EXHIBIT 13
                 PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 2000

Financial Summary*

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                                    ------------------------
                                                               2000            1999           1998           1997             1996
                                                               ----            ----           ----           ----             ----
                                                                         (Dollars in thousands, except per share data)
Financial Condition
<S>                                                         <C>             <C>             <C>             <C>             <C>
     Securities ....................................        $ 57,862        $ 54,178        $ 38,284        $ 25,510        $ 26,525
     Allowance for loan losses .....................           1,000             943             955             890             705
     Net loans .....................................          96,562          75,215          66,938          64,948          53,953
     Premises and equipment - net ..................           3,411           3,289           2,871           1,675           1,782
     Total assets ..................................         181,066         153,583         127,127         104,968          98,673
     Noninterest bearing deposits ..................          21,224          16,909          14,798          16,501          10,352
     Interest bearing deposits .....................         143,158         121,709          97,698          75,790          77,108
     Total deposits ................................         164,382         138,618         112,496          92,291          87,460
     Total liabilities .............................         166,171         139,847         113,524          93,118          88,338
     Total shareholders' equity ....................          14,895          13,736          13,603          11,850          10,335

Results of Operations
     Interest income ...............................        $ 12,034        $ 10,402        $  8,904        $  7,578        $  6,928
     Interest expense ..............................           7,014           5,687           4,518           3,664           3,695
                                                            --------        --------        --------        --------        --------
     Net interest income ...........................           5,020           4,715           4,386           3,914           3,233
     Provision for loan losses .....................             305             300             213             315             223
                                                            --------        --------        --------        --------        --------
     Net interest income after provision ...........           4,715           4,415           4,173           3,599           3,010
     Other income ..................................             865             662             574             522             342
     Other expenses ................................           2,962           2,542           2,155           1,909           1,559
                                                            --------        --------        --------        --------        --------
     Income before income taxes ....................           2,618           2,535           2,592           2,212           1,793
     Income tax expense ............................             939             909             928             807             641
                                                            --------        --------        --------        --------        --------
     Net income ....................................        $  1,679        $  1,626        $  1,664        $  1,405        $  1,152
                                                            ========        ========        ========        ========        ========

Per Share Data**
     Net income ....................................        $   0.83        $   0.78        $   0.81        $   0.70        $   0.57
     Net income, assuming dilution .................            0.78            0.73            0.76            0.67            0.55
     Period end book value .........................            7.36            6.53            6.56            5.79            5.10
</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
   year ended December 31, 1996 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 5% stock
   dividend effective December 15, 2000, 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 a 5% stock dividend effective May 1,
   1996.



                                       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.

         On April 20, 2000, the Company repurchased and cancelled 110,000 shares
of its  common  stock  for a price of  $17.27  per  share,  totaling  $1,900,000
(115,500  shares at $16.45 per share, if adjusted to reflect a 5% stock dividend
effective  December 15, 2000).  These shares,  comprising  5.5% of the Company's
then  outstanding  common  stock,  were acquired  from one  shareholder  who had
expressed to management a desire to sell his shares.  The acquisition  price was
negotiated between the shareholder and the Company's management and was approved
by the Board of Directors.

         During 2000,  management was aware of a few other transactions in which
the  Company's  common  stock  traded in a price range from $16.45 to $20.00 per
share (per  share  prices  have been  adjusted  to  reflect a 5% stock  dividend
effective December 15, 2000). 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 28, 2001, there were approximately 795 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 2001.

         The Board of Directors  declared a 5% stock dividend effective December
15, 2000, a 10% stock  dividend  effective  December 15, 1999, and a two-for-one
stock split effective July 31, 1998.


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 5% stock dividend effective
December 15,  2000,  a 10% stock  dividend  effective  December 15, 1999,  and a
two-for-one stock split effective July 31, 1998.


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 with two offices into
Anderson  County,  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

2000 Compared with 1999

         For the year ended December 31, 2000,  the Company  recorded net income
of $1,679,000,  an increase of $53,000,  or 3.3%,  from net income of $1,626,000
for 1999.  Net income per share for 2000 was $.83  compared  with $.78 for 1999.
Per share net income,  assuming dilution for unexercised stock options, was $.78
for 2000  compared  with $.73 for 1999.  Return on average  assets was 1.02% for
2000  compared  with  1.09% for 1999.  Return on  average  shareholders'  equity
increased to 12.70% for 2000 from 11.86% for 1999.

         Net income  increased  slightly in 2000 primarily as a result of higher
net  interest  income.   The  $305,000  increase  in  net  interest  income  was
attributable to higher volumes of interest earning assets in 2000,  particularly
loans  and   available-for-sale   securities.   These   increases   are  further
attributable to the Company's increased ability to attract deposits at favorable
rates due to its expansion activities into Anderson County, South Carolina.  See
"Net Interest  Income" for further  discussion of the Company's  interest income
and expense.

         Partially  offsetting  the positive  effects of increased  net interest
income were increases in other operating expenses largely related to the banking
subsidiary's expansion activities. In 2000, the banking subsidiary completed its
second full year of operations in its de novo City of Anderson office. On August
28, 2000, the Company opened for business a fourth office,  de novo, in the Town
of Williamston.  Expenses  incurred to staff and operate these offices and other
expenses  incurred  for  increased  volumes of business  throughout  the banking
subsidiary  were  responsible  for an increase of $420,000 in other  expenses in
2000. The Company expects that, as it continues to conduct marketing  activities
in the Anderson  area,  loan growth and its  associated  income and other income
sources will increasingly offset the higher overhead expenses.

         Comprehensive  income for 2000, 1999 and 1998 was  $2,941,000,  $14,000
and  $1,664,000,  respectively.  Accounting  principles  generally  require that
recognized revenue,  expenses, gains and losses be included in net income. Other
elements of comprehensive  income for the Company are correlated directly to the
effects that  changing  market rates of interest  have on the fair values of the
Company's holdings of  available-for-sale  securities.  The resulting changes in
unrealized  holding  gains  and  losses on such  securities  are  reported  as a
separate component of shareholders'  equity. Those changes in fair value, net of
income tax effects, combined with net income comprise comprehensive income.

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 $.78 compared  with $.81 for 1998.  Per
share net income,  assuming dilution for unexercised stock options, was $.73 for
1999  compared with $.76 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 office  expansion into Anderson
County, South Carolina. Increases in expenses related to this expansion included
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 office.



                                       15
<PAGE>

Net Interest Income

         Net interest income,  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.  For analysis purposes, interest income from tax-exempt investments
has  been  adjusted  to an  amount  that  would  have to be  earned  on  taxable
investments  to produce  the same  after-tax  yields.  This  adjusted  amount is
referred to as fully taxable equivalent (FTE) interest income.

         FTE net interest income was  $5,028,000,  $4,717,000 and $4,386,000 for
2000, 1999 and 1998,  respectively.  FTE interest income for 2000 was $1,638,000
or 15.7%  more than in 1999.  Similarly,  interest  expense  for 2000  increased
$1,327,000 or 23.3% over the prior year amount. The $311,000 increase in FTE net
interest  income for 2000  resulted  primarily  from higher  volumes of interest
earning assets.  Growth in loans was especially strong as average loans for 2000
were  $14,318,000  or 19.9% more than the 1999 amount.  In addition,  investment
securities increased  significantly,  averaging $8,189,000 or 16.4% more in 2000
than in 1999.  Funding  sources  for these  assets were  provided by  increasing
deposit liabilities and decreasing  investments in overnight federal funds sold.
Average  interest  bearing  deposits  increased by $12,700,000 or 10.8% over the
1999 amount and average non-interest bearing deposits increased by $2,847,000 or
18.1%. Average federal funds sold decreased by $7,621,000 or 37.8% from the 1999
amount.

         On an overall basis, rising interest rates had an adverse effect on the
Company  during 2000.  Rates paid for funds  increased more than rates earned on
earning  assets.  Accordingly,  the interest rate spread  (earning  assets yield
minus interest bearing  liabilities  rate) decreased by 19 basis points to 2.30%
for 2000.  Furthermore,  the net yield on earning  assets (net  interest  income
divided by average earning assets) decreased by 11 basis points to 3.20%.

         During  2000,  market  rates of  interest  increased  significantly  in
response to actions  taken by the Federal  Reserve  Board to implement  monetary
policy.  The Federal Reserve  perceived that inflation,  historically high stock
valuations  and other  factors  provided  significant  potential  threats to the
nation's economic stability. The Company responded to the actions of the Federal
Reserve by varying  the rates it  charged on  variable  rate loans as allowed by
contract and by investing in somewhat  longer-term,  higher-yielding  investment
securities while maintaining a conservative level of liquidity. In addition, the
Company  increased the rates of interest it paid on certain new deposit accounts
originated in 2000,  particularly on certificates of deposit in the new Anderson
and Williamston markets. These actions were taken to meet competitors' offerings
and to increase the Company's ability to acquire funds in these market areas. It
is expected that such actions may continue in selected markets from time-to-time
as the Company may determine necessary and desirable.

         The  $331,000  growth  in FTE 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  $26,453,000,  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 $1,500,000 to $10,404,000
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 average amounts of the Company's  assets and liabilities and the
effective  yields and rates on the categories of average interest earning assets
and interest bearing liabilities for the years ended December 31, 2000, 1999 and
1998.


