SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1997     Commission File Number _________

                         COMMUNITY FIRST BANCORPORATION
              (Exact Name of Small Business Issuer in its Charter)

         South Carolina                                   58-2322486
(State or Other Jurisdiction of             (IRS Employer Identification Number)
Incorporation or Organization)

            3685 Blue Ridge Boulevard, Walhalla, South Carolina 29691
                (Address of Principal Executive Office, Zip Code)

         Issuer's Telephone Number, Including Area Code: (864) 638-2105

Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                (Title of Class)

Securities Registered Pursuant to Section 12(g) of the Act:

                           Common Stock (no par value)
                                (Title of Class)

         Check  whether the issuer (1) has filed all the reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
preceding 12 months (or shorter  period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [_]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for the most recent fiscal year.  $ 8,099,848

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates on March 1, 1998, was  approximately  $8,985,114.  As of
March 1, 1998,  there were 888,009 shares of the  Registrant's  Common Stock, no
par value,  outstanding.  For purposes of the foregoing  calculation  only,  all
directors and executive officers of the Registrant have been deemed affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

     (1)  Portions of the Annual Report to the  Stockholders  for the year ended
          December 31, 1997 - Parts I and II

     (2)  Portions  of the  Registrant's  Proxy  Statement  for the 1998  Annual
          Meeting of Shareholders - Part III

          Transitional Small Business  Disclosure Format.
          Yes __   No X

<PAGE>



                          10-KSB CROSS REFERENCE INDEX

         Part I                                                             Page
Item 1   Description of Business ........................................      1
Item 2   Description of Property ........................................      9
Item 3   Legal Proceedings ..............................................     10
Item 4   Submission of Matters to a Vote of Security Holders ............   None
                            Part II
Item 5   Market for Common Equity and Related Stockholder Matters .......     11
Item 6   Management's Discussion and Analysis or Plan of Operation ......     11
Item 7   Financial Statements ...........................................     11
Item 8   Changes In and Disagreements with Accountants ..................
           on Accounting and Financial Disclosure .......................   None
                                            Part III
Item 9   Directors and Executive Officers, Promoters and Control
         Persons; Compliance With Section 16(a) of the Exchange Act .....      *
Item 10  Executive Compensation .........................................      *
Item 11  Security Ownership of Certain Beneficial Owners and Management .      *
Item 12  Certain Relationships and Related Transactions .................      *
                            Part IV
Item 13  Exhibits and Reports on  Form 8-K

     * Incorporated  by reference to the  Registrant's  Proxy  Statement for the
     1998 Annual Meeting of Shareholders

<PAGE>

                                     PART I

         This Annual Report on Form 10-KSB contains  forward-looking  statements
as  defined  by  the  Private   Securities   Litigation   Reform  Act  of  1995.
Forward-looking  statements  should be read with the  cautionary  statements and
important  factors  included in this Form  10-KSB.  (See Item 6. -  Management's
Discussion and Analysis of Financial  Condition and Results of Operations,  Safe
Harbor  for  Forward-Looking  Statements.)  Forward-looking  statements  include
statements concerning plans,  objectives,  goals,  strategies,  future events or
performance and underlying assumptions and other statements which are other than
statements  of  historical  facts.  Such  forward-  looking  statements  may  be
identified,   without  limitation,  by  the  use  of  the  words  "anticipates,"
"estimates,"  "expects," "intends," "plans," "predicts," "projects," and similar
expressions.  The Company's expectations,  beliefs and projections are expressed
in good  faith and are  believed  by the  Company  to have a  reasonable  basis,
including without limitation,  management's  examination of historical operating
trends,  data  contained in the Company's  records and other data available from
third  parties,  but there can be no assurance that  management's  expectations,
beliefs or projections will result or be achieved or accomplished.

Item 1.  Description of Business

                              FORM OF ORGANIZATION

         Community  First  Bancorporation  (the  "Company") is a South  Carolina
corporation  and a bank holding company  incorporated  May 23, 1997. The Company
commenced  operations on October 16, 1997, upon effectiveness of the acquisition
of Community First Bank (the "Bank") as a wholly owned subsidiary. The principal
business of the Company is ownership and operation of the Bank.

                               BUSINESS OF BANKING

General

         The Bank is a South  Carolina  state  bank  which was  incorporated  in
December,  1988, and commenced  operations as a commercial bank in March,  1990.
The Bank operates from its offices in Walhalla and Seneca,  South Carolina.  The
main  office is  located  at 3685  Blue  Ridge  Boulevard,  in  Walhalla,  South
Carolina, and the Seneca office is located at 1600 Sandifer Boulevard in Seneca,
South Carolina.

Services and Products Offered

         The Bank  offers a full  array of  commercial  bank  services.  Deposit
services include business and personal checking accounts, NOW accounts,  savings
accounts,  money market  accounts,  various term  certificates  of deposit,  IRA
accounts, and other deposit services.  Most of the Bank's deposits are attracted
from individuals and small  businesses.  The Bank does not offer trust services,
and does not accept brokered deposits.

