U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                   FORM 10-Q

(Mark One)

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended June 30, 1998


[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act

     For the transition period from ______ to ______

                       Commission File Number:

                         COMMUNITY FIRST BANKING COMPANY
------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


                 GEORGIA                              58-2309605
   ---------------------------------            ---------------------
   (State or Other Jurisdiction of              (I.R.S. Employer
   Incorporation or Organization)               Identification No.)

                                110 Dixie Street
                            Carrollton, Georgia 30117
                                 (770) 834-1071

            -------------------------------------------------------
          (Address of Principal Executive Offices and Telephone Number)


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  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_

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date: As of July 31, 1998, there were
1,842,572  shares issued and 1,697,036  shares  outstanding of the  Registrant's
Common Stock, par value $.01 per share.

CONTENTS

PART I.  FINANCIAL INFORMATION
         ---------------------
Item 1.  Financial Statements

     Consolidated  Balance Sheets as of June 30, 1998  (unaudited) and December
          31, 1997

     Consolidated Statements of Earnings for the Three and Six Months Ended June
          30, 1998 and 1997 (unaudited)

     Consolidated  Statements  of  Comprehensive  Income  for the  Three and Six
          Months Ended June 30, 1998 and 1997 (unaudited)

     Consolidated  Statements  of Cash Flows for the Three and Six Months  Ended
          June 30, 1998 and 1997 (unaudited)

     Notes to Consolidated Financial Statements

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

Item 2.  Changes in Securities

Item 3.  Defaults Upon Senior Securities

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

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

SIGNATURES

<PAGE>
                         COMMUNITY FIRST BANKING COMPANY
                           Consolidated Balance Sheets
                            (In thousands of dollars)
<TABLE>
<CAPTION>

                                                                    June 30,   December 31,
                                  Assets                              1998         1997
<S>                                                                <C>         <C>
Cash and due from banks .........................................      7,973      10,766
Interest-bearing deposits in financial institutions .............      2,132       1,863
Federal funds sold and repurchase agreements ....................     16,960      17,655
                                                                      ------      ------
   Cash & cash equivalents ......................................     27,065      30,284

Securities available for sale ...................................     89,767      49,492
Securities held to maturity .....................................      5,949       6,006
Other investments ...............................................      2,328       2,269
Mortgage loans held for sale ....................................        709         789
Loans, net ......................................................    267,497     283,602
Premises & equipment net ........................................      9,120       9,095
Accrued interest receivable .....................................      3,600       3,169
Other real estate ...............................................      6,089       6,628
Other assets ....................................................      3,531       2,959
                                                                       -----       -----
   Total assets .................................................    415,655     394,293
                                                                     =======     =======


                      Liabilities and Stockholders' Equity
Deposits:
  Demand ........................................................     14,800      18,734
  Interest-bearing demand .......................................     58,141      51,198
  Savings .......................................................     38,313      38,273
  Time ..........................................................    160,032     161,431
  Time, over $100,000 ...........................................     44,212      45,895
                                                                      ------      ------
     Total deposits .............................................    315,498     315,531

Federal Home Loan Bank advances .................................     44,407       5,495
Note payable ....................................................      5,000           -
Subordinated debentures .........................................        900         900
Accrued interest payable & other liabilities ....................      4,011       3,329
                                                                       -----       -----
     Total liabilities ..........................................    369,816     325,255

Stockholders' Equity:
Convertible preferred stock, par value $.01, 96,542 shares issued      2,064           -
Common stock, $.01 par, 10,000,000 authorized, 1,883,339 issued .         19          24
Additional paid in capital ......................................     22,160      47,040
Unearned ESOP shares and stock awards ...........................     (4,788)     (3,476)
Retained earnings ...............................................     25,620      24,725
Accumulated other comprehensive income ..........................        764         725
                                                                         ---         ---
     Total stockholders' equity .................................     45,839      69,038

Total liabilities & stockholders' equity ........................    415,655     394,293
                                                                     =======     =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
                         COMMUNITY FIRST BANKING COMPANY
                       Consolidated Statement of Earnings
                                   (Unaudited)
                (In thousands of dollars - except per share data)
<TABLE>
<CAPTION>
 