                                       16
<PAGE>

                       Average Balances, Yields and Rates

<TABLE>
<CAPTION>
                                                                            Years ended December 31,
                                                                            ------------------------
                                                     2000                             1999                           1998
                                                     ----                             ----                           ----
                                      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>
Interest bearing deposits
   due from banks .................      $      9   $     1   11.11%     $     17   $     1    5.88%      $      -   $    -    0.00%
Taxable securities ................        57,841     3,556    6.15%       49,767     3,045    6.12%        30,142    1,841    6.11%
Tax exempt securities (2) .........           197        15    7.61%           82         6    7.32%             -        -    0.00%
Federal funds sold ................        12,514       761    6.08%       20,135       995    4.94%        16,882      926    5.49%
Other investments .................           385        30    7.79%          374        27    7.22%           343       21    6.12%
Loans  (2), (3) ...................        86,262     7,679    8.90%       71,944     6,330    8.80%        68,499    6,116    8.93%
                                         --------   -------              --------   -------               --------   ------
        Total interest
          earning assets ..........       157,208    12,042    7.66%      142,319    10,404    7.31%       115,866    8,904    7.68%
Cash and due from banks ...........         3,156                           3,348                            2,791
Allowance for loan losses .........          (991)                           (955)                            (975)
Unrealized securities
   gains (losses) .................        (2,489)                         (1,075)                               6
Premises and equipment ............         3,339                           3,251                            2,116
Other assets ......................         3,737                           1,904                            1,176
                                         --------                        --------                         --------
        Total assets ..............      $163,960                        $148,792                         $120,980
                                         ========                        ========                         ========

Liabilities and
  shareholders' equity
Interest bearing deposits
     Interest bearing
        transaction accounts ......      $ 22,870   $   739    3.23%     $ 17,711   $   541    3.05%      $ 13,778   $  575    4.17%
     Savings ......................        21,006       806    3.84%       20,063       704    3.51%        20,443      779    3.81%
     Time deposits
        $100M and over ............        38,800     2,440    6.29%       37,977     2,015    5.31%        24,977    1,391    5.57%
     Other time deposits ..........        48,105     3,029    6.30%       42,330     2,427    5.73%        30,428    1,773    5.83%
                                         --------   -------              --------   -------               --------   ------
        Total interest bearing
          deposits ................       130,781     7,014    5.36%      118,081     5,687    4.82%        89,626    4,518    5.04%
Short-term borrowings .............             -         -    0.00%            3         -    0.00%             -        -    0.00%
                                         --------   -------              --------   -------               --------   ------
        Total interest bearing
          liabilities .............       130,781     7,014    5.36%      118,084     5,687    4.82%        89,626    4,518    5.04%
Noninterest bearing
   demand deposits ................        18,550                          15,703                           17,599
Other liabilities .................         1,407                           1,297                            1,018
Shareholders' equity ..............        13,222                          13,708                           12,737
                                         --------                        --------                         --------
        Total liabilities and
           shareholders' equity ...      $163,960                        $148,792                         $120,980
                                         ========                        ========                         ========
Interest rate spread (4) ..........                            2.30%                           2.49%                           2.64%
Net interest income and net yield
     on earning assets (5) ........                 $ 5,028    3.20%                $ 4,717    3.31%                 $4,386    3.79%
Interest free funds
   supporting earning assets (6) ..      $ 26,427                        $ 24,235                         $ 26,240
</TABLE>
--------------------------
(1)  Average balances are computed on a daily basis.
(2)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.
(3)  Nonaccrual  loans are included in the average  loan  balances and income on
     such loans is recognized on a cash basis.
(4)  Total  interest  earning  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.  The Company  experienced  strong growth in all  categories of such
liabilities  during the year, except savings deposits.  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
office expansion,  the Company invested  relatively larger amounts in investment
securities and federal funds sold during 1999.

         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.

                        Volume and Rate Variance Analysis

<TABLE>
<CAPTION>
                                                                2000 Compared with 1999               1999 Compared with 1998
                                                                -----------------------               -----------------------
                                                          Volume(1)     Rate(1)        Total     Volume(1)     Rate(1)       Total
                                                          ---------     -------        -----     ---------     -------       -----
                                                                                       (Dollars in thousands)
<S>                                                        <C>          <C>          <C>          <C>          <C>          <C>
Interest bearing deposits due from banks .............     $     -      $     -      $     -      $     1      $     -      $     1
Taxable securities ...................................         496           15          511        1,201            3        1,204
Tax exempt securities (2) ............................           8            1            9            6            -            6
Federal funds sold ...................................        (431)         197         (234)         167          (98)          69
Other investments ....................................           1            2            3            2            4            6
Loans (2) ............................................       1,274           75        1,349          304          (90)         214
                                                           -------      -------      -------      -------      -------      -------
             Total interest income ...................       1,348          290        1,638        1,681         (181)       1,500
                                                           -------      -------      -------      -------      -------      -------
Interest bearing deposits
     Interest bearing transaction accounts ...........         165           33          198          141         (175)         (34)
     Savings .........................................          34           68          102          (14)         (61)         (75)
     Time deposits $100M and over ....................          45          380          425          693          (69)         624
     Other time deposits .............................         350          252          602          683          (29)         654
                                                           -------      -------      -------      -------      -------      -------
             Total interest expense ..................         594          733        1,327        1,503         (334)       1,169
                                                           -------      -------      -------      -------      -------      -------
             Net interest income .....................     $   754      $  (443)     $   311      $   178      $   153      $   331
                                                           =======      =======      =======      =======      =======      =======
</TABLE>
---------------------------------------------------------------
(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)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.


         During 2001,  management expects that interest rates will move within a
narrow range,  and  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 2001 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 market areas in Oconee and Anderson counties of South Carolina.
These  strategies  involve  offering  attractive  interest  rates  for loans and
deposits and continuing the Company's commitment to provide 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

                                       18
<PAGE>

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 2000 by  $80,709,000,  resulting in a cumulative
gap ratio of .40.  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 2000 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 a negative 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.  These
liabilities  are subject to contractual  arrangements  that allow  management 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.

      Interest Sensitivity Analysis

<TABLE>
<CAPTION>
                                                                                         December 31, 2000
                                                                                         -----------------
                                                                   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>
     Interest bearing deposits due from banks ...........       $     16       $      -       $      -       $      -       $     16
     Securities available-for-sale ......................          1,992          4,246         30,858         20,766         57,862
     Other investments ..................................            386              -              -              -            386
     Federal funds sold .................................         15,580              -              -              -         15,580
     Loans (1) ..........................................         21,236         11,325         57,378          7,282         97,221
                                                                --------       --------       --------       --------       --------
            Total interest earning assets ...............         39,210         15,571       $ 88,236       $ 28,048       $171,065
                                                                --------       --------       ========       ========       ========

Interest bearing liabilities
     Interest bearing deposits
        Interest bearing transaction accounts ...........       $ 22,025       $      -       $      -       $      -       $ 22,025
        Savings .........................................         18,404              -              -              -         18,404
        Time deposits $100M and over ....................         22,735         19,288          1,239              -         43,262
        Other time deposits .............................         10,973         42,065          6,429              -         59,467
                                                                --------       --------       --------       --------       --------
            Total interest bearing liabilities ..........         74,137         61,353       $  7,668       $      -       $143,158
                                                                --------       --------       ========       ========       ========

Interest sensitivity gap ................................       $(34,927)      $(45,782)
Cumulative interest sensitivity gap .....................       $(34,927)      $(80,709)
Gap ratio ...............................................           0.53           0.25
Cumulative gap ratio ....................................           0.53           0.40
</TABLE>
(1)  Loans are net of nonaccruing loans totaling $341,000.



                                       19
<PAGE>

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  $305,000,  $300,000 and
$213,000 for the years ended December 31, 2000, 1999 and 1998, respectively. The
Company  increased  the  provisions  in 2000 and 1999 due to the  levels  of net
charge-offs and because of loan growth.  Net charge-offs for 2000 were $248,000,
a decrease of $64,000 from the amount for 1999.  Net  charge-offs  for 1999 were
$312,000,  an increase of $164,000 over the 1998 amount.  The allowance for loan
losses as a  percentage  of total loans at year end was 1.02% for 2000  compared
with 1.24% at the end of 1999.  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 2000  increased  $203,000 or 30.7% to $865,000,
compared  with an  increase  of  $88,000  or 15.3% in 1999.  Service  charges on
deposit accounts  increased  $147,000 or 34.3% to $576,000 for 2000, and $60,000
or 16.3% in 1999.  These  increases were  primarily due to increased  chargeable
account activity related to larger numbers of accounts held by customers. Credit
life insurance  commissions  increased $21,000 in 2000 following a slight $1,000
decrease  in 1999.  There were no realized  securities  gains or losses in 2000,
1999 or 1998. Other noninterest  income increased by $35,000 in 2000 and $29,000
in 1999.


Other Expenses

         Noninterest  expenses for 2000  increased  $420,000 or 16.5%,  compared
with an increase of $387,000 or 18.0% in 1999.  Salaries and  employee  benefits
increased $180,000 in 2000 and $240,000 in 1999. The 2000 increase resulted from
the hiring of additional management and other personnel to oversee the Company's
expanding  operations  and from normal  salary  adjustments.  The 1999  increase
resulted  primarily  from the  effects of the first full year of  operating  the
Bank's new office in Anderson, South Carolina.

         Net  occupancy  and  furniture  and  equipment  expenses  increased  by
$94,000,  or 27.0%,  in 2000 and $38,000,  or 12.3%,  for 1999. The increases in
2000 and 1999 were  caused  by higher  depreciation  expense  and other  related
expenses of operations (such as real estate taxes and utilities) associated with
the expansion into Anderson County.