         The Bank  offers  secured  and  unsecured,  short-to-intermediate  term
loans,  with  floating  and fixed  interest  rates for  commercial  and consumer
purposes.  Consumer loans include generally car loans,  home equity  improvement
loans  (secured  by first and second  mortgages),  personal  expenditure  loans,
education  loans,  and  overdraft  lines of  credit.  Commercial  loans  include
generally short term unsecured loans,  short and  intermediate  term real estate
mortgage  loans,  loans  secured by listed  stocks,  loans  secured by equipment
inventory,  and accounts  receivable.  Management believes that the credit staff
possesses knowledge of the community and lending skills sufficient to enable the
Bank to maintain a sufficient volume of high quality loans.

         Management of the Bank  believes that the loan  portfolio is adequately
diversified.  There are no significant concentrations of loans in any particular
individuals,  industries or groups of related  individuals or industries and the
Bank has no foreign loans. The loan portfolio  consists  primarily of extensions
of credit to  businesses  and  individuals  in its service  area  within  Oconee
County,  South  Carolina.  The economy of this area is diversified  and does not
depend  on any one  industry  or group of  related  industries.  Management  has
established loan policies and practices


<PAGE>

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.

         Other services  offered by the Bank include  residential  mortgage loan
origination  services,  safe deposit boxes, night depository  service,  VISA and
MasterCard charge cards, tax deposits,  sale of U.S.  Treasury bonds,  notes and
bills and other U.S. government securities (through a correspondent),  travelers
checks,  and twenty-four hour automated  teller service.  The ATM is part of the
Cirrus network.

         As  of  December  31,  1997,  local  governmental   deposits  comprised
approximately 33% of the Bank's total deposits.  These deposits are concentrated
among a few local governmental entities and are somewhat volatile. Management of
the Bank has,  however,  taken steps that it believes are sufficient to minimize
to the greatest  extent  possible the impact of such  volatibility on the Bank's
liquidity position,  including maintaining the ratio of average loans to average
total  deposits at 67.6% in 1997,  and  concentrating  these funds in short-term
investments and securities available-for-sale.

Employees

         At December 31, 1997, the Company employed 32 people.

Competition

         The banking laws of South  Carolina  allow  statewide  branching,  and,
therefore, commercial banking in the state is highly competitive. South Carolina
law also permits bank holding  companies in other states with reciprocal laws to
acquire  depository  institutions  in  South  Carolina,  and  most of the  other
financial  institutions  in the Oconee County area are branch  offices of large,
regional banks. Further, Congress has enacted the Riegle-Neal Interstate Banking
and Branching  Efficiency  Act of 1994,  which has increased the ability of bank
holding companies and banks to operate across state lines.

         Banks generally compete with other financial  institutions  through the
banking  services and products  offered,  the pricing of services,  the level of
service provided,  the convenience and availability of services,  and the degree
of expertise  and personal  concern  with which  services are offered.  The Bank
encounters  strong  competition  from most of the financial  institutions in the
Bank's  market  area,  which  generally   encompasses   Oconee  County  and  the
immediately  surrounding area. The Bank's primary competitors in its market area
are  eleven  other  banks  and  branches  of  banks  and six  savings  and  loan
associations  and  branches.  Additionally,  in the  conduct of certain  banking
business, the Bank also competes with credit unions, consumer finance companies,
insurance   companies,   money  market   mutual  funds,   and  other   financial
institutions, some of which are not subject to the same degree of regulation and
restrictions imposed upon the Bank. Many of these competitors have substantially
greater  resources and lending limits than the Bank and offer certain  services,
such as  international  banking  and  trust  services,  that the  Bank  does not
provide. The Bank believes,  however,  that its relatively small size permits it
to offer  more  personalized  services  than many of its  competitors.  The Bank
attempts to compensate  for its lower  lending  limits by  participating  larger
loans with other institutions.



                                        2

<PAGE>

                         EFFECT OF GOVERNMENT REGULATION

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation may have a material effect on the business of the Holding Company and
the Bank.

General

         As a bank holding company registered under the Bank Holding Company Act
("BHCA"),  the Company is subject to supervision,  and to regular  inspection by
the Federal  Reserve.  The Company is also  subject to  regulation  by the State
Board. The Bank is a state bank subject to regulation by the State Board and the
FDIC.  The following  discussion  summarizes  certain  aspects of those laws and
regulations  that affect the Company and the Bank.  Proposals to change the laws
and  regulations  governing  the  banking  industry  are  frequently  raised  in
Congress, the state legislature and before the various bank regulatory agencies.
The  likelihood and timing of any changes and the impact such changes might have
on the Company and the Bank are difficult to determine.

         Under the BHCA, the Company's  activities and those of its subsidiaries
are limited to banking, managing or controlling banks, furnishing services to or
performing services for its subsidiaries or engaging in any other activity which
the Federal  Reserve  determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto.  The BHCA prohibits the
Company  from  acquiring  direct  or  indirect  control  of more  than 5% of the
outstanding  voting stock or substantially all of the assets of any bank or from
merging or  consolidating  with  another  bank  holding  company  without  prior
approval of the Federal  Reserve.  In making  such  determinations,  the Federal
Reserve is required to consider  whether the performance of such activities by a
bank holding company or its  subsidiaries  can reasonably be expected to produce
benefits to the public such as greater  convenience,  increased  competition  or
gains in  efficiency  that  outweigh  possible  adverse  effects,  such as undue
concentration  of  resources,  decreased  or unfair  competition,  conflicts  of
interest or unsound banking practices.

