferred
     Federal ....................................................                19,914                 1,800               (45,555)
     State ......................................................                 1,737                   157                (3,974)
                                                                              ---------             ---------             ---------
               Total deferred ...................................                21,651                 1,957               (49,529)
                                                                              ---------             ---------             ---------
               Total income tax expense .........................             $ 909,041             $ 928,127             $ 806,903
                                                                              =========             =========             =========
</TABLE>

                                       46
<PAGE>

The  principal  components  of the  deferred  portion of income  tax  expense or
(credit) were:

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                            ------------------------
                                                                                1999                  1998                  1997
                                                                                ----                  ----                  ----

<S>                                                                         <C>                    <C>                     <C>
Provision for loan losses ...................................               $  4,250               $(23,213)               $(66,460)
Accelerated depreciation ....................................                  2,040                 17,365                  10,870
Deferred net loan costs and fees ............................                  6,386                  7,805                   6,276
Other real estate ...........................................                  8,975                      -                    (215)
                                                                            --------               --------                --------
               Total ........................................               $ 21,651               $  1,957                $(49,529)
                                                                            ========               ========                ========
</TABLE>

Income before income taxes presented in the consolidated statement of income for
the years ended December 31, 1999, 1998 and 1997, included no foreign component.
A  reconciliation  between  the income tax  expense  and the amount  computed by
applying  the  federal  statutory  rate of 34% to  income  before  income  taxes
follows:

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                          ------------------------
                                                                                1999                  1998                  1997
                                                                                ----                  ----                  ----
<S>                                                                         <C>                    <C>                    <C>
Tax expense at statutory rate .................................             $ 862,015              $ 881,418              $ 752,064
State income tax, net of federal
     income tax benefit .......................................                48,824                 50,706                 43,344
Tax-exempt interest income ....................................                (4,904)                (6,538)                (5,854)
Non-deductible interest expense to
     carry tax-exempt instruments .............................                   487                    491                    480
Non-deductible corporate
     reorganization expenses ..................................                     -                      -                 15,069
Other, net ....................................................                 2,619                  2,050                  1,800
                                                                            ---------              ---------              ---------
               Total ..........................................             $ 909,041              $ 928,127              $ 806,903
                                                                            =========              =========              =========
</TABLE>

Deferred tax assets and liabilities  included in the consolidated  balance sheet
consisted of the following:

<TABLE>
<CAPTION>
                                                                                                              December 31,
                                                                                                              ------------
                                                                                                    1999                     1998
                                                                                                    ----                     ----
Deferred tax assets
<S>                                                                                             <C>                       <C>
     Allowance for loan losses .................................................                $  276,699                $  280,949
     Other real estate .........................................................                         -                     8,975
     Unrealized holding gains and losses on
       available-for-sale securities ...........................................                   912,341                     9,499
                                                                                                ----------                ----------
               Gross deferred tax assets .......................................                 1,189,040                   299,423
     Valuation allowance .......................................................                         -                         -
                                                                                                ----------                ----------
               Total ...........................................................                 1,189,040                   299,423
                                                                                                ----------                ----------
Deferred tax liabilities
     Accelerated depreciation ..................................................                    92,294                    90,254
     Deferred net loan costs ...................................................                    19,158                    12,772
                                                                                                ----------                ----------
               Gross deferred tax liabilities ..................................                   111,452                   103,026
                                                                                                ----------                ----------
Net deferred income tax assets .................................................                $1,077,588                $  196,397
                                                                                                ==========                ==========
</TABLE>

                                       47
<PAGE>

The portion of the change in net  deferred  tax assets or  liabilities  which is
related to unrealized holding gains and losses on available-for-sale  securities
is charged or credited directly to other  comprehensive  income.  The balance of
the change in net  deferred  tax assets is  charged  or  credited  to income tax
expense. In 1999, 1998 and 1997, $902,842 was credited,  $237 was credited,  and
$34,841  was  charged  to other  comprehensive  income,  respectively.  In 1999,
$21,651 was charged to income tax expense; in 1998, $1,957 was charged to income
tax expense; and, in 1997, $49,529 was credited to income tax expense.