         Other  expense for 2000  increased  $146,000,  or 17.9%,  over the 1999
amount.  Other expenses for 1999  increased  $109,000,  or 15.4%,  for 1999. The
increase was caused  primarily 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  office
network.  In addition,  a loss of $7,000 on the  disposition of foreclosed  real
estate was recognized in 2000, contributing to the $13,000 increase in net costs
and expenses of other real estate.

         Noninterest  overhead  expenses  for 2001 are  expected  to increase as
compared  with 2000  because  of the  Company's  continuing  expansion  into the
Anderson  County  market.  The Company  opened an office in  Williamston,  South
Carolina  in  temporary  quarters  in the third  quarter of 2000.  Plans for the
construction of a permanent office have not yet been completed.

         The Company  continues  to market four  parcels of land it developed in
1999 adjacent to its City of Anderson  office.  This property was subdivided and
developed from the original property acquisition for the new office. To date, no
contracts  for sales have been  entered  into.  The  property  is carried in the
consolidated  balance  sheet  at  a  cost  of  $980,000  at  the  end  of  2000.
Periodically, management evaluates this real estate for impairment in value, and
any appropriate  downward adjustments to net realizable value will be charged to
expense if necessary.



                                       20
<PAGE>

         Until the Anderson and 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.

Income Taxes

         For 2000,  federal and state income tax expenses  increased  $30,000 to
$939,000.  In 1999,  federal and state income tax expenses decreased to $909,000
from  $928,000  in 1998.  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 2000,  35.9% for 1999,  and
35.8% for 1998.  The  Company  has  minimal  amounts of 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,
                                           2000           1999           1998
                                           ----           ----           ----
                                        Available-     Available-     Available-
                                         for-Sale       for-Sale       for-Sale
                                         --------       --------       --------
                                                  (Dollars in thousands)

U. S. Treasury ......................      $ 1,992      $ 1,969        $     -
U. S. Government agencies ...........       47,510       45,675         30,919
State, county and municipal .........          204          193              -
Mortgage-backed securities ..........        8,156        6,341          7,365
                                           -------      -------        -------
   Total ............................      $57,862      $54,178        $38,284
                                           =======      =======        =======

         The following table presents  maturities and weighted average yields of
securities at December 31, 2000.



                                       21
<PAGE>

                   Securities Portfolio Maturities and Yields

                                                           December 31, 2000
                                                           -----------------
                                                       Available-
                                                        for-Sale          Yield
                                                        --------          -----
                                                         (Dollars in thousands)
U. S. Treasuries
   Within one year ..............................         $ 1,992          4.88%
                                                          -------
U. S. Government agencies
   Within one year ..............................           4,059          6.20%
   After one through five years .................          24,884          6.22%
   After five through ten years .................          17,605          6.26%
   After ten years ..............................             962          6.40%
                                                          -------
                                                           47,510          6.24%
                                                          -------
State, county and municipal (1)
   After ten years ..............................             204          7.49%
                                                          -------
Mortgage-backed securities (2)
   Within one year ..............................             187          6.00%
   After one through five years .................           5,974          5.71%
   After ten years ..............................           1,995          6.12%
                                                          -------
                                                            8,156          5.82%
                                                          -------
Total
   Within one year ..............................           6,238          5.77%
   After one through five years .................          30,858          6.12%
   After five through ten years .................          17,605          6.26%
   After ten years ..............................           3,161          6.29%
                                                          -------
       Total ....................................         $57,862          6.14%
                                                          -------
                                                          =======
----------------------------
(1)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.
(2)  Maturity  categories  based  upon  final  stated  maturity  dates.  Average
     maturity  is  substantially  shorter  because  of  the  monthly  return  of
     principal on certain securities.


         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  2000,  1999 and  1998,  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, 2000,  1999 and 1998
are shown in the following  table  according to type of loan, and the percentage
of each category to total loans:


                                       22
<PAGE>

                           Loan Portfolio Composition

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                           ------------
                                                                      2000                      1999                   1998
                                                                      ----                      ----                   ----
                                                             Amount          %         Amount          %      Amount            %
                                                             ------       ------       ------        -----    ------           -----
                                                                                      (Dollars in thousands)
Commercial, financial and industrial
<S>                                                        <C>            <C>        <C>            <C>        <C>            <C>
     Commercial and industrial ....................        $16,997         17.4%     $11,964         15.7%     $ 9,255         13.6%
     Purchasing or carrying securities ............          2,654          2.7%       1,998          2.6%         282           .4%
Real estate - construction ........................            200           .2%          28           .1%          51           .1%
Real estate - mortgage
     1-4 family residential .......................         39,163         40.1%      31,854         41.8%      30,187         44.5%
     Multifamily (5 or more) residential ..........            641           .7%         182           .2%          90           .1%
     Nonfarm, nonresidential ......................         17,897         18.4%      12,919         17.0%      11,376         16.8%
Consumer installment
     Credit card and checking credit ..............          1,097          1.1%       1,046          1.4%       1,022          1.5%
     Other ........................................         18,913         19.4%      16,167         21.2%      15,630         23.0%
                                                           -------        -----      -------        -----      -------        -----
                     Total loans ..................        $97,562        100.0%     $76,158        100.0%     $67,893        100.0%
                                                           =======        =====      =======        =====      =======        =====
</TABLE>


         A certain degree of risk taking is inherent in the extension of credit.
Management has established  loan and credit  policies and practices  designed to
control  both the types and amounts of risks  assumed,  and to minimize  losses.
Such policies and practices 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 2000, total
commercial and industrial loans increased  $5,689,000 or 40.7%. Loans mainly for
business  and  investment  purposes  that are secured by real  estate  (nonfarm,
nonresidential) increased by $4,978,000 or 38.5% during 2000. 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  position was
created to enhance expertise and supervision in this area. However,  turnover of
personnel  hired for this  position has somewhat  slowed the  implementation  of
these objectives, and no one is currently employed in this position.

         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% of
the Company's  loan  portfolio at the end of each of 2000 and 1999.  Real estate
mortgage  loans of all types  grew  $12,746,000  during  2000 and by  $3,302,000
during 1999.  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.



                                       23
<PAGE>

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,  2000,  as well as the type of
interest requirement on such loans.

<TABLE>
<CAPTION>
                                                                                               December 31, 2000
                                                                                               -----------------
                                                                           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 ...............................         $10,590         $ 7,511         $ 1,550         $19,651
Real estate - construction .........................................               -             200               -             200
Real estate - mortgage .............................................          10,685          20,408          26,608          57,701
Consumer installment ...............................................           4,642          14,114           1,254          20,010
                                                                             -------         -------         -------         -------
              Total loans ..........................................         $25,917         $42,233         $29,412         $97,562
                                                                             =======         =======         =======         =======


Predetermined rate, maturity greater than one year .................                         $39,824         $ 7,250         $47,074
                                                                                             =======         =======         =======

Variable rate or maturity within one year ..........................         $25,917         $ 2,409         $22,162         $50,488
                                                                             =======         =======         =======         =======
</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 and 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,
                                                            ------------
                                                     2000       1999       1998
                                                     ----       ----       ----
                                                       (Dollars in thousands)

Nonaccrual loans ..............................      $341       $209       $366
Accruing loans 90 days or more past due .......         9         20         10
                                                     ----       ----       ----
            Total .............................      $350       $229       $376
                                                     ====       ====       ====

Percent of total loans ........................       0.4%       0.3%       0.6%


         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 2000, 1999, and 1998.

         As of December 31, 2000,  there were no commitments to lend  additional
funds to debtors owing amounts on nonaccrual loans.


                                       24
<PAGE>

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, 2000  determined  by  management  to be  potential
problem loans was $425,000. 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, 2000.

                                                           December 31, 2000
                                                           -----------------
                                                         Amount             %
                                                         ------           -----
                                                        (Dollars in thousands)

Real estate - mortgage
     1-4 family residential ....................           $327           77.0%
     Nonfarm, nonresidential ...................             45           10.6%
Consumer installment
     Vehicles ..................................             38            8.9%
     Unsecured .................................             15            3.5%
                                                           ----          -----
                Total ..........................           $425          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, 2000.

         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 2000 did not reflect any material  change from the prior years. 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.