         Additionally,  the BHCA prohibits the Company from engaging in, or from
acquiring  ownership or control of more than 5% of the outstanding  voting stock
of any  company  engaged in, a  non-banking  business  unless  such  business is
determined by the Federal  Reserve to be so closely  related to banking as to be
properly incident thereto.

         In addition to  registration  with the Federal  Reserve under the BHCA,
all South  Carolina  bank holding  companies  must register with the State Board
under the South Carolina Bank Holding  Company Act (the "South Carolina Act"). A
registered  bank holding  company must provide the State Board with  information
with  respect  to  the  financial   condition,   operations,   management,   and
inter-company  relationships  of the holding company and its  subsidiaries.  The
State Board may also  require  such other  information  as is  necessary to keep
itself  informed  about  whether the  provisions  of South  Carolina law and the
regulations  and orders issued  thereunder by the State Board have been complied
with, and the State Board may make  examinations of any bank holding company and
its subsidiaries.

Obligations of the  Company to its Subsidiary Bank

         Under the policy of the Federal  Reserve  with  respect to bank holding
company  operations,  a bank holding company is required to serve as a source of
financial  strength  to its  subsidiary  depository  institutions  and to commit
resources to support such institutions in circumstances where it might not do so
absent such policy. Under the Federal Deposit Insurance Corporation  Improvement
Act of  1991  ("1991  Banking  Law"),  to  avoid  receivership  of  its  insured
depository  institution  subsidiary,  a bank  holding  company  is  required  to
guarantee the compliance of any insured depository  institution  subsidiary that
may become  "undercapitalized"  with the terms of any capital  restoration  plan
filed by such subsidiary  with its appropriate  federal banking agency up to the
lesser of (i) an amount  equal to 5% of the  institution's  total  assets at the
time  the  institution  became  undercapitalized,  or (ii) the  amount  which is
necessary  (or  would  have  been  necessary)  to  bring  the  institution  into
compliance with all applicable capital standards

                                        3

<PAGE>

as of the time the  institution  fails to comply with such  capital  restoration
plan.  Under the BHCA,  the Federal  Reserve has the authority to require a bank
holding company to terminate any activity or to relinquish  control of a nonbank
subsidiary  (other  than a  nonbank  subsidiary  of a  bank)  upon  the  Federal
Reserve's determination that such activity or control constitutes a serious risk
to the  financial  soundness  and  stability of any bank  subsidiary of the bank
holding company.

         In addition,  the  "cross-guarantee"  provisions of the Federal Deposit
Insurance Act, as amended  ("FDIA"),  require  insured  depository  institutions
under common  control to reimburse  the FDIC for any loss suffered or reasonably
anticipated  by either the Savings  Association  Insurance  Fund ("SAIF") or the
Bank Insurance Fund ("BIF") of the FDIC as a result of the default of a commonly
controlled insured depository  institution or for any assistance provided by the
FDIC to a  commonly  controlled  insured  depository  institution  in  danger of
default.  The FDIC may decline to enforce the  cross-guarantee  provisions if it
determines that a waiver is in the best interest of the SAIF or the BIF or both.
The  FDIC's  claim for  damages is  superior  to claims of  stockholders  of the
insured  depository  institution  or its holding  company but is  subordinate to
claims of depositors,  secured creditors and holders of subordinated debt (other
than affiliates) of the commonly controlled insured depository institutions.

         The FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  stockholder.  This
provision  would give  depositors  a preference  over  general and  subordinated
creditors  and  stockholders  in the event a receiver is appointed to distribute
the assets of the Bank.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

Capital Adequacy Guidelines for Bank Holding Companies and State Banks

         The various federal bank regulators,  including the Federal Reserve and
the FDIC,  have adopted  risk-based  capital  requirements  for  assessing  bank
holding company and bank capital adequacy. These standards define what qualifies
as capital and  establish  minimum  capital  standards in relation to assets and
off-balance sheet exposures, as adjusted for credit risks. Capital is classified
into two tiers.  For bank holding  companies,  Tier 1 or "core" capital consists
primarily of common shareholders' equity,  perpetual preferred stock (subject to
certain  limitations)  and minority  interests in the common equity  accounts of
consolidated subsidiaries, and is reduced by goodwill and certain investments in
other corporations ("Tier 1 Capital").  Tier 2 capital consists of the allowance
for  possible  loan  losses  (subject  to  certain  limitations),   and  certain
subordinated debt, "hybrid capital instruments", subordinated and perpetual debt
and  intermediate  term and other preferred stock ("Tier 2 Capital").  A minimum
ratio of total capital to risk- weighted  assets of 8.00% is required and Tier 1
capital  must be at least 50% of total  capital.  The Federal  Reserve  also has
adopted  a  minimum  leverage  ratio  of Tier 1  Capital  to total  assets  (not
risk-weighted)  of 3%. The 3% Tier 1 Capital to total assets  ratio  constitutes
the  leverage  standard  for  bank  holding  companies,  and  will  be  used  in
conjunction  with  the  risk-based  ratio in  determining  the  overall  capital
adequacy of banking organizations.