                                                           Three Months Ended         Six Months Ended
                                                                 June 30,                June 30,
                                                              1998     1997              1998      1997
                                                              ----     ----              ----      ----
<S>                                                          <C>      <C>             <C>      <C> 
Interest income:
Interest and fees on loans .........................         6,485    6,492             13,090   12,733
Interest-bearing deposits and federal funds sold ...           268      267                632      419
Interest and dividends on investment securities:
   U.S. Treasury ...................................            45        7                 90       14
   U.S. Govt. agency and mortgage-backed ...........         1,315      881              2,182    1,679
   State, county & municipals ......................            29       22                 59       50
   Other ...........................................            79       41                157       88
                                                                --       --                ---       --
     Total interest income .........................         8,221    7,710             16,210   14,983

Interest Expense:
Interest on deposits:
  Demand ...........................................           356      390                710      751
   Savings .........................................           295      322                595      575
   Time ............................................         2,921    2,986              5,822    5,908
                                                             -----    -----              -----    -----
                                                             3,572    3,698              7,127    7,234
Interest on debt ...................................           678      261                942      522
                                                               ---      ---                ---      ---
          Total interest expense ...................         4,250    3,959              8,069    7,756
                                                             -----    -----              -----    -----
               Net interest income .................         3,971    3,751              8,141    7,227
                                                             -----    -----              -----    -----
Provision for loan losses ..........................           182      209                335      304
                                                               ---      ---                ---      ---
   Net interest inc. after provision for loan losses.         3,789    3,542              7,806    6,923

Noninterest income:
   Service charges on deposits .....................           773      683              1,470    1,288
   Gain on calls and sales of securities available for sale    452        -                503        -
   Insurance commissions ...........................           112      166                364      227
   Miscellaneous ...................................           321       77                510      223
                                                               ---       --                ---      ---
          Total noninterest income .................         1,658      926              2,847    1,738

Noninterest expenses:
   Salaries and employee benefits ..................         1,901    1,787              3,751    3,590
   ESOP & retirement expense .......................           825        -              1,250        -
   Occupancy and equipment .........................           539      543              1,098    1,087
   Deposit insurance premiums ......................            46       46                 92       58
   Other operating expense .........................         1,045    1,138              2,329    2,416
                                                             -----    -----              -----    -----
         Total noninterest expense .................         4,356    3,514              8,520    7,151
                                                             -----    -----              -----    -----
         Earnings before income tax expense ........         1,091      954              2,133    1,510
Income tax expense .................................           355      317                690      505

               Net earnings ........................           736      637              1,443    1,005
                                                               ===      ===              =====    =====
                                                  
Basic earnings per common share                               0.39      N/A               0.73      N/A
Diluted earnings per common share                             0.36      N/A               0.69      N/A
Dividends per common share                                    0.15      N/A               0.30      N/A
</TABLE>
<PAGE>
                         COMMUNITY FIRST BANKING COMPANY
                 Consolidated Statements of Comprehensive Income
                      (Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
                                                                              Three Months Ended   Six Months Ended
                                                                                    June 30,            June 30,
                                                                                  1998      1997     1998     1997
                                                                                ------    ------   ------   ------
<S>                                                                             <C>       <C>      <C>      <C> 
Net earnings ................................................................      736       637    1,443    1,005
Other  comprehensive  income,  net of  income  taxes:
 Unrealized  gains (losses) on securities available for sale ................   (1,300)      397      562      (50)
  Income tax on gains (losses) ..............................................     (442)      135      191      (17)
                                                                                ------    ------   ------    ------
    Unrealized gains (losses) arising during the period, net of tax .........     (858)      262      371      (33)

  Less: Reclassification adjustment for gains included in net earnings ......      452         -      503        -
   Income tax on reclassification adjustments ...............................      154         -      171        -
                                                                                   ---       ---      ---         
    Reclassification adjustment for gains included in net earnings net of tax      298         -      332        -
                                                                                   ---       ---      ---
     Other comprehensive income .............................................     (560)      262       39      (33)
                                                                                ------    ------   ------    ------
COMPREHENSIVE INCOME ........................................................      176       899    1,482      972
                                                                                ======    ======   ======    ======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>