                                       25
<PAGE>

                         Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                        ------------------------
                                                                         2000           1999        1998        1997          1996
                                                                         ----           ----        ----        ----          ----
                                                                                           (Dollars in thousands)

<S>                                                                     <C>          <C>          <C>          <C>          <C>
Total loans outstanding at end of period ..........................     $97,562      $76,158      $67,893      $65,838      $54,658
Average amount of loans outstanding ...............................      86,262       71,944       68,499       60,707       49,952

Balance of allowance for loan losses - beginning ..................     $   943      $   955      $   890      $   705      $   575
                                                                        -------      -------      -------      -------      -------
Loans charged off
     Commercial and industrial ....................................          97          234           44           37           11
     Real estate - mortgage .......................................          40            -            9           31           29
     Consumer installment .........................................         121           99          116           72           69
                                                                        -------      -------      -------      -------      -------
           Total charge-offs ......................................         258          333          169          140          109
                                                                        -------      -------      -------      -------      -------
Recoveries of loans previously charged off
     Commercial and industrial ....................................           -           12            -            3            1
     Real estate - mortgage .......................................           -            -           15            -            5
     Consumer installment .........................................          10            9            6            7           10
                                                                        -------      -------      -------      -------      -------
           Total recoveries .......................................          10           21           21           10           16
                                                                        -------      -------      -------      -------      -------
Net charge-offs ...................................................         248          312          148          130           93
                                                                        -------      -------      -------      -------      -------
Additions to allowance charged to expense .........................         305          300          213          315          223
                                                                        -------      -------      -------      -------      -------
Balance of allowance for loan losses - ending .....................     $ 1,000      $   943      $   955      $   890      $   705
                                                                        =======      =======      =======      =======      =======

Ratios
     Net charge-offs to average loans .............................        0.29%        0.43%        0.22%        0.21%        0.19%
     Net charge-offs to loans at end of period ....................        0.25%        0.41%        0.22%        0.20%        0.17%
     Allowance for loan losses to average loans ...................        1.16%        1.31%        1.39%        1.47%        1.41%
     Allowance for loan losses to loans at end of period ..........        1.02%        1.24%        1.41%        1.35%        1.29%
     Net charge-offs to allowance for loan losses .................       24.80%       33.09%       15.50%       14.61%       13.19%
     Net charge-offs to provision for loan losses .................       81.31%      104.00%       69.48%       41.27%       41.70%
</TABLE>



                                       26
<PAGE>

Deposits

         The average amounts and percentage  composition of deposits held by the
Company for the years ended  December 31, 2000,  1999 and 1998,  are  summarized
below:

                                Average Deposits

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                                    ------------------------
                                                                  2000                         1999                     1998
                                                                  ----                         ----                     ----
                                                        Amount            %          Amount         %         Amount             %
                                                        ------          -----        ------       -----       ------           -----
                                                                                   (Dollars in thousands)

<S>                                                    <C>              <C>       <C>              <C>       <C>               <C>
Noninterest bearing demand .....................       $ 18,550         12.4%     $ 15,703         11.7%     $ 17,599          16.4%
Interest bearing transaction accounts ..........         22,870         15.3%       17,711         13.2%       13,778          12.8%
Savings ........................................         21,006         14.1%       20,063         15.0%       20,443          19.1%
Time deposits $100M and over ...................         38,800         26.0%       37,977         28.4%       24,977          23.3%
Other time deposits ............................         48,105         32.2%       42,330         31.7%       30,428          28.4%
                                                       --------        -----      --------        -----      --------         -----
             Total deposits ....................       $149,331        100.0%     $133,784        100.0%     $107,225         100.0%
                                                       ========        =====      ========        =====      ========         =====
</TABLE>


         As of December 31, 2000,  there were  $43,262,000  in time  deposits of
$100,000  or  more.  Approximately   $22,603,000  mature  within  three  months,
$11,399,000  mature over three  through six months,  $7,621,000  mature over six
through twelve months and $1,639,000  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  market 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 not to 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,
                                           ------------------------
                                       2000           1999          1998
                                       ----           ----          ----

       Return on assets ..........     1.02%          1.09%          1.38%
       Return on equity ..........    12.70%         11.86%         13.06%
       Dividend payout ratio .....     0.00%          0.00%          0.00%
       Equity to assets ratio ....     8.06%          9.21%         10.53%


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


                                       27
<PAGE>

to obtain  deposits  within the  Company's  market 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  67.4% of average
total assets during 2000  compared  with 64.4% during 1999.  Deposits of several
local  governmental  entities  comprised  approximately  22%  and  27% of  total
deposits at the end of 2000 and 1999,  respectively.  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,  2000,  the  banking
subsidiary  is  eligible  to  borrow  up to  $26,586,000  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  $34,934,000  as of
December 31, 2000. In addition,  the banking  subsidiary has available an unused
short-term  line of credit to purchase up to $4,000,000 of federal funds from an
unrelated  correspondent  institution.  The  line is  generally  available  on a
one-day basis for up to 14 days in any 30 day period,  in the sole discretion of
the lender. 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, 2000, the banking subsidiary's  undivided profits totaled $5,380,000.  Under
Federal  Reserve  Board  regulations,  the amounts of loans or advances from the
banking  subsidiary to the parent company are also restricted.  During 2000, the
parent  company  received  a  cash  dividend  of  $2,420,000  from  the  banking
subsidiary after obtaining regulatory approval.  However, $1,900,000 was used to
repurchase  and cancel shares of the Company's  common stock.  In 1999 and 1998,
the parent company received no cash dividends from its banking subsidiary.

         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 $1,159,000 and $133,000 during 2000
and 1999,  respectively.  During 2000, net income increased shareholders' equity
by $1,679,000,  and the exercise of employee stock options  provided an increase
of $124,000. 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,  increased shareholders' equity by $1,262,000 for the year
ended  December  31,  2000.  In  addition,  $6,000  was paid in lieu of  issuing
fractional shares with respect to the 5% stock dividend effected in 2000. During
2000,  the Company  repurchased  and cancelled  110,000  shares of common stock;
consequently,   shareholders'  equity  was  reduced  by  $1,900,000   Management
continues  to use  retained  earnings  to provide  adequate  capital  for future
growth.

         In 2000 and 1999, the Company's Board of Directors  declared 5% and 10%
stock  dividends,  respectively.  During 1998, the Company's  Board of Directors
declared a two-for-one  stock split.  These actions  resulted in the issuance of
95,248,  180,155 and 889,198  additional shares of the Company's common stock to
its shareholders, respectively.



                                       28
<PAGE>

         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
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, 2000 and 1999,  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, 2000                                                                          (Dollars in thousands)
<S>                                                                      <C>          <C>     <C>          <C>    <C>          <C>
      The Company
          Total Capital to risk weighted assets ...................      $16,262      15.4%   $ 8,453      8.0%   $10,567      10.0%
          Tier 1 Capital to risk weighted assets ..................      $15,262      14.4%   $ 4,227      4.0%   $ 6,340       6.0%
          Tier 1 Capital to average assets (leverage) .............      $15,262       8.9%   $ 5,170      3.0%   $ 8,616       5.0%
      Community First Bank
          Total Capital to risk weighted assets ...................      $15,214      14.4%   $ 8,453      8.0%   $10,567      10.0%
          Tier 1 Capital to risk weighted assets ..................      $14,214      13.5%   $ 4,227      4.0%   $ 6,340       6.0%
          Tier 1 Capital to average assets (leverage) .............      $14,214       8.3%   $ 5,170      3.0%   $ 8,616       5.0%

December 31, 1999
      The Company
          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%

</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, 2000 and 1999,
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, 2000.  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, 2000 and 1999,
and the  consolidated  results of their operations and their  consolidated  cash
flows for each of the three years in the period  ended  December  31,  2000,  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 9, 2001


                                       30
<PAGE>

Consolidated Balance Sheet
Community First Bancorporation

<TABLE>
<CAPTION>
                                                                                                          December 31,
                                                                                                          ------------
                                                                                                   2000                    1999
                                                                                                   ----                    ----
Assets
<S>                                                                                         <C>                       <C>
     Cash and due from banks (Note B) ..........................................            $   4,027,045             $   4,554,189
     Interest bearing deposits due from banks ..................................                   16,078                       622
     Federal funds sold ........................................................               15,580,000                12,410,000
     Securities available-for-sale (Note C) ....................................               57,861,760                54,178,048
     Other investments .........................................................                  385,700                   382,000
     Loans (Note D) ............................................................               97,562,062                76,157,943
         Allowance for loan losses .............................................               (1,000,000)                 (942,950)
                                                                                            -------------             -------------
            Loans - net ........................................................               96,562,062                75,214,993
     Premises and equipment - net (Note E) .....................................                3,411,026                 3,288,580
     Accrued interest receivable ...............................................                1,376,429                 1,192,396
     Real estate held for sale .................................................                  980,003                   975,000
     Other assets ..............................................................                  866,155                 1,387,632
                                                                                            -------------             -------------

            Total assets .......................................................            $ 181,066,258             $ 153,583,460
                                                                                            =============             =============

Liabilities
     Deposits (Note F)
         Noninterest bearing ...................................................            $  21,223,751             $  16,908,526
         Interest bearing ......................................................              143,158,706               121,709,720
                                                                                            -------------             -------------
            Total deposits .....................................................              164,382,457               138,618,246
     Accrued interest payable ..................................................                1,759,520                 1,179,891
     Other liabilities .........................................................                   29,507                    49,033
                                                                                            -------------             -------------
            Total liabilities ..................................................              166,171,484               139,847,170
                                                                                            -------------             -------------

     Commitments and contingent liabilities (Note K)

Shareholders' equity (Note G)
     Common stock - no par value; 10,000,000
         shares authorized; issued and
         outstanding - 2,022,623 for 2000 and
         2,002,699 for 1999 ....................................................               14,383,234                14,254,918
     Retained earnings .........................................................                  878,398                 1,110,371
     Accumulated other comprehensive income (loss) .............................                 (366,858)               (1,628,999)
                                                                                            -------------             -------------
            Total shareholders' equity .........................................               14,894,774                13,736,290
                                                                                            -------------             -------------

            Total liabilities and shareholders' equity .........................            $ 181,066,258             $ 153,583,460
                                                                                            =============             =============
</TABLE>












See accompanying notes to consolidated financial statements.