         The Federal  Reserve and the FDIC have  emphasized  that the  foregoing
standards are supervisory minimums and that an institution would be permitted to
maintain  such levels of capital only if it had a composite  rating of "1" under
the regulatory  rating systems for bank holding  companies and banks.  All other
bank holding  companies are required to maintain a leverage  ratio of 3% plus at
least 1% to 2% of additional  capital.  These rules further provide that banking
organizations  experiencing  internal  growth  or  making  acquisitions  will be
expected  to  maintain  capital  positions   substantially   above  the  minimum
supervisory  levels and comparable to peer group averages,  without  significant
reliance on  intangible  assets.  The Federal  Reserve  continues  to consider a
"tangible  Tier 1 leverage  ratio" in evaluating  proposals for expansion or new
activities. The tangible Tier 1 leverage ratio is the ratio of a banking

                                        4

<PAGE>

organization's  Tier 1 Capital less all intangibles,  to total assets,  less all
intangibles.  The Bank's  December  31,  1997 ratios are set forth in the Annual
Report to  Shareholders  for the year ended  December 31, 1997 under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Capital Resources."

         Bank  regulators  from  time to time  indicate  their  desire  to raise
capital  requirements  applicable to banking  organizations beyond their current
levels.  However,  the  managements  of the  Company  and the Bank are unable to
predict  whether and when higher capital  requirements  would be imposed and, if
so, at what levels and on what schedule.

Recent Regulations and Proposals Relating to Capital Adequacy

         The 1991 Banking Law required each federal  banking  agency,  including
the Federal Reserve,  to revise its risk-based  capital standards to ensure that
those standards take adequate  account of interest rate risk,  concentration  of
credit risk and the risks of non-traditional  activities, as well as reflect the
actual  performance  and expected risk of loss on  multi-family  mortgages.  The
Federal Reserve, the FDIC and the Office of the Comptroller of the Currency (the
"OCC") have issued a joint rule  amending the capital  standards to specify that
the banking  agencies  will  include in their  evaluations  of a bank's  capital
adequacy an assessment of the exposure to declines in the economic  value of the
bank's capital due to changes in interest rates. The agencies have also issued a
joint policy  statement that provides  bankers  guidance on sound  practices for
managing interest rate risk. The policy statement identifies the key elements of
sound  interest  rate risk  management  and  describes  prudent  principles  and
practices for each element,  emphasizing the importance of adequate oversight by
a bank's board of directors and senior  management and of a  comprehensive  risk
management process. The policy statement also outlines the critical factors that
will affect the agencies'  evaluation of a bank's interest rate risk when making
a  determination  of capital  adequacy.  In adopting the policy  statement,  the
agencies have asserted their intention to continue to place significant emphasis
on the level of a bank's interest rate risk exposure and the quality of its risk
management process when evaluating a bank's capital adequacy.

         The  Federal  Reserve,  the  FDIC,  the OCC and the  Office  of  Thrift
Supervision  (the "OTS") have also issued joint rules  amending  the  risk-based
capital  guidelines  to take into account  concentration  of credit risk and the
risk of non-traditional activities, and to incorporate a measure for exposure to
market  risk.  The rule  relating  to  concentration  of credit risk and risk of
non-traditional  activities amends each agency's risk-based capital standards by
explicitly  identifying  concentration  of credit risk and the risk arising from
activities that have not customarily  been part of the banking business but have
been  conducted as a result of  developing  technology  and changes in financial
markets, as well as an institution's ability to manage these risks, as important
factors to be taken into  account by the agency in  assessing  an  institution's
overall capital adequacy.  The rule relating to market risk amends each agency's
risk-based-capital  standards to  incorporate  measures for market risk to cover
all  positions  located  in a banking  institution's  trading  account,  foreign
exchange and  commodity  positions.  The effect of the market risk rules is that
any bank or bank holding company regulated by the Federal Reserve, the FDIC, OCC
or the OTS that has  significant  exposure to market risk must measure that risk
using its own internal  value-at-risk  model and also hold a commensurate amount
of capital.  "Market risk" means the risk of loss  resulting  from  movements in
market prices.  "Value-at-risk" is an estimate of potential changes in portfolio
value based on a  statistical  confidence  interval of changes in market  prices
that occur during some time  intervals.  The  effective  date of the market risk
rules is January 1, 1997, and compliance with the rules was mandatory January 1,
1998.

         The Company is still  assessing  the impact  these  rules and  proposed
policy  statement  would  have on the  capital  requirements  of the Bank or the
Company, but does not expect the impact to be material.

Payment of Dividends

         The  Company is a legal  entity  separate  and  distinct  from its bank
subsidiary.  Most of the  revenues of the  Company  are  expected to result from
dividends paid to the Company by the Bank. There are statutory and regulatory

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<PAGE>

requirements  applicable to the payment of dividends by subsidiary banks as well
as by the Company to its  stockholders.  It is not anticipated  that the Company
will pay cash dividends in the near future.