                         COMMUNITY FIRST BANKING COMPANY
                      Consolidated Statements of Cash Flows
                      (Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                        1998       1997
                                                                                        ----       ----
<S>                                                                                 <C>        <C> 
Net earnings .....................................................................     1,443      1,005
 Adjustments to reconcile net earnings to net cash provided by (used in) operating
activities:
  Depreciation, amortization and accretion .......................................       768        645
  Provision for loan losses ......................................................       335        304
  Gain on calls and sales of securities available for sale .......................      (503)      --
  Gain on sale of other real estate...............................................      (178)
  Loss on sales of premises and equipment, net ...................................        27        (19)
  ESOP and stock award compensation expense ......................................     1,264       --
  Change in:
    Mortgage loans held for sale .................................................        80        126
    Accrued interest receivable ..................................................      (432)       (12)
    Other assets .................................................................      (571)       (73)
    Accrued interest payable .....................................................       528        165
    Accrued expenses and other liabilities .......................................       154      1,417
                                                                                     -------    -------
       Net cash provided by (used in) operating activities .......................     2,915      3,558

Cash flows from investing activities:
  Proceeds from sales and calls of securities available for sale .................    16,301      4,000
  Proceeds from maturities of securities held to maturity ........................       109        737
  Proceeds from maturities of other investments ..................................       619       --
  Purchases of other investments .................................................        60       --
  Proceeds from sales of other investments .......................................      --          220
  Purchases of securities available for sale .....................................   (56,934)   (14,742)
  Net change in loans ............................................................    15,770    (18,174)
  Proceeds from sale of real estate ..............................................       717         12
  Proceeds from sales of premises and equipment ..................................        27         28
  Purchases of premises and equipment ............................................      (737)    (1,216)
  Organization costs .............................................................      --          (32)
                                                                                     -------    -------
       Net cash used in investing activities .....................................   (24,068)   (29,167)

Cash flows from financing activities:
  Net change in demand and savings deposits ......................................     3,049     55,960
  Net change in time deposits ....................................................    (3,082)    (2,117)
  Payment of FHLB advances .......................................................    (1,088)      (338)
  Proceeds from FHLB advances ....................................................    40,000       --
  Proceeds from note payable. ....................................................     5,000       --
  Payment of subordinated debentures .............................................      --       (1,100)
  Treasury stock purchased .......................................................   (25,397)      --
  Cash dividend paid .............................................................      (548)      --
  Net proceeds from issuance of common stock .....................................      --       43,160
                                                                                     -------    -------
      Net cash provided by financing activities ..................................    17,934     95,565
                                                                                     -------    -------
      Net change in cash and cash equivalents ....................................    (3,219)    69,956
                                                                                     -------    -------
Cash and cash equivalents at beginning of year ...................................    30,284     23,097
                                                                                     -------    -------
Cash and cash equivalents at quarter end .........................................    27,065     93,053
                                                                                      ======     ======
                                                                                     
Supplemental disclosure of cash flow information:                                    
  Cash paid for:                                                                           
     Interest                                                                          7,540      7,592
     Income taxes                                                                      1,250        460
                                    
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1.  NATURE OF BUSINESS

GENERAL

         Community First Banking Company (the "Company") was incorporated in the
State of  Georgia  on March 12,  1997,  for the  purpose  of  becoming a holding
company to own 100% of the outstanding capital stock of Carrollton Federal Bank,
FSB (the "Savings Bank").  The Savings Bank was organized on August 1, 1994 as a
federal  savings bank  subsidiary  of CF Mutual  Holdings  (the "Mutual  Holding
Company"), a federally chartered mutual holding company. Prior to that date, the
predecessor  of the Savings  Bank had  operated as a mutual  savings  bank since
1929.

         On  June  27,  1997,  a plan  of  conversion  and  reorganization  (the
"Conversion")  whereby the Company  became the unitary  holding  company for the
Savings Bank and the dissolution of the Mutual Holding Company was completed.

         On December 29, 1997, the Savings Bank converted from a federal savings
bank  regulated  by the Office of Thrift  Supervision  (the  "OTS") to a Georgia
chartered state  commercial bank regulated by the Georgia  Department of Banking
and Finance (the "Georgia  Department") and concurrently changed the name of the
institution to Community First Bank (the "Bank").