Management  believes that the Company will fully realize the deferred tax assets
as of December 31, 1999 and 1998 based on refundable income taxes available from
carryback years, as well as estimates of future taxable income.


NOTE K - RETIREMENT PLAN

 In 1996,  the Company  established  the  Community  First Bank 401(k) Plan (the
"401(k)  Plan") for the  exclusive  benefit of all eligible  employees and their
beneficiaries.  Employees are eligible to participate in the 401(k) Plan with no
minimum age requirement  after completing twelve months of service in which they
are credited with at least 501 hours of service.  Employees are allowed to defer
and contribute up to 15% of their salary each year. The Company matches $.50 for
each dollar deferred up to 10% of total salary.  The Board of Directors can also
elect to make  discretionary  contributions.  Employees are fully vested in both
the matching and any  discretionary  contributions  after five years of service.
The employer  contributions to the plan for 1999, 1998 and 1997 totaled $26,952,
$30,044 and $29,550, respectively.


NOTE L - COMMITMENTS AND CONTINGENCIES

     Commitments to Extend Credit. In the normal course of business, the banking
     subsidiary is party to financial instruments with  off-balance-sheet  risk.
     These  financial  instruments  include  commitments  to extend  credit  and
     standby  letters of credit,  and have  elements of credit risk in excess of
     the amount  recognized in the balance sheet. The exposure to credit loss in
     the  event  of  nonperformance  by  the  other  parties  to  the  financial
     instruments  for commitments to extend credit and standby letters of credit
     is represented by the  contractual  notional  amount of those  instruments.
     Generally, the same credit policies used for on-balance-sheet  instruments,
     such as loans,  are used in extending loan  commitments and standby letters
     of credit.






Following are the off-balance-sheet financial instruments whose contract amounts
represent credit risk:

                                                              December 31,
                                                              ------------
                                                       1999               1998
                                                       ----               ----

Loan commitments .........................         $9,547,608         $4,880,316
Standby letters of credit ................            538,759            333,100


Loan commitments involve agreements to lend to a customer as long as there is no
violation of any condition  established in the contract.  Commitments  generally
have  fixed  expiration  dates or other  termination  clauses  and some  involve
payment of a fee. Many of the  commitments  are expected to expire without being
fully  drawn;  therefore,   the  total  amount  of  loan  commitments  does  not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if any,
upon  extension  of credit is based on  management's  credit  evaluation  of the
borrower. Collateral held varies but may include commercial and residential real
properties, accounts receivable, inventory and equipment.


                                       48
<PAGE>

Standby  letters  of  credit  are  conditional   commitments  to  guarantee  the
performance of a customer to a third party.  The credit risk involved in issuing
standby  letters  of  credit  is the  same  as  that  involved  in  making  loan
commitments to customers.

The estimated fair values of  off-balance-sheet  financial  instruments  such as
loan  commitments  and standby  letters of credit are generally  based upon fees
charged to enter into  similar  agreements,  taking into  account the  remaining
terms  of the  agreements  and the  counterparties'  creditworthiness.  The vast
majority  of the  banking  subsidiary's  loan  commitments  do not  involve  the
charging of a fee,  and fees  associated  with  outstanding  standby  letters of
credit  are not  material.  Therefore,  as of  December  31 1999 and  1998,  the
estimated  fair  values  of these  off-balance-sheet  financial  instruments  is
nominal.  For loan  commitments  and standby  letters of credit,  the  committed
interest rates are either variable or approximate current interest rates offered
for similar  commitments.  Management is not aware of any significant  change in
the credit risk associated with these commitments.