Certain Transactions by the Company with its Affiliates

         There are  various  legal  restrictions  on the  extent  to which  bank
holding companies and their nonbank  subsidiaries can borrow or otherwise obtain
credit from their bank  subsidiaries.  An insured bank and its  subsidiaries are
limited in engaging in "covered  transactions"  with their nonbank affiliates to
the  following  amounts:  (i) in the case of any such  affiliate,  the aggregate
amount of covered transactions of the insured bank and its subsidiaries will not
exceed 10% of the capital stock and surplus of the insured bank, and (ii) in the
case of all  affiliates,  the aggregate  amount of covered  transactions  of the
insured bank and its  subsidiaries  will not exceed 20% of the capital stock and
surplus of the bank. "Covered  transactions" are defined by statute to include a
loan or extension of credit,  as well as a purchase of  securities  issued by an
affiliate,  a purchase  of assets  (unless  otherwise  exempted  by the  Federal
Reserve), the acceptance of securities issued by the affiliate as collateral for
a loan and the  issuance  of a  guarantee,  acceptance,  or  letter of credit on
behalf of an affiliate. Further, a bank holding company and its subsidiaries are
prohibited  from engaging in certain tie-in  arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments

         Because the Bank's deposits are insured by the BIF, the Bank is subject
to insurance  assessments  imposed by the FDIC. Under current law, the insurance
assessment to be paid by BIF-insured  institutions is as specified in a schedule
issued by the FDIC that  specifies,  at  semiannual  intervals,  target  reserve
ratios designed to maintain the FDIC insurance funds' reserve ratios at 1.25% of
estimated  insured  deposits (or such higher ratio as the FDIC may  determine in
accordance with the statute).  Further,  the FDIC is authorized to impose one or
more special  assessments in any amount deemed  necessary to enable repayment of
amounts  borrowed by the FDIC from the United States  Department of the Treasury
("Treasury Department").

         The FDIC has  implemented a risk-based  assessment  schedule,  imposing
assessments  ranging from 0.00% to 0.27% of an institution's  average assessment
base.  The  actual  assessment  to be paid by each  BIF  member  is based on the
institution's  assessment  risk  classification,  which is  determined  based on
whether  the   institution  is  considered   "well   capitalized,"   "adequately
capitalized"  or   "undercapitalized,"  as  such  terms  have  been  defined  in
applicable  federal  regulations,  and whether such institution is considered by
its supervisory agency to be financially sound or to have supervisory  concerns.
The FDIC may  increase or decrease the  assessment  rates  semiannually  up to a
maximum increase or decrease of 5 basis points,  as deemed necessary to maintain
the BIF reserve ratio at $1.25 per $100 of insured deposits.

         The Deposit  Insurance  Funds Act of 1996 (the "Funds Act")  authorized
the  FICO  to  levy  assessments  on  BIF-  and  SAIF-assessable  deposits,  and
stipulated that the BIF rate must equal one-fifth the SAIF rate through year-end
1999,  or  until  the  insurance  funds  are  merged,  whichever  occurs  first.
Thereafter,  BIF and SAIF payers will be  assessed  pro rata for FICO.  The FICO
assessment  is based on  deposit  balances  and will be  adjusted  quarterly  to
reflect  changes  in the  assessment  bases  of the  respective  funds  based on
quarterly Call Report and Thrift Financial Report submissions.

Regulation of the Bank

         The Bank is also subject to  examination  by the South  Carolina  state
bank  examiners.  In  addition,  the Bank is subject to various  other state and
federal  laws and  regulations,  including  state usury laws,  laws  relating to
fiduciaries,  consumer  credit and laws relating to branch  banking.  The Bank's
loan  operations are also subject to certain  federal  consumer  credit laws and
regulations promulgated thereunder,  including,  but not limited to: the federal
Truth-In-Lending   Act,  governing  disclosures  of  credit  terms  to  consumer
borrowers; the Home Mortgage Disclosure Act, requiring financial institutions to
provide certain information concerning their mortgage lending; the Equal

                                        6

<PAGE>

Credit Opportunity Act and the Fair Housing Act,  prohibiting  discrimination on
the basis of certain  prohibited  factors in extending  credit;  the Fair Credit
Reporting  Act,  governing  the use  and  provision  of  information  to  credit
reporting agencies;  the Bank Secrecy Act, dealing with, among other things, the
reporting of certain  currency  transactions;  and the Fair Debt Collection Act,
governing  the manner in which  consumer  debts may be collected  by  collection
agencies.  The deposit  operations  of the Bank are also subject to the Truth in
Savings Act, requiring certain disclosures about rates paid on savings accounts;
the  Expedited  Funds  Availability  Act,  which  deals with  disclosure  of the
availability  of funds  deposited in accounts and the  collection  and return of
checks by banks;  the Right to Financial  Privacy Act,  which  imposes a duty to
maintain  certain   confidentiality   of  consumer  financial  records  and  the
Electronic  Funds Transfer Act and  regulations  promulgated  thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         The  Bank  is  also  subject  to  the  requirements  of  the  Community
Reinvestment  Act (the  "CRA").  The CRA imposes on  financial  institutions  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers,  acquisitions
and applications to open a branch or facility.

         Subject to certain exceptions, the FDIC assesses the CRA performance of
a bank by applying  lending,  investment  and service  tests.  The lending  test
evaluates a bank's record of helping to meet the credit needs of its  assessment
area through its lending activities by considering a bank's home mortgage, small
business,   small  farm,  community  development,   and  consumer  lending.  The
investment test evaluates a bank's record of helping to meet the credit needs of
its assessment area through  qualified  investments  that benefit its assessment
area or a broader statewide or regional area that includes the bank's assessment
area.  The service test  evaluates a bank's record of helping to meet the credit
needs  of  its  assessment   area  by  analyzing  both  the   availability   and
effectiveness of a bank's systems for delivering retail banking services and the
extent  and  innovativeness  of its  community  development  services.  The FDIC
assigns a rating to a bank of "outstanding,"  satisfactory," "needs to improve,"
or  "substantial  noncompliance"  based  on the  bank's  performance  under  the
lending,  investment and service tests.  To evaluate  compliance with the tests,
subject to certain  exceptions,  banks will be required to collect and report to
the FDIC extensive demographic and loan data.