NOTE 2.  BASIS OF PRESENTATION

Prior to June 27, 1997,  the Company had not issued any stock,  had no assets or
liabilities,  and had not engaged in any  business  activities  other than of an
organizational nature. Accordingly, the financial data for periods prior to June
27, 1997  included  herein  reflect the  operations of the  consolidated  Mutual
Holding Company.

The  accompanying   unaudited  consolidated  financial  statements  (except  for
statements of financial  condition on December 31, 1997, which are audited) have
been prepared in accordance with instructions to Form 10Q. Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all  adjustments  (none of which were other than  normal  recurring
accruals)  necessary  for a fair  presentation  of the  financial  position  and
results of operations  for the periods  presented  have been  included.  Certain
amounts in the prior  year's  financial  statements  have been  reclassified  to
conform with the 1998 presentation. These reclassifications had no effect on net
income. The accompanying  consolidated financial statements include the accounts
of the  Company  and the Bank.  All  significant  intercompany  items  have been
eliminated.


The results of  operations  for the three and six months ended June 30, 1998 are
not necessarily indicative of the results of operations that may be expected for
the year ended  December  31,  1998.  The  accompanying  consolidated  financial
statements and related notes of Community  First Banking  Company and subsidiary
should be read in conjunction with the audited consolidated financial statements
and related notes  included in the Company's  Annual Report on Form 10-K for the
year ended December 31, 1997.


NOTE 3.  EARNINGS PER COMMON SHARE

Earnings per common share calculations for the three and six month periods ended
June 30,  1998 are  presented  based on the net  earnings  for the three and six
months  divided  by the  weighted  average  number  of  shares  outstanding,  or
1,897,932 and 1,977,561 shares  respectively.  Net earnings per common share are
not  presented  for the three and six months  ended June 30,  1997 since  shares
issued in conjunction  with the conversion and offering were not outstanding for
the majority of the period. Diluted earnings per common share takes into account
the effect of  dilution  from the  assumed  exercise  of all  outstanding  stock
options and awards.  Diluted earnings per common share is calculated by dividing
net earnings by the average number of common shares outstanding adjusted for the
incremental  shares  resulting from the exercise of dilutive  options during the
period,  or 2,032,219  and  2,104,324  shares for the three and six months ended
June 30, 1998.


NOTE 4.  RECENTLY ISSUED ACCOUNTING STANDARDS

On January 1, 1998,  The  Company  adopted  Statement  of  Financial  Accounting
Standard No. 130, "Reporting  Comprehensive  Income". This Statement establishes
standards  for  the  reporting  and  display  of  comprehensive  income  and its
components in the financial  statements.  Comprehensive income is defined as the
change in equity of a business  enterprise during a period from transactions and
other  events  and  circumstances  from  non-owner  sources.  For  the  Company,
comprehensive  income includes net income reported in the statements of earnings
and changes in the fair value of  securities  available  for sale  reported as a
component of stockholders' equity.

In February 1998, the Financial  Accounting Standards Board issued Statement No.
132, "Employer's Disclosures about Pensions and Other Postretirement  Benefits".
The new  statement  revises  employers'  disclosures  about  pension  and  other
postretirement  benefit plans but does not change the measurement or recognition
provisions of those plans.  Statement No. 132 provides additional information to
facilitate  financial analysis and eliminates  certain  disclosures which are no
longer  useful.  The  statement is effective  for fiscal years  beginning  after
December 15, 1997.  The  statement is not expected to have a material  impact on
the consolidated financial statements of the Company.

In March 1998, the AICPA issued SOP 98-1,  "Accounting for the Costs of Computer
Software  Developed or Obtained for  Internal  Use," which is effective  for all
nongovermental  entities for fiscal years beginning after December 15, 1998. The
SOP,  among other things,  provides  guidance as to when and what types of costs
should be capitalized as it relates to internal-use software. Upon adoption, the
Company  expects  that  this  SOP will not  have  any  impact  on its  financial
statements.