                                       31
<PAGE>

Consolidated Statement of Income
Community First Bancorporation

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                 2000                    1999               1998
                                                                                 ----                    ----               ----
Interest income
<S>                                                                          <C>                   <C>                   <C>
     Loans, including fees .......................................           $ 7,675,937           $ 6,330,466           $ 6,116,208
     Securities
         Taxable .................................................             3,556,111             3,044,216             1,841,050
         Tax-exempt ..............................................                 9,819                 4,119                     -
     Federal funds sold ..........................................               761,571               994,827               926,264
     Other investments ...........................................                29,773                27,349                20,797
     Interest bearing deposits due from banks ....................                   533                   918                     -
                                                                             -----------           -----------           -----------
         Total interest income ...................................            12,033,744            10,401,895             8,904,319
                                                                             -----------           -----------           -----------

Interest expense
     Time deposits $100,000 and over .............................             2,439,638             2,015,117             1,390,866
     Other deposits ..............................................             4,574,386             3,671,647             3,127,035
     Short-term borrowings .......................................                     -                   148                     -
                                                                             -----------           -----------           -----------
         Total interest expense ..................................             7,014,024             5,686,912             4,517,901
                                                                             -----------           -----------           -----------

Net interest income ..............................................             5,019,720             4,714,983             4,386,418
Provision for loan losses (Note D) ...............................               305,033               300,009               213,486
                                                                             -----------           -----------           -----------
Net interest income after provision ..............................             4,714,687             4,414,974             4,172,932
                                                                             -----------           -----------           -----------

Other income
     Service charges on deposit accounts .........................               575,822               428,733               368,777
     Credit life insurance commissions ...........................                59,436                38,042                39,189
     Other income ................................................               229,868               195,244               166,766
                                                                             -----------           -----------           -----------
         Total other income ......................................               865,126               662,019               574,732
                                                                             -----------           -----------           -----------

Other expenses (Notes H and J)
     Salaries and employee benefits ..............................             1,559,219             1,378,965             1,138,752
     Net occupancy expense .......................................               186,203               129,225               115,789
     Furniture and equipment expense .............................               255,787               218,800               194,429
     Other expense ...............................................               960,663               814,664               706,289
                                                                             -----------           -----------           -----------
         Total other expenses ....................................             2,961,872             2,541,654             2,155,259
                                                                             -----------           -----------           -----------

Income before income taxes .......................................             2,617,941             2,535,339             2,592,405
Income tax expense (Note I) ......................................               938,689               909,041               928,127
                                                                             -----------           -----------           -----------
Net income .......................................................           $ 1,679,252           $ 1,626,298           $ 1,664,278
                                                                             ===========           ===========           ===========

Per share (Note G)
     Net income ..................................................           $      0.83           $      0.78           $      0.81
     Net income, assuming dilution ...............................                  0.78                  0.73                  0.76
</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                       Retained     Other Comprehensive
                                                          Shares*         Amount         Earnings        Income (Loss)      Total
                                                          -------         ------         --------        -------------      -----

<S>                                                       <C>          <C>             <C>             <C>             <C>
Balance, January 1, 1998 ...........................      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

Comprehensive income:
    Net income .....................................              -               -       1,679,252               -       1,679,252
    Change in unrealized holding gains
      and losses on available-for-sale
      securities, net of income tax effects ........              -               -               -       1,262,141       1,262,141
                                                                                                                       ------------
         Total comprehensive income ................              -               -               -               -       2,941,393
                                                                                                                       ------------
Issuance of 5% stock dividend,
    including cash payment for
    fractional shares ..............................         95,248       1,904,961      (1,911,225)              -          (6,264)
Exercise of employee stock options .................         34,676         123,355               -               -         123,355
Repurchase and cancellation of
    common stock ...................................       (110,000)     (1,900,000)              -               -      (1,900,000)
                                                       ------------    ------------    ------------    ------------    ------------
Balance, December 31, 2000 .........................      2,022,623    $ 14,383,234    $    878,398    $   (366,858)   $ 14,894,774
                                                       ============    ============    ============    ============    ============
</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,
                                                                                              ------------------------
                                                                                     2000                1999                 1998
                                                                                     ----                ----                 ----
Operating activities
<S>                                                                            <C>                 <C>                 <C>
     Net income ........................................................       $  1,679,252        $  1,626,298        $  1,664,278
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ..................................            305,033             300,009             213,486
            Depreciation ...............................................            227,063             170,623             149,463
            Deferred income taxes ......................................             (2,208)             21,651               1,957
            Amortization of net loan fees and costs ....................             63,669              64,876              55,014
            Securities accretion and premium amortization ..............             (6,900)            (16,944)            (98,401)
            Loss (gain) on sale of other real estate ...................              7,351              (9,684)                  -
            Loss on disposal of premises and equipment .................              6,247               8,342                 439
            Increase in interest receivable ............................           (184,033)           (363,195)            (36,486)
            Increase in interest payable ...............................            579,629             214,238             193,548
            (Increase) decrease in prepaid expenses ....................            (69,028)             24,230             (27,364)
            (Decrease) increase in other accrued expenses ..............            (19,526)            (12,958)              6,250
                                                                               ------------        ------------        ------------
                Net cash provided by operating activities ..............          2,586,549           2,027,486           2,122,184
                                                                               ------------        ------------        ------------

Investing activities
     Purchases of available-for-sale securities ........................         (4,972,022)        (26,347,189)        (60,961,204)
     Maturities of available-for-sale securities .......................          3,264,229           7,955,341          48,285,332
     Purchases of other investments ....................................             (3,700)            (36,600)            (10,400)
     Net increase in loans made to customers ...........................        (21,771,906)         (8,783,558)         (2,259,098)
     Acquisitions of other real estate .................................           (103,688)                  -                   -
     Proceeds from sale of other real estate ...........................             38,307               9,684                   -
     Purchases of real estate held for sale ............................             (5,003)           (975,000)                  -
     Purchases of premises and equipment ...............................           (355,756)           (596,389)         (1,345,566)
                                                                               ------------        ------------        ------------
                Net cash used by investing activities ..................        (23,909,539)        (28,773,711)        (16,290,936)
                                                                               ------------        ------------        ------------

Financing activities
     Net increase in demand deposits, interest
         bearing transaction accounts and savings accounts .............          9,546,217           3,197,622           6,111,490
     Net increase in certificates of deposit and other
         time deposits .................................................         16,217,994          22,924,452          14,094,110
     Repurchase and cancellation of common stock .......................         (1,900,000)                  -                   -
     Payment of cash in lieu of fractional shares
         for stock dividend ............................................             (6,264)             (5,654)                  -
     Exercise of employee stock options, net
         of issuance costs of $15,953 in 1999 ..........................            123,355             124,724              89,385
                                                                               ------------        ------------        ------------
                Net cash provided by financing activities ..............         23,981,302          26,241,144          20,294,985
                                                                               ------------        ------------        ------------
Increase (decrease) in cash and cash equivalents .......................          2,658,312            (505,081)          6,126,233
Cash and cash equivalents, beginning ...................................         16,964,811          17,469,892          11,343,659
                                                                               ------------        ------------        ------------
Cash and cash equivalents, ending ......................................       $ 19,623,123        $ 16,964,811        $ 17,469,892
                                                                               ============        ============        ============
</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, Anderson and Williamston, 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 and 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
businesses within its 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.  In certain  instances,  amounts
reported  in  prior  years'   consolidated   financial   statements   have  been
reclassified to conform with the current  presentation.  Such  reclassifications
had no effect on previously reported shareholders' equity or net income.

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 loan but 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
additions to the allowance based on their judgments about information  available
to them at the time of their examination.

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


                                       35
<PAGE>

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 security 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, 2000 and 1999 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 deferred and
amortized as an adjustment of the related loan's yield. Generally, these amounts
are 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
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 probable,  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 judgments 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.


                                       36
<PAGE>

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.  Properties  acquired through  foreclosure or acceptance of a
deed in lieu of  foreclosure  were carried in other assets at values of $256,225
and $142,061 as of December 31, 2000 and 1999, respectively. Such properties are
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  foreclosed  properties  is  maintained  for  subsequent  downward  valuation
adjustments.

Real estate held for sale is carried in the  consolidated  balance  sheet at the
lower of cost or estimated net realizable  value. Such property consists of four
commercial  lots that were  subdivided  and  developed  from  land  acquired  to
construct the banking  subsidiary's  Anderson  office.  Management  periodically
evaluates  real  estate  held  for  sale for  impairment,  with any  appropriate
downward valuation adjustments being made when necessary.

Advertising.  The Company  expenses  advertising and promotion costs as they are
incurred.

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
J. 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
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 G 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 G.



                                       37
<PAGE>

Comprehensive  Income.  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. The Company
classifies and reports items of other  comprehensive  income  according to their
nature, reports total comprehensive income or loss in the consolidated statement
of changes in shareholders' equity and displays the accumulated balance of other
comprehensive  income or loss separately in the shareholders'  equity section of
the consolidated balance sheet. See Note G.


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

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                          ------------------------
                                                                               2000                  1999                  1998
                                                                               ----                  ----                  ----
<S>                                                                        <C>                   <C>                    <C>
Change in unrealized holding gains and
     losses on available-for-sale securities ...................           $ 1,969,019           $(2,514,880)           $      (661)
Income tax expense (benefit) on other
     comprehensive income (loss) ...............................               706,878              (902,842)                  (237)
                                                                           -----------           -----------            -----------
         Net-of-tax amount .....................................           $ 1,262,141           $(1,612,038)           $      (424)
                                                                           ===========           ===========            ===========
</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  2000,  1999 and 1998,  interest  paid on deposits  and other  borrowings
amounted to $6,434,395,  $5,543,362  and  $4,348,010,  respectively.  Income tax
payments of  $995,600,  $865,800 and  $958,200  were made during 2000,  1999 and
1998, respectively.  In 2000 and 1999, noncash transfers of $56,135 and $142,061
were made from loans to other  real  estate.  Noncash  transfers  from  retained
earnings to common stock in the amounts of $1,904,961 and  $3,561,672  were made
as the result of stock dividends declared in 2000 and 1999, respectively. During
2000,  1999  and  1998,  noncash  valuation   adjustments  totaling  $1,969,019,
$2,514,880,  and $661  were  made  which  increased,  decreased  and  decreased,
respectively,  the carrying amount of  available-for-sale  securities.  In 2000,
accumulated  other  comprehensive  income increased  $1,262,141 and deferred tax
assets decreased  $706,878;  in 1999,  accumulated  other  comprehensive  income
decreased  $1,612,038 and deferred tax assets increased $904,842;  and, in 1998,
accumulated  other  comprehensive  income decreased $424 and deferred tax assets
increased $237.