         For  banks  with  total  assets  of less  than  $250  million  that are
affiliates  of a holding  company with banking and thrift assets of less than $1
billion,  such as the Bank,  the FDIC  evaluates the bank's record of helping to
meet the credit needs of its assessment area pursuant to the following criteria:
(1) the bank's  loan-to-deposit  ratio,  adjusted for seasonal variation and, as
appropriate,  other  lending-related  activities,  such as loan originations for
sale  to the  secondary  markets,  community  development  loans,  or  qualified
investments;   (2)  the   percentage  of  loans  and,  as   appropriate,   other
lending-related activities located in the bank's assessment area; (3) the bank's
record of lending to and,  as  appropriate,  engaging  in other  lending-related
activities for borrowers of different  income levels and businesses and farms of
different  sizes;  (4) the geographic  distribution of the bank's loans; and (5)
the  bank's  record of taking  action,  if  warranted,  in  response  to written
complaints  about  its  performance  in  helping  to meet  credit  needs  in its
assessment  area.  Small banks may also elect to be assessed under the generally
applicable  standards  of the rule,  but to do so a small bank must  collect and
report extensive data.

         A bank may also submit a strategic plan to the FDIC and be evaluated on
its performance under the plan.

Other Safety and Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized," "undercapitalized,"

                                        7

<PAGE>

"significantly undercapitalized" or "critically undercapitalized." Under uniform
regulations  defining such capital levels issued by each of the federal  banking
agencies,  a bank is considered  "well  capitalized" if it has (i) a total risk-
based capital ratio of 10% or greater, (ii) a Tier 1 risk-based capital ratio of
6% or greater,  (iii) a leverage  ratio of 5% or greater and (iv) is not subject
to any order or written directive to meet and maintain a specific capital level.
An  "adequately  capitalized"  bank  is  defined  as one  that  has  (i) a total
risk-based  capital  ratio of 8% or greater,  (ii) a Tier 1  risk-based  capital
ratio of 4% or  greater  and (iii) a leverage  ratio of 4% or greater  (or 3% or
greater in the case of a bank that has a composite  CAMEL rating of 1 and is not
experiencing  or  anticipating  significant  growth).  A bank is considered  (A)
"undercapitalized"  if it has (i) a total risk-based  capital ratio of less than
8%,  or (ii) a Tier 2  risk-based  capital  ratio of less  that 4%,  and (iii) a
leverage ratio of less than 4% (or 3% in the case of a bank that has a composite
CAMEL rating of 1 and is not experiencing or anticipating  significant  growth);
(B)  "significantly  undercapitalized"  if the bank  has (i) a total  risk-based
capital ratio of less than 6%, or (ii) a Tier 1 risk-based capital ratio of less
than  3%;  or  (iii) a  leverage  ratio of less  than  3%;  and (C)  "critically
undercapitalized"  if the bank has a ratio of  tangible  equity to total  assets
equal to or less than 2%.

         A bank that is "undercapitalized"  becomes subject to provisions of the
FDIA restricting payment of capital distributions and management fees; requiring
FDIC to monitor the condition of the bank; requiring submission by the bank of a
capital  restoration  plan;  restricting  the  growth of the  bank's  assets and
requiring  prior  approval  of  certain  expansion  proposals.  A bank  that  is
"significantly undercapitalized" is also subject to restrictions on compensation
paid  to  senior  management  of  the  bank,  and a  bank  that  is  "critically
undercapitalized"  is further  subject to  restrictions on the activities of the
bank and restrictions on payments of subordinated  debt of the bank. The purpose
of these  provisions is to require banks with less than adequate  capital to act
quickly to restore their capital and to have the FDIC move promptly to take over
banks that are unwilling or unable to take such steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain  restrictions on payment of rates), while  "undercapitalized"  banks may
not accept brokered  deposits.  The regulations  provide that the definitions of
"well capitalized", "adequately capitalized" and "undercapitalized" are the same
as the  definitions  adopted by the agencies to implement the prompt  corrective
action provisions of the 1991 Banking Law (described in the previous paragraph).

         Operational and Managerial Standards. The federal banking agencies have
issued Interagency  Guidelines  Establishing Standards for Safety and Soundness,
which set forth general  operational  and  managerial  standards in the areas of
internal  controls,   information  systems  and  internal  audit  systems,  loan
documentation,  credit  underwriting,  interest rate exposure,  asset growth and
compensation,  fees and  benefits.  The  Guidelines  also  prohibit  payment  of
excessive  compensation  as an unsafe  and  unsound  practice.  Compensation  is
defined as excessive if it is unreasonable or  disproportionate  to the services
actually  performed.  Bank holding  companies are not subject to the Guidelines.
The Guidelines  contemplate  that each federal agency will determine  compliance
with these  standards  through the  examination  process,  and if  necessary  to
correct  weaknesses,  require  an  institution  to  file a  written  safety  and
soundness compliance plan.