In April 1998, the AICPA issued Statement of Position (SOP) 98-5,  "Reporting on
the Costs of Start-Up  Activities,"  which is effective  for all  nongovermental
entities,  except as provided for  therein,  for fiscal  years  beginning  after
December 15, 1998.  The SOP requires  that all start-up  costs (except for those
that are  capitalizable  under other GAAP) be expensed as incurred.  At June 30,
1998, the Company had  approximately  $24,000 of deferred costs  associated with
organizing the Company. Upon adoption of this statement,  it is anticipated that
these deferred costs will be expensed.

NOTE 5. DIVIDENDS DECLARED

On February  19, 1998,  the Board of  Directors  of the Company  approved a cash
dividend of $.15 per share payable April 1, 1998 for  stockholders  of record on
March 15, 1998. On June 18, 1998 the Board of Directors of the Company  approved
a cash  dividend  of $.15 per share  payable  July 1, 1998 for  stockholders  of
record  on June 18,  1998.  The  dividends  are  accrued  on the  June 30,  1998
consolidated balance sheet.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS


COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND DECEMBER 31, 1997

On June 30,  1998,  the Company had total assets of $415.7  million  compared to
$394.3  million at December 31, 1997.  This increase of $21.4 million or 5.4% is
primarily due to the purchase of available for sale  securities  which increased
$40.3 million or 81.4% during the six month period.  Securities  purchased  were
government  agency bonds  issued by FHLMC and FNMA  totaling  $25.5  million and
Federal Home Loan Bank (FHLB) bonds totaling  $14.5 million.  These bonds have a
federal tax  equivalent  yield of 6.59% with an average  duration of 4.96 years.
The purchase of bonds was funded by  borrowing  $40 million from the FHLB on the
Bank's available line of credit.

Net loans decreased $16.1 million or 5.7% during the first half of 1998. Of this
decrease,  $9.8 million were mortgage  loans,  $3.3 million were consumer loans,
$2.4 were  commercial  loans and $.6  million  were  credit  card  loans.  These
decreases in net loans can be attributed to increased  reliance on the secondary
market for  mortgage  loans,  increased  refinancing  activity,  more  stringent
underwriting  criteria  in  regard  to  consumer  lending  and  normal  seasonal
fluctuation in commercial loans outstanding.

Accrued  interest  receivable  increased $.4 million as the result of the larger
securities  investment  portfolio.  Other real estate decreased $.5 million from
the sale of one  foreclosed  commercial  property.  Other assets  increased  $.6
million  primarily  as a  result  of the  purchase  of an  interest  rate cap on
February 27, 1998.  This interest rate cap was purchased as part of an arbitrage
transaction  where the Bank  borrowed  $40 million of FHLB 7 yr./2 yr.  callable
advances, and purchased $40 million in bonds.

Total deposit  liabilities  were  consistent from December 31, 1997 through June
30, 1998.  Demand  deposits  increased  $3.0 million or 4.3%,  savings  deposits
remained  consistent  and time  deposits  decreased  $3.1 million or 1.5%.  FHLB
advances  increased  $38.9  million at June 30, 1998 as compared to December 31,
1997,  primarily due to the aforementioned  arbitrage  transaction.  The Company
borrowed $5 million on June 2, 1998 and  pledged all the issued and  outstanding
shares of capital stock owned of the Bank.  The note payable  bears  interest at
prime less one percent  with one interest  installment  due on September 2, 1998
and the entire outstanding balance due December 2, 1998. This money was borrowed
to help fund the repurchase of 238,700  shares of the Company's  common stock on
June 2,  1998 in  accordance  with  the  Company's  previously  announced  stock
repurchase  plan.  Accrued  interest  payable  and other  liabilities  increased
$682,000 or 20.5% during the first half of 1998. This increase was primarily the
result of an increase of $528,000 in accrued interest  payable  primarily due to
the increase in FHLB advances.

On January 8, 1998,  96,542 shares of  convertible  preferred  stock were issued
under the Management  Recognition  Plan. The stock awards are being amortized as
earned over a five year period.

On December 29, 1997 the Board of  Directors  of the Company  authorized a stock
repurchase  program whereby the Company intends to purchase up to 600,000 shares
of its common stock through open market purchases. In accordance with this plan,
530,223  shares of treasury stock were acquired and retired during the first six
months of 1998 at an average cost of $47.90 per share.


COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND
     1997

GENERAL. Net earnings totaled $736,000 for the three months ended June 30, 1998,
an increase of 15.7% from the $636,000 earned in the same three-month  period in
1997.  This  increase in earnings is primarily  the result of an increase in net
interest income and an increase in non-interest  income. This increase in income
was offset by increases in non-interest expense,  primarily compensation expense
related to the employee stock ownership plan and the management recognition plan
totaling  $979,000 for the second quarter of 1998.  These and other  significant
fluctuations are discussed below.

NET INTEREST  INCOME.  Net  interest  income for the three months ended June 30,
1998 increased  $202,000 or 5.9% over the same three-month period in 1997. Total
interest income increased  $511,000 or 6.6%,  while interest  expense  increased
$291,000 or 7.3%.  This  increase in  earnings  on interest  bearing  assets was
caused  by the  change  in mix  of the  loan  portfolio  and  higher  levels  of
investment  securities.  The loan  portfolio  is moving  away  from  residential
mortgage loans and into higher yielding commercial loans. The average balance of
loans by type for the second quarters of 1998 and 1997 were as follows:

                                Average Balances
                                 Second Quarter
                                1998       1997
                                ----       ----
                                (In thousands)
Mortgage loans                115,189    137,274
Consumer loans                 61,508     65,384
Credit card loans               3,718      4,518
Commercial loans               92,247     74,952
                               ------     ------
                              272,662    282,128
                              =======    =======

Interest  income on loans  decreased  $7,000 or .1% for the second  quarter 1998
compared  to the same  quarter  in 1997,  while  the  average  balance  of loans
decreased  $9.5  million  or 3.4%.  Interest  income on  federal  funds sold and
interest bearing  deposits  remained almost unchanged for the three months ended
June 30, 1998  compared to the same three months  ended June 30, 1997.  Interest
income on investment  securities  increased  $517,000 or 54.3% while the average
balance of investment securities increased $47.6 million or 91.9%.

The net interest rate spread  measures the difference  between the average yield
on earning  assets and the  average  rate paid on  interest  bearing  sources of
funds.  The net interest  rate spread for the  quarters  ended June 30, 1998 and
1997 was 3.62% and 4.05% respectively. This decrease was primarily the result of
the increase in the amount of investment securities and the average rates earned
on these securities.  The average rate earned on investment securities decreased
by 1.46 basis  points for the quarter  ended June 30, 1998  compared to the same
quarter in 1997.  This  decrease was the result of higher  yielding  investments
being called and lower yields on newly purchased investment  securities.  Yields
on interest  earning assets other than investment  securities  increased for the
three  months  ended June 30, 1998  compared to the three  months ended June 30,
1997.  Average yields paid on total funding sources increased by 13 basis points
for the quarter ended June 30, 1998 compared to the same quarter in 1997.

The following table presents  average  balances and associated  rates earned and
paid for all interest  earning assets and interest  bearing  liabilities for the
three  months  ended June 30,  1998 and 1997.  (dollars  in  thousands) 
<TABLE>
<CAPTION>
                                            Quarter Ended June 30, 1998        Quarter Ended June 30, 1997
                                            Average   Interest  Effective    Average    Interest   Effective
                                            Balance     Yield      Rate      Balance      Yield       Rate
                                           ------------------------------   --------------------------------
<S>                                        <C>        <C>        <C>        <C>         <C>         <C>
Loans                                       269,818     6,485      9.75%     279,765      6,492       9.41%
Interest Bearing Deposits & FF Sold          19,036       268      5.72%      20,220        267       5.35%
Securities                                   99,455     1,468      5.99%      51,819        951       7.45%
                                             ------     -----      ----       ------        ---       ---- 
                                            388,309     8,221      8.59%     351,804      7,710       8.89%
                                            -------     -----      ----      -------      -----       ---- 
Demand Deposits                              56,382       356      2.56%      55,588        390       2.85%
Savings                                      38,998       295      3.07%      46,555        322       2.80%
Certificates of Deposit                     204,154     2,921      5.80%     211,687      2,986       5.72%
Borrowings                                   47,192       678      5.83%      17,778        261       5.95%
                                             ------       ---      ----       ------        ---       ---- 
                                            346,726     4,250      4.97%     331,608      3,959       4.84%
                                            -------     -----      ----      -------      -----       ---- 
Net interest income & spread                            3,972      3.62%                  3,751       4.05%
</TABLE>