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.


                                       38
<PAGE>

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 of 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,  interest bearing deposits 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 - 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, 2000 and 1999, were approximately  $856,000 and
$638,000, respectively.


NOTE C- SECURITIES

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

Note D - Securities

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                            ------------
                                                       2000                                                1999
                                                       ----                                                ----
                                               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 .........   $ 1,998,249   $         -   $     6,374   $ 1,991,875   $ 1,991,048   $   -   $    22,298   $ 1,968,750
   U.S. Government
       agencies ..........    47,962,521       140,585       593,267    47,509,839    47,975,198       -     2,299,562    45,675,636
   Mortgage-backed
       securities ........     8,275,873         2,462       122,020     8,156,315     6,555,924       -       215,073     6,340,851
   State, county and
       municipal .........       197,438         6,293             -       203,731       197,218       -         4,407       192,811
                             -----------   -----------   -----------   -----------   -----------   -----   -----------   -----------
         Total ...........   $58,434,081   $   149,340   $   721,661   $57,861,760   $56,719,388   $   -   $ 2,541,340   $54,178,048
                             ===========   ===========   ===========   ===========   ===========   =====   ===========   ===========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                            ------------
                                                                            2000                                   1999
                                                                            ----                                   ----
                                                                  Amortized         Estimated          Amortized         Estimated
                                                                    Cost            Fair Value           Cost            Fair Value
                                                                    ----            ----------           ----            ----------
Available-for-sale
<S>                                                             <C>                <C>                <C>                <C>
     Due within one year ...............................        $ 6,016,574        $ 6,050,863        $         -        $         -
     Due after one through five years ..................         24,955,440         24,883,703         22,009,558         21,444,378
     Due after five through ten years ..................         17,988,756         17,605,249         26,956,688         25,311,883
     Due after ten years ...............................          1,197,438          1,165,630          1,197,218          1,080,936
                                                                -----------        -----------        -----------        -----------
                                                                 50,158,208         49,705,445         50,163,464         47,837,197
     Mortgage-backed securities ........................          8,275,873          8,156,315          6,555,924          6,340,851
                                                                -----------        -----------        -----------        -----------
         Total .........................................        $58,434,081        $57,861,760        $56,719,388        $54,178,048
                                                                ===========        ===========        ===========        ===========
</TABLE>



                                       39
<PAGE>


The fair value of U.S. Treasury and U.S.  Government agencies debt securities is
estimated based on published closing quotations. The fair value of state, county
and municipal  securities is generally not available from published  quotations;
consequently,  their fair values estimates are based on matrix pricing or quoted
market prices of similar  instruments  adjusted for credit  quality  differences
between the quoted  instruments and the securities being valued.  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 2000, 1999 and 1998.

At December 31, 2000,  securities  with an amortized cost of $46,405,237  and an
estimated fair value of $45,859,900  were pledged as collateral to secure public
deposits. The amortized cost and estimated fair value of such pledged securities
were $39,186,397 and $37,129,288, respectively, at the end of 1999.

NOTE D - LOANS

Loans consisted of the following:

Loan Composition

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                          ------------
                                                                          2000                                   1999
                                                                          ----                                   ----
                                                              Carrying          Estimated             Carrying          Estimated
                                                                Amount           Fair Value             Amount          Fair Value
                                                                ------           ----------             ------          ----------

<S>                                                          <C>                 <C>                <C>                 <C>
Commercial, financial and industrial .................       $ 19,650,877        $ 19,310,780       $ 13,962,418        $ 13,735,734
Real estate- construction ............................            200,000             197,122             27,808              27,475
Real estate - mortgage ...............................         57,701,320          56,802,251         44,954,510          44,356,723
Consumer installment .................................         20,009,865          19,687,112         17,213,207          16,990,119
                                                             ------------        ------------       ------------        ------------
     Total ...........................................         97,562,062          95,997,265         76,157,943          75,110,051
Allowance for loan losses ............................         (1,000,000)                  -           (942,950)                  -
                                                             ------------        ------------       ------------        ------------
     Loans - net .....................................       $ 96,562,062        $ 95,997,265       $ 75,214,993        $ 75,110,051
                                                             ============        ============       ============        ============
</TABLE>

Net  deferred  loan costs of $35,839  and  $53,365  have been  allocated  to the
various loan categories as of December 31, 2000 and 1999, 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:

<TABLE>
<CAPTION>
                                                                                                               December 31,
                                                                                                               ------------
                                                                                                         2000                1999
                                                                                                         ----                ----
Investment in impaired loans
<S>                                                                                                   <C>                   <C>
     Nonaccrual ........................................................................              $341,023              $208,792
     Accruing 90 days and over past due ................................................                 8,900                19,890
                                                                                                      --------              --------
         Total .........................................................................              $349,923              $228,682
                                                                                                      ========              ========

Average total investment in impaired loans during the year .............................              $249,000              $254,000
Allowance for loan losses on impaired loans ............................................               140,815                38,224
</TABLE>



                                       40
<PAGE>


The average total  investment in impaired loans during 1998 was $184,800.  There
were no outstanding commitments at December 31, 2000 to lend additional funds to
debtors owing amounts on impaired loans.

As of December 31, 2000 and 1999,  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,
                                                                                       ------------------------
                                                                          2000                      1999                   1998
                                                                          ----                      ----                   ----

<S>                                                                   <C>                      <C>                      <C>
Balance at January 1 ....................................             $   942,950              $   954,788              $   890,125
Provision charged to expense ............................                 305,033                  300,009                  213,486
Recoveries ..............................................                  10,304                   21,465                   20,915
Charge-offs .............................................                (258,287)                (333,312)                (169,738)
                                                                      -----------              -----------              -----------
Balance at December 31 ..................................             $ 1,000,000              $   942,950              $   954,788
                                                                      ===========              ===========              ===========
</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  $6,620,237 and
$4,268,490 at December 31, 2000 and 1999, respectively.  During 2000, $5,782,321
of new loans were made and repayments totaled $3,430,574.


NOTE E - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                             December 31,
                                                             ------------
                                                         2000             1999
                                                         ----             ----

Land .............................................     $1,022,387     $  695,670
Buildings and land improvements ..................      2,051,151      1,946,097
Furniture and equipment ..........................      1,308,800      1,101,865
Construction in progress .........................              -        315,078
                                                       ----------     ----------
              Total ..............................      4,382,338      4,058,710
Accumulated depreciation .........................        971,312        770,130
                                                       ----------     ----------
              Premises and equipment - net .......     $3,411,026     $3,288,580
                                                       ==========     ==========


Depreciation  expense for the years ended  December 31, 2000,  1999 and 1998 was
$227,063, $170,623 and $149,463, respectively.



                                       41
<PAGE>

NOTE F - DEPOSITS

A summary of deposits follows:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                          ------------
                                                                          2000                                   1999
                                                                          ----                                   ----
                                                               Carrying           Estimated           Carrying             Estimated
                                                                Amount           Fair Value            Amount             Fair Value
                                                                ------           ----------            ------             ----------

<S>                                                         <C>                 <C>                 <C>                 <C>
Noninterest bearing demand .........................        $ 21,223,750        $ 21,223,750        $ 16,908,526        $ 16,908,526
Interest bearing transaction accounts ..............          22,025,094          22,025,094          17,894,447          17,894,447
Savings ............................................          18,404,432          18,404,432          17,304,086          17,304,086
Time deposits $100,000 and over ....................          43,262,035          43,267,134          40,934,288          40,936,034
Other time deposits ................................          59,467,146          59,499,828          45,576,899          45,567,529
                                                            ------------        ------------        ------------        ------------
     Total deposits ................................        $164,382,457        $164,420,238        $138,618,246        $138,610,622
                                                            ============        ============        ============        ============
</TABLE>


As of  December  31,  2000  and  1999,  local  governmental  deposits  comprised
approximately 22% and 27% of total deposits, respectively.

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, 2000 and 1999.  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, 2000 and 1999,  for  deposits of similar  remaining
maturities.

At December 31, 2000, the scheduled maturities of time deposits are as follows:

               Year                                           Amount
               ----                                           ------

               2001                                      $ 94,601,638
               2002                                         8,065,223
               2003                                            50,660
               2004                                             5,276
               2005 and thereafter                              6,384


NOTE G - 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, 2000, the
banking subsidiary's undivided profits totaled $5,380,116. 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, 2000 and 1999,  the Company  issued
stock dividends of 5% and 10%, respectively.  All per share information has been
retroactively adjusted to give effect to the stock split and stock dividends.

Accumulated Other Comprehensive Income (Loss). As of December 31, 2000 and 1999,
accumulated  other  comprehensive  income or loss  included  as a  reduction  of
shareholders' equity in the accompanying consolidated balance sheet consisted of
accumulated   changes   in  the   unrealized   holding   gains  and   losses  on
available-for-sale  securities, net of income tax effects, amounting to $366,858
and $1,628,999, respectively.