Interstate Banking

         In July 1994,  South Carolina  enacted  legislation  which  effectively
provides that,  after September 30, 1996,  out-of-state  bank holding  companies
(including bank holding  companies in the Southern Region,  as defined under the
statute) may acquire  other banks or bank holding  companies  having  offices in
South  Carolina upon the approval of the South Carolina State Board of Financial
Institutions and assuming  compliance with certain other  conditions,  including
that the effect of the transaction  not lessen  competition and that the laws of
the state in which the out-of-state bank holding company filing the applications
has its principal place of business permit South Carolina bank holding companies
to  acquire  banks and bank  holding  companies  in that  state.  Although  such
legislation has increased takeover activity in South Carolina, the Bank does not
believe that such  legislation  will have a material  impact on its  competitive
position. However, no assurance of such fact may be given.

                                        8

<PAGE>

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
has increased the ability of bank holding  companies and banks to operate across
state  lines.  Under  Riegle-Neal,   the  existing  restrictions  on  interstate
acquisitions  of banks by bank holding  companies have been repealed,  such that
the Company and any other bank  holding  company  located in South  Carolina can
acquire a bank located in any other state,  and a bank holding  company  located
outside South  Carolina could acquire any South  Carolina-based  bank, in either
case  subject  to  certain  deposit  percentage  and  other  restrictions.   The
legislation  also provides that,  unless an individual  state elects  beforehand
either (i) to  accelerate  the effective  date or (ii) to prohibit  out-of-state
banks from operating interstate branches within its territory,  on or after June
1, 1997, adequately  capitalized and managed bank holding companies will be able
to consolidate  their  multistate  bank operations into a single bank subsidiary
and  to  branch  interstate  through  acquisitions.  De  novo  branching  by  an
out-of-state  bank would be permitted  only if it is expressly  permitted by the
laws of the  host  state.  The  authority  of a bank to  establish  and  operate
branches  within  a state  will  continue  to be  subject  to  applicable  state
branching  laws.  South  Carolina law was amended,  effective  July 1, 1996,  to
permit such  interstate  branching but not de novo branching by an  out-of-state
bank.  The Company  believes  that this  legislation  will result in  additional
acquisitions of South Carolina financial  institutions by out-of-state financial
institutions.  However,  the Company  does not  presently  anticipate  that such
legislation will have a material impact on its operations or future plans.

Legislative Proposals

         The Treasury Department has previously issued a proposal to consolidate
the  federal  bank  regulatory  agencies.  Under  this  proposal,  most  of  the
supervisory and regulatory oversight authority of the FDIC, the OCC, the OTS and
the Federal  Reserve would be transferred to a new  independent  federal banking
agency.  The FDIC would continue to have  oversight  over the deposit  insurance
funds and the Federal  Reserve  would  continue to carry out monetary and fiscal
policy,  discount window operations and payments system functions.  The Treasury
Department  is expected to seek to  introduce a bill in Congress  providing  for
such  consolidation  in the near  future.  Three  bills  providing  for  various
"modernizations"  of the banking  system are pending in Congress as well. Due to
the  preliminary  nature of these  proposals and the potential for opposition by
industry groups and others, the Bank cannot determine at this time the effect of
any regulatory consolidation or other modernization.

         Other  proposed   legislation  which  could  significantly  affect  the
business of banking has been  introduced  or may be  introduced in Congress from
time to time.  Management  of the Bank cannot  predict the future course of such
legislative proposals or their impact on the Company and the Bank should they be
adopted.

Fiscal and Monetary Policy

         Banking is a business  which depends to a large extent on interest rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other  borrowings,  and the interest  received by a bank on
its loans and  securities  holdings,  constitutes  the major portion of a bank's
earnings.  Thus, the earnings and growth of the Company and the Bank are subject
to the influence of economic  conditions  generally,  both domestic and foreign,
and also to the  monetary  and  fiscal  policies  of the  United  States and its
agencies,  particularly the Federal Reserve.  The Federal Reserve  regulates the
supply of money through various means,  including open-market dealings in United
States government  securities,  the discount rate at which banks may borrow from
the Federal Reserve,  and the reserve  requirements on deposits.  The nature and
timing of any changes in such  policies  and their impact on the Company and the
Bank cannot be predicted.

Item 2.  Description of Property

         The Bank owns in fee simple with no major  encumbrances,  real property
at 3685 Blue Ridge  Boulevard,  Walhalla,  South Carolina,  and real property at
1600 Sandifer  Boulevard in Seneca,  South  Carolina,  where its two offices are
located.  Management of the Bank believes the Bank's facilities are suitable and
adequate for the Company's needs.


                                        9

<PAGE>

Item 3.  Legal Proceedings

         The Bank is from  time to time a party  to  various  legal  proceedings
arising in the ordinary  course of business,  but  management of the Bank 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 Bank's business and operations.