Borrowing  Commitments.  At December 31, 1999, the banking subsidiary had unused
short-term  lines of credit to purchase up to  $2,500,000  of federal funds from
unrelated  correspondent  financial  institutions.  The correspondent  lines are
generally  available on a one to seven day basis for general corporate  purposes
of the Bank.  The lenders have reserved the right to withdraw the lines at their
option.  The Bank also has an unused  line of  credit  agreement  with the FHLB.
Under  the  terms of the FHLB  agreement,  the  Bank  may  borrow  approximately
$21,706,750 for its general  corporate  purposes.  Borrowings under the line may
bear interest at either a variable or fixed rate  established  by the FHLB.  The
line, if utilized,  would be secured by FHLB capital stock with a carrying value
of $382,000,  and a blanket lien on all qualifying 1-4 family  residential first
lien  mortgage  loans  held by the Bank.  The  carrying  value of such  loans at
December 31, 1999 was approximately $28,432,517.

Litigation.  The Company and its  subsidiary  were not involved as defendants in
any  litigation at December 31, 1999.  Management is not aware of any pending or
threatened litigation,  or unasserted claims or assessments that are expected to
result in losses,  if any, that would be material to the consolidated  financial
statements.

Accounting  Estimates.  In preparing  financial  statements in  conformity  with
generally  accepted  accounting  principles,  management  is  required  to  make
estimates  and  assumptions  that affect the  reported  amounts of revenues  and
expenses during the reporting period.  Actual results could differ significantly
from those estimates.  Material  estimates that are particularly  susceptible to
significant change in the near-term relate to the determination of the allowance
for loan losses.  In connection with the determination of the allowance for loan
losses, management has identified specific loans as well as adopting a policy of
providing amounts for loan valuation  purposes which are not identified with any
specific loans and are derived from actual loss experience  ratios,  loan types,
loan volume, economic conditions and industry standards.

Management  believes  that the  allowance  for loan  losses is  adequate.  While
management  uses  available  information  to recognize  losses on loans,  future
additions  to the  allowance  may be  necessary  based on  changes  in  economic
conditions.  In  addition,  regulatory  agencies,  as an integral  part of their
examination process,  periodically review the banking subsidiary's allowance for
loan  losses.  Such  agencies  may require the  recognition  of additions to the
allowance based on their judgments  about  information  available to them at the
time of their examination.


                                       49
<PAGE>

NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

Following  is summary  information  on the  estimated  fair  value of  financial
instruments,  cross  referenced  to the location in the  consolidated  financial
statements and notes where more detailed information can be obtained:

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                           ------------
                                                                         1999                                  1998
                                                                         ----                                  ----
                                                            Carrying            Estimated             Carrying           Estimated
                                                             Amount             Fair Value             Amount           Fair Value
                                                           of Assets            of Assets            of Assets           of Assets
                                                         (Liabilities)        (Liabilities)        (Liabilities)       (Liabilities)
                                                         -------------        -------------        -------------       -------------

<S>                                                    <C>                  <C>                  <C>                  <C>
Cash and due from banks (Note A) ...............       $   4,554,811        $   4,554,811        $   3,319,892        $   3,319,892
Federal funds sold (Note A) ....................          12,410,000           12,410,000           14,150,000           14,150,000
Securities (Note D) ............................          54,178,048           54,178,048           38,284,136           38,284,136
Other investments (Note A) .....................             382,000              382,000              345,400              345,400
Loans (Note E) .................................          75,214,993           75,110,051           66,938,381           67,342,792
Accrued interest receivable (Note A) ...........           1,192,396            1,192,396              829,201              829,201
Deposits (Note G) ..............................        (138,618,246)        (138,610,622)        (112,496,172)        (112,546,966)
Accrued interest payable (Note A) ..............          (1,179,891)          (1,179,891)            (965,653)            (965,653)
Loan commitments (Note L) ......................                               (9,547,608)                               (4,880,316)
Standby letters of credit (Note L) .............                                 (538,759)                                 (333,100)
</TABLE>