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

                                       42
<PAGE>
<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                       2000               1999              1998
                                                                                       ----               ----              ----
<S>                                                                                 <C>                <C>                <C>
Net income per share, basic
   Numerator - net income .................................................         $1,679,252         $1,626,298         $1,664,278
                                                                                    ==========         ==========         ==========
   Denominator
     Weighted average common shares issued and outstanding ................          2,033,404          2,078,035          2,053,007
                                                                                    ==========         ==========         ==========
               Net income per share, basic ................................         $      .83         $      .78         $      .81
                                                                                    ==========         ==========         ==========
Net income per share, assuming dilution
   Numerator - net income .................................................         $1,679,252         $1,626,298         $1,664,278
                                                                                    ==========         ==========         ==========
   Denominator
     Weighted average common shares issued and outstanding ................          2,033,404          2,078,035          2,053,007
     Effect of dilutive stock options .....................................            122,154            159,046            133,284
                                                                                    ----------         ----------         ----------
               Total shares ...............................................          2,155,558          2,237,081          2,186,291
                                                                                    ==========         ==========         ==========
               Net income per share, assuming dilution ....................         $      .78         $      .73         $      .76
                                                                                    ==========         ==========         ==========
</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,
2000 and 1999,  that the Company and its  subsidiary  bank  exceeded all capital
adequacy minimum requirements.

As of December 31, 2000, 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.

<TABLE>
<CAPTION>
                                                                                         Minimum for             Minimum to be
                                                                  Actual              Capital Adequacy          Well Capitalized
                                                                  ------              ----------------          ----------------
                                                            Amount      Ratio        Amount        Ratio        Amount      Ratio
                                                            ------      -----        ------        -----        ------      -----
December 31, 2000                                                                  (Dollars in thousands)
<S>                                                        <C>          <C>          <C>            <C>       <C>           <C>
      The Company
          Total Capital to risk weighted assets ........   $16,262      15.4%        $8,453         8.0%      $10,567       10.0%
          Tier 1 Capital to risk weighted assets .......   $15,262      14.4%        $4,227         4.0%       $6,340        6.0%
          Tier 1 Capital to average assets (leverage) ..   $15,262       8.9%        $5,170         3.0%       $8,616        5.0%
      Community First Bank
          Total Capital to risk weighted assets ........   $15,214      14.4%        $8,453         8.0%      $10,567       10.0%
          Tier 1 Capital to risk weighted assets .......   $14,214      13.5%        $4,227         4.0%       $6,340        6.0%
          Tier 1 Capital to average assets (leverage) ..   $14,214       8.3%        $5,170         3.0%       $8,616        5.0%

December 31, 1999
      The Company
          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%
</TABLE>

                                       43
<PAGE>

Stock  Options.  In 1998,  the  Company's  shareholders  approved the 1998 Stock
Option Plan under which an aggregate of 462,000 shares  (adjusted for subsequent
stock  dividends  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  322,899 shares
(adjusted  for stock  dividends  and  splits)  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 2000,  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 2000, 1999 and 1998 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.

The Company adopted only the disclosure  provisions 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 net income per share would have been reduced
to the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                         ------------------------
                                                                              2000                   1999                  1998
                                                                              ----                   ----                  ----
Net income
<S>                                                                    <C>                     <C>                     <C>
      As reported ..........................................           $   1,679,252           $   1,626,298           $   1,664,278
      Pro forma ............................................               1,480,137               1,479,156               1,576,137
Net income per share
      As reported ..........................................           $        0.83           $        0.78           $        0.81
      Pro forma ............................................                    0.73                    0.71                    0.77
Net income per share, assuming dilution
      As reported ..........................................           $        0.78           $        0.73           $        0.76
      Pro forma ............................................                    0.69                    0.66                    0.72
</TABLE>

The fair values of options granted during 2000, 1999 and 1998 were $9.73, $10.94
and $5.39 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 2000,  1999 and 1998:  dividend yield of 0%, expected life of
10 years, and risk-free interest rates of 5.85%, 5.23% and 5.51%, respectively.

Transactions  under the plans for the years ended  December 31,  2000,  1999 and
1998 are summarized as follows:

                                       44
<PAGE>
<TABLE>
<CAPTION>
                                                                       Weighted
                                                                        Average
                                                      Number of        Exercise
                                                        Shares           Price
                                                        ------           -----
<S>                                                    <C>            <C>
Options outstanding January 1, 1998 ...............    165,652        $    4.84
     Granted ......................................     78,600             9.19
     Exercised ....................................    (21,512)            4.16
     Canceled .....................................     (2,742)            7.30
                                                       -------
Options outstanding 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 outstanding December 31, 1999 .............    246,554             7.99
     Granted ......................................     42,150            17.85
     Exercised ....................................    (34,676)            3.63
     Canceled .....................................     (6,224)           16.90
     Stock dividend ...............................     13,228                -
                                                       -------
Options outstanding December 31, 2000 .............    261,032             9.57
                                                       =======

Options exercisable at year end
     2000                                              167,523        $    7.34
     1999                                              158,025             5.88
     1998                                              155,980             4.74
</TABLE>
<TABLE>
<CAPTION>
                                                                            Outstanding Options              Exercisable Options
                                                                            -------------------              -------------------
                                                                         Number           Exercise         Number          Exercise
                                                                        of Shares          Price         of Shares          Price
                                                                        ---------          -----         ---------          -----
Options at December 31, 2000 expire
<S>                                                                      <C>            <C>                <C>            <C>
    January 22, 2001 .......................................             2,914          $    3.36          2,914          $    3.36
    March 1, 2001 ..........................................             8,074               3.36          8,074               3.36
    April 27, 2002 .........................................             9,137               4.03          9,137               4.03
    October 1, 2002 ........................................             9,689               4.18          9,689               4.18
    January 25, 2003 .......................................             5,170               4.34          5,170               4.34
    January 18, 2004 .......................................            27,679               4.39         27,679               4.39
    June 1, 2004 ...........................................             1,469               4.59          1,469               4.59
    December 21, 2005 ......................................            10,533               5.38         10,533               5.38
    July 25, 2006 ..........................................            13,283               5.65         13,283               5.65
    January 16, 2007 .......................................            11,475               6.02          9,083               6.02
    February 19, 2008 ......................................            25,642               7.90         15,206               7.90
    June 1, 2008 ...........................................             4,158               8.01          1,386               8.01
    June 18, 2008 ..........................................            50,820               8.01         30,492               8.01
    January 21, 2009 .......................................             5,545              17.32          2,081              17.32
    February 26, 2009 ......................................            31,185              17.32         12,474              17.32
    April 18, 2010 .........................................            16,119              16.96          3,225              16.96
    August 17, 2010 ........................................             1,470              16.45            294              16.45
    August 25, 2010 ........................................             3,150              16.45            630              16.45
    October 16, 2010 .......................................            23,520              17.14          4,704              17.14
</TABLE>

Included  in the  261,032  outstanding  options as of December  31,  2000,  were
options to purchase  93,509  shares at an average price of $13.56 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: 35,408 shares at
$12.05 in 2001, 33,008 shares at $12.49 in 2002, 16,242 shares at $17.15 in 2003
and 8,851  shares at $17.00 in 2004.  Of the  784,899  authorized  shares of the
Company's  common stock  originally  reserved for issuance  upon the exercise of
options  under the two plans,  323,615 had not been  awarded as of December  31,
2000.
                                       45
<PAGE>

NOTE H - OTHER EXPENSES

Other expenses are summarized below:
<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                    2000                 1999                 1998
                                                                                    ----                 ----                 ----
<S>                                                                             <C>                  <C>                  <C>
Salaries and employee benefits ......................................           $1,559,219           $1,378,965           $1,138,752
Net occupancy expense ...............................................              186,203              129,225              115,789
Furniture and equipment expense .....................................              255,787              218,800              194,429
Other expense
     Stationery, printing and postage ...............................              186,292              164,970              153,901
     Telephone ......................................................               51,515               44,321               22,828
     Advertising and promotion ......................................               68,628               63,759               41,134
     Professional services ..........................................               75,947               43,578               54,456
     Insurance ......................................................               10,260               14,021               19,052
     FDIC insurance assessment ......................................               28,850               13,977               11,565
     Directors' fees ................................................               64,700               57,500               34,200
     Other real estate costs and expenses, net ......................               17,513                4,998                  864
     Data processing expenses .......................................               68,569               77,807               92,841
     Other ..........................................................              388,389              329,733              275,448
                                                                                ----------           ----------           ----------
         Total ......................................................           $2,961,872           $2,541,654           $2,155,259
                                                                                ==========           ==========           ==========
</TABLE>
NOTE I - INCOME TAXES

Income tax expense consisted of:
                                                    Years Ended December 31,
                                                    ------------------------
                                                 2000         1999        1998
                                                 ----         ----        ----
Current
     Federal ..............................   $ 864,872    $ 815,151   $ 849,500
     State ................................      76,025       72,239      76,670
                                              ---------    ---------   ---------
               Total current ..............     940,897      887,390     926,170
                                              ---------    ---------   ---------
Deferred
     Federal ..............................      (2,030)      19,914       1,800
     State ................................        (178)       1,737         157
                                              ---------    ---------   ---------
               Total deferred .............      (2,208)      21,651       1,957
                                              ---------    ---------   ---------
               Total income tax expense ...   $ 938,689    $ 909,041   $ 928,127
                                              =========    =========   =========