Item 4.  Submission of Matters to a Vote of Security Holders

          No matters were  submitted for a vote of the security  holders  during
the fourth quarter of 1997.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         The  information  set forth under the caption  "Market for Common Stock
and Dividends" and in Note H to the Company's  Consolidated Financial Statements
under the caption "Restrictions on Subsidiary  Dividends,  Loans or Advances" in
the Annual  Report to  Shareholders  for the year ended  December  31, 1997 (the
"1997 Annual Report") is incorporated  herein by reference.  The information set
forth in Part I,  Item 1 of this  Form  10-KSB  under  the  caption  "Effect  of
Government  Regulation -- Payment of Dividends" is also  incorporated  herein by
reference.

         In connection  with its  acquisition  of all of the Common Stock of the
Bank, in 1997, the Company  exchanged  shares of the Company's  Common Stock for
all of the  outstanding  stock  of the  Bank.  The  securities  issued  in  this
transaction  were exempt from  registration  pursuant to Section 3(a)(12) of the
Securities Act of 1933.

Item 6. Management's Discussion and Analysis or Plan of Operation

        The information set forth under the caption "Management's Discussion and
Analysis of Financial  Condition and Results of  Operations"  in the 1997 Annual
Report is incorporated herein by reference.

Item 7.  Financial Statements

         The Consolidated  Financial  Statements,  including Notes thereto,  set
forth in the 1997 Annual Report are incorporated herein by reference.

Item 8.   Changes  In and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

         There were no disagreements with or changes in accountants.

                                    PART III

Item 9.   Directors,   Executive   Officers,   Promoters  and  Control  Persons;
          Compliance with Section 16(a) of the Exchange Act

         The  information  set  forth  under  the  captions  "Management  of the
Company" and "Section 16(a) Beneficial  Ownership  Reporting  Compliance" in the
Proxy  Statement  to be used in  conjunction  with the 1998  Annual  Meeting  of
Shareholders (the "Proxy Statement"), which will be filed within 120 days of the
Corporation's fiscal year end, is incorporated herein by reference.

Item 10.  Executive Compensation

         The information set forth under the caption  "Management  Compensation"
in the Proxy Statement is incorporated herein by reference.

                                       10

<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The  information  set forth under the caption  "Security  Ownership  of
Certain  Beneficial  Owners"  and  "Management  of the  Company"  in  the  Proxy
Statement is incorporated herein by reference.

Item 12.  Certain Relationships and Related Transactions

          The information set forth under the caption "Certain Relationships and
Related   Transactions"  in  the  Proxy  Statement  is  incorporated  herein  by
reference.

Item 13.  Exhibits and Reports on Form 8-K

(a) Exhibit No.(from              Description
    item 601 of
    Regulation S-B)

         3.1                      Articles of Incorporation

         3.2                      By-laws

         4                        Specimen Stock certificate

         10.1                     Community First Bank 1989 Incentive
                                  Stock Option Plan

         10.2                     Community First Bank Incentive Stock
                                  Agreement with Frederick D.Shepherd, Jr.

         13                       Portions of the Annual Report to Shareholders
                                  for the Year Ended December 31, 1997

         21                       Subsidiaries of the registrant

         27                       Financial data schedule

(b) No Reports on Form 8-K were filed during the year ended December 31, 1997.

                                       11

<PAGE>

SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                              COMMUNITY FIRST BANK

                                   s/Frederick D. Shepherd, Jr.
Date: March  23, 1998           By:-------------------------------------------
                                   Frederick D. Shepherd, Jr.
                                   Its President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
Signature                                        Capacity                                         Date

<S>                                              <C>                                              <C>
_______________________________                  Vice Chairman and Director                       March   , 1998
                                                                                                        --
(Larry S. Bowman)

_______________________________                  Director and Secretary                           March   , 1998
                                                                                                        --
(William M. Brown)

s/Robert H. Edwards
-------------------------------                  Director                                         March 23  , 1998
(Robert H. Edwards)

_______________________________                  Director                                         March   , 1998
                                                                                                        --
(B. Molgro England, Sr.)

_______________________________                  Director                                         March   , 1998
                                                                                                        --
(Blake L. Griffith)

s/John R. Hamrick
-------------------------------                  Director                                         March 23, 1998
(John R. Hamrick)

s/R. Theo Harris, Sr.
-------------------------------                  Director                                         March 23, 1998
(R. Theo Harris, Sr.)

s/James E. McCoy
-------------------------------                  Chairman and Director                            March 23, 1998
(James E. McCoy)

s/Frederick D. Shepherd, Jr.
-------------------------------                  Director, President, Chief                       March 23, 1998
(Frederick D. Shepherd, Jr.)                     Executive Officer, Treasurer and
                                                 Principal Financial Officer

s/Gary V. Thrift
-------------------------------                  Director                                         March 23, 1998
(Gary V. Thrift)

s/James E. Turner
-------------------------------                  Director                                         March 23, 1998
(James E. Turner)

s/Charles L. Winchester
-------------------------------                  Director                                         March 23, 1998
(Charles L. Winchester)
</TABLE>

                                       12

<PAGE>




                                  EXHIBIT INDEX



         3.1               Articles of Incorporation

         3.2               By-laws

         4                 Specimen Stock certificate

         10.1              Community First Bank 1989 Incentive Stock Option Plan

         10.2              Community First Bank Incentive Stock Agreement with
                           Frederick D. Shepherd, Jr.

         13                Portions of the Annual Report to  Shareholders  for
                           the Year Ended December 31, 1997

         21                Subsidiaries of the registrant

         27                Financial data schedule




                                       13