NOTE N - COMMUNITY FIRST BANCORPORATION (PARENT COMPANY ONLY)

<TABLE>
<CAPTION>
                                                                                                           December 31,
                                                                                                           ------------
                                                                                                 1999                      1998
                                                                                                 ----                      ----
Condensed Balance Sheet
Assets
<S>                                                                                            <C>                       <C>
    Cash .......................................................................               $   405,642               $   282,464
    Investment in banking subsidiary ...........................................                13,327,985                13,303,767
    Other assets ...............................................................                     5,130                    19,047
                                                                                               -----------               -----------
       Total assets ............................................................               $13,738,757               $13,605,278
                                                                                               ===========               ===========
Liabilities
    Other liabilities ..........................................................               $     2,467               $     2,318
Shareholders' equity ...........................................................                13,736,290                13,602,960
                                                                                               -----------               -----------
       Total liabilities and shareholders' equity ..............................               $13,738,757               $13,605,278
                                                                                               ===========               ===========
</TABLE>




                                       50
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                            ------------------------
                                                                                 1999                 1998                 1997
                                                                                 ----                 ----                 ----
Condensed Statement of Income
  Income
<S>                                                                           <C>                  <C>                  <C>
    Dividends received from banking subsidiary ......................         $         -          $         -          $   250,000
    Interest income .................................................              11,760                  793                    -
                                                                              -----------          -----------          -----------
       Total income .................................................              11,760                  793              250,000
                                                                              -----------          -----------          -----------
  Expenses
    Interest expense ................................................                   -                    -                  649
    Other expenses ..................................................              26,848               56,815               50,642
                                                                              -----------          -----------          -----------
       Total expenses ...............................................              26,848               56,815               51,291
                                                                              -----------          -----------          -----------
  Income (loss) before income taxes and equity in
    undistributed earnings of banking subsidiary ....................             (15,088)             (56,022)             198,709
  Income tax expense (credit) .......................................              (5,130)             (19,047)              (2,370)
  Equity in undistributed earnings
    of banking subsidiary ...........................................           1,636,256            1,701,253            1,203,971
                                                                              -----------          -----------          -----------
  Net income ........................................................         $ 1,626,298          $ 1,664,278          $ 1,405,050
                                                                              ===========          ===========          ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                                                 Years Ended December 31,
                                                                                                 ------------------------
                                                                                       1999              1998               1997
                                                                                       ----              ----               ----
Condensed Statement of Cash Flows
     Operating activities
<S>                                                                               <C>                <C>                <C>
         Net income .......................................................       $ 1,626,298        $ 1,664,278        $ 1,405,050
            Adjustments to reconcile net income to net
                cash provided by operating activities
                    Equity in undistributed earnings
                      of banking subsidiary ...............................        (1,636,256)        (1,701,253)        (1,203,971)
                    (Increase) decrease in other assets ...................            13,917            (16,677)            (2,370)
                    Increase in other liabilities .........................               149              1,026              1,292
                                                                                  -----------        -----------        -----------
                      Net cash provided (used) by
                         operating activities .............................             4,108            (52,626)           200,001
                                                                                  -----------        -----------        -----------
     Financing activities
         Exercise of employee stock options, net of issuance
            costs of $15,953 in 1999 ......................................           124,724             89,385             50,027
         Payment of cash in lieu of fractional
            shares for stock dividend .....................................            (5,654)                 -             (4,323)
                                                                                  -----------        -----------        -----------
                      Net cash provided by financing activities ...........           119,070             89,385             45,704
                                                                                  -----------        -----------        -----------
     Increase in cash and cash equivalents ................................           123,178             36,759            245,705
     Cash and cash equivalents, beginning .................................           282,464            245,705                  -
                                                                                  -----------        -----------        -----------
     Cash and cash equivalents, ending ....................................       $   405,642        $   282,464        $   245,705
                                                                                  ===========        ===========        ===========

</TABLE>


                                       51