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

                                                  Years Ended December 31,
                                                  ------------------------
                                               2000          1999         1998
                                               ----          ----         ----
Provision for loan losses .............     $  1,280      $  4,250     $(23,213)
Accelerated depreciation ..............        2,805         2,040       17,365
Deferred net loan costs and fees ......       (6,293)        6,386        7,805
Other real estate .....................            -         8,975            -
                                            --------      --------     --------
               Total ..................     $ (2,208)     $ 21,651     $  1,957
                                            ========      ========     ========

Income before income taxes presented in the consolidated statement of income for
the years ended December 31, 2000, 1999 and 1998, 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:
                                                   Years Ended December 31,
                                                   ------------------------
                                               2000         1999          1998
                                               ----         ----          ----
Tax expense at statutory rate ...........   $ 890,100    $ 862,015    $ 881,418
State income tax, net of federal
     income tax benefit .................      50,059       48,824       50,706
Tax-exempt interest income ..............      (5,111)      (4,904)      (6,538)
Non-deductible interest expense to
     carry tax-exempt instruments .......         608          487          491
Other, net ..............................       3,033        2,619        2,050
                                            ---------    ---------    ---------
               Total ....................   $ 938,689    $ 909,041    $ 928,127
                                            =========    =========    =========

                                       46
<PAGE>


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

                                                              December 31,
                                                              ------------
                                                           2000           1999
                                                           ----           ----
Deferred tax assets
     Allowance for loan losses ...................     $  275,419     $  276,699
     Unrealized holding gains and losses on
       available-for-sale securities .............        205,463        912,341
                                                       ----------     ----------
               Gross deferred tax assets .........        480,882      1,189,040
     Valuation allowance .........................              -              -
                                                       ----------     ----------
               Total .............................        480,882      1,189,040
                                                       ----------     ----------

Deferred tax liabilities
     Accelerated depreciation ....................         95,098         92,294
     Deferred net loan costs .....................         12,866         19,158
                                                       ----------     ----------
               Gross deferred tax liabilities ....        107,964        111,452
                                                       ----------     ----------
Net deferred income tax assets ...................     $  372,918     $1,077,588
                                                       ==========     ==========

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 or loss.  The
balance of the change in net  deferred  tax  assets is  charged or  credited  to
income tax expense. In 2000, 1999 and 1998,  $706,878 was charged,  $902,842 was
credited,  and  $237  was  credited  to  other  comprehensive  income  or  loss,
respectively.  In 2000,  $2,208 was  credited  to income tax  expense;  in 1999,
$21,651 was charged to income tax expense;  and, in 1998,  $1,957 was charged to
income tax expense.

Management  believes that the Company will fully realize the deferred tax assets
as of December 31, 2000 and 1999 based on refundable income taxes available from
carryback years, as well as estimates of future taxable income.

NOTE J - RETIREMENT PLAN

The Company  sponsors 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 2000, 1999 and 1998 totaled $28,585,
$26,952 and $30,044, respectively.

NOTE K - 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,
                                                            ------------
                                                     2000                 1999
                                                     ----                 ----

Loan commitments .......................         $11,157,499         $ 9,547,608
Standby letters of credit ..............           1,336,100             538,759

                                       47
<PAGE>

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.

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,  2000 and 1999,  the
estimated  fair  values of these  off-balance-sheet  financial  instruments  are
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, 2000, the banking subsidiary had unused
short-term lines of credit to purchase up to $4,000,000 of federal funds from an
unrelated  correspondent  bank. The line is available on a one-day basis for the
general  corporate  purposes  of the Bank.  Advances  under the line are further
restricted in availability  to 14 days in any 30 day period,  except in the sole
discretion  of the other  institution.  The Bank also has unused lines of credit
available from the FHLB.  Under the terms of the FHLB  agreements,  the Bank may
borrow approximately $26,586,000 for its general corporate purposes.  Borrowings
under the lines may bear interest at either a variable or fixed rate established
by the FHLB. The lines, if utilized, would be secured by FHLB capital stock with
a  carrying  value of  $385,700,  and  blanket  liens on  qualifying  1-4 family
residential  first lien mortgage loans held by the Bank sufficient to secure the
advances.   The  carrying   value  of  such  loans  at  December  31,  2000  was
approximately $34,934,000.

Litigation.  The Company and its  subsidiary  were not involved as defendants in
any  litigation at December 31, 2000.  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.

Williamston Office. In August of 2000, a temporary office facility was placed on
the land acquired for the banking subsidiary's Williamston office and opened for
commercial  operations.  As of December 31, 2000,  management  has not completed
plans nor entered into any contracts for construction of a permanent office.

NOTE L - 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,
                                                                                            ------------
                                                                            2000                                   1999
                                                                            ----                                   ----
                                                                 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) .......................     $   4,027,045      $   4,027,045      $   4,554,189      $   4,554,189
Interest bearing deposits due from banks (Note A) ......            16,078             16,078                622                622
Federal funds sold (Note A) ............................        15,580,000         15,580,000         12,410,000         12,410,000
Securities (Note C) ....................................        57,861,760         57,861,760         54,178,048         54,178,048
Other investments (Note A) .............................           385,700            385,700            382,000            382,000
Loans (Note D) .........................................        96,562,062         95,997,265         75,214,993         75,110,051
Accrued interest receivable (Note A) ...................         1,376,429          1,376,429          1,192,396          1,192,396
Deposits (Note F) ......................................      (164,382,457)      (164,420,238)      (138,618,246)      (138,610,622)
Accrued interest payable (Note A) ......................        (1,759,520)        (1,759,520)        (1,179,891)        (1,179,891)
Loan commitments (Note K) ..............................                 -        (11,157,499)                 -         (9,547,608)
Standby letters of credit (Note K) .....................                 -         (1,336,100)                 -           (538,759)
</TABLE>

                                       48
<PAGE>

NOTE M - COMMUNITY FIRST BANCORPORATION (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
                                                                                                            December 31,
                                                                                                            ------------
                                                                                                     2000                   1999
                                                                                                     ----                   ----
Condensed Balance Sheet
<S>                                                                                              <C>                     <C>
     Assets
         Cash ......................................................................             $ 1,049,609             $   405,642
         Investment in banking subsidiary ..........................................              13,846,701              13,327,985
         Other assets ..............................................................                       -                   5,130
                                                                                                 -----------             -----------
            Total assets ...........................................................             $14,896,310             $13,738,757
                                                                                                 ===========             ===========
     Liabilities
         Other liabilities .........................................................             $     1,536             $     2,467
     Shareholders' equity ..........................................................              14,894,774              13,736,290
                                                                                                 -----------             -----------
            Total liabilities and shareholders' equity .............................             $14,896,310             $13,738,757
                                                                                                 ===========             ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                  2000                 1999                 1998
                                                                                  ----                 ----                 ----
Condensed Statement of Income
<S>                                                                           <C>                  <C>                  <C>
     Income
         Dividends received from banking subsidiary .................         $ 2,420,000          $         -          $         -
         Interest income ............................................              32,933               11,760                  793
         Other income ...............................................               1,483                    -                    -
                                                                              -----------          -----------          -----------
            Total income ............................................           2,454,416               11,760                  793
                                                                              -----------          -----------          -----------
     Expenses
         Other expenses .............................................              30,360               26,848               56,815
                                                                              -----------          -----------          -----------
            Total expenses ..........................................              30,360               26,848               56,815
                                                                              -----------          -----------          -----------
     Income (loss) before income taxes and equity in
         undistributed earnings of banking subsidiary ...............           2,424,056              (15,088)             (56,022)
     Income tax expense (credit) ....................................               1,379               (5,130)             (19,047)
     Equity in undistributed earnings
         of banking subsidiary ......................................            (743,425)           1,636,256            1,701,253
                                                                              -----------          -----------          -----------
     Net income .....................................................         $ 1,679,252          $ 1,626,298          $ 1,664,278
                                                                              ===========          ===========          ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                                               Years Ended December 31,
                                                                                               ------------------------
                                                                                      2000               1999               1998
                                                                                      ----               ----               ----
Condensed Statement of Cash Flows
     Operating activities
<S>                                                                                 <C>               <C>               <C>
         Net income ..........................................................      $ 1,679,252       $ 1,626,298       $ 1,664,278
            Adjustments to reconcile net income to net
                cash provided by operating activities
                    Equity in undistributed earnings
                      of banking subsidiary ..................................          743,425        (1,636,256)       (1,701,253)
                    Decrease (increase) in other assets ......................            5,130            13,917           (16,677)
                    (Decrease) increase in other liabilities .................             (931)              149             1,026
                                                                                    -----------       -----------       -----------
                      Net cash provided (used) by
                         operating activities ................................        2,426,876             4,108           (52,626)
                                                                                    -----------       -----------       -----------
     Financing activities
         Repurchase and cancellation of common stock .........................       (1,900,000)                -                 -
         Exercise of employee stock options, net of issuance
            costs of $15,953 in 1999 .........................................          123,355           124,724            89,385
         Payment of cash in lieu of fractional
            shares for stock dividend ........................................           (6,264)           (5,654)                -
                                                                                    -----------       -----------       -----------
                      Net cash (used) provided by financing activities .......       (1,782,909)          119,070            89,385
                                                                                    -----------       -----------       -----------
     Increase in cash and cash equivalents ...................................          643,967           123,178            36,759
     Cash and cash equivalents, beginning ....................................          405,642           282,464           245,705
                                                                                    -----------       -----------       -----------
     Cash and cash equivalents, ending .......................................      $ 1,049,609       $   405,642       $   282,464
                                                                                    ===========       ===========       ===========
</TABLE>
                                       49