PROVISION  FOR LOAN LOSSES.  The provision for loan losses was $182,000 for
the three  months  ended June 30, 1998  compared to $209,000 for the three
months ended June 30, 1997. In 1997  management  increased the loan loss reserve
to 1% of total loans  outstanding at December 31, 1997. Since then the loan loss
reserve has increased by $30,000 while the net total loans  outstanding has
decreased  $16.1  million.  At June 30,  1998,  the loan loss  reserve  was $2.8
million or 1.02% of total loans  compared to $2.4 million or .83% of total loans
at June 30, 1997.  Management  deemed the allowance for loan losses  adequate at
June 30, 1998.

NONPERFORMING  ASSETS AND PAST DUE LOANS.  Nonperforming  assets,  comprised  of
non-accrual  loans (loans on which  payments are more than 90 days past due) and
other real estate owned totaled $6.9 million or 1.7% of total assets at June 30,
1998, and $9.6 million or 2.4% of total assets at June 30, 1997. The majority of
nonperforming assets or $4.9 million at June 30, 1998 and June 30, 1997 were the
result of foreclosure  on five loans to one borrower  represented by two parcels
of undeveloped land.

OTHER INCOME.  Total noninterest  income increased  $732,000,  or 78.9%, for the
three months  ended June 30, 1998 versus the same three months in 1997.  Service
charges on deposits  increased  $90,000 or 13.2% for the second  quarter of 1998
verses  the  same  period  in 1997  because  of an  increase  in the  number  of
transaction  accounts  and the fee  structure on these  accounts.  The number of
customer demand deposit accounts of the Bank increased by 1,267 accounts or 5.8%
as of June 30, 1998 compared to June 30, 1997. Fees on transaction accounts were
increased  during  the first  quarter  of 1998 as the  result of an  independent
review of the Bank's fee structure  that was performed in the fourth  quarter of
1997. Gains on the sales of available for sale securities totaling $452,000 were
from the sale of equity  securities  owned by the Company that were sold to help
fund the purchase of a block of 238,700 shares of the Company's  common stock on
June 2, 1998. Income from insurance  commissions  decreased $55,000 or 32.8% for
the three  months  ended June 30, 1998 versus the same three months in 1997 as a
result of lower loan volume and stricter underwriting  standards.  Miscellaneous
income  increased  $244,000 for the quarter  ended June 30, 1998 compared to the
same three months in 1997  primarily from the gain on sales of other real estate
owned totaling $172,000.

NONINTEREST  EXPENSES.  Total  noninterest  expenses  increased $842 thousand or
23.9% for the three  months  ended June 30,  1998 as  compared to the same three
months in 1997.  This increase is primarily the result of  compensation  expense
related to the ESOP and  Management  Recognition  Plan (MRP).  During the second
quarter  of 1998  management  increased  the  number of shares  committed  to be
released by the ESOP from 9,654 shares per quarter to 17,585 shares per quarter.
Compensation expense for the three months ended June 30, 1998 as a result of the
shares  committed  to be  released  by the ESOP  totaled  $822,000.  The Company
recorded a market value  adjustment  for the MRP preferred  stock of $51,000 for
the three  months  ended June 30,  1998,  while the total  compensation  expense
recorded for the MRP including the market value  adjustment was $154,000 for the
quarter ended June 30, 1998. The ESOP and MRP were not in place during the three
months ended June 30, 1997.  Occupancy and equipment expense decreased  slightly
($4,000 or .7%) for the three  months  ended June 30, 1998 versus the same three
months in 1997.  This decrease is the result of closing two branches in February
1998.  One branch was located  inside a grocery store and the other was attached
to a convenience store. Both of these facilities were leased and within the city
of  Carrollton,  Georgia.  Closing of these  branches was deemed  appropriate by
management  because of the volume of customer  traffic  and the  addition of the
McIntosh  branch  in  Carrollton  which has been  expanded  in 1998 to add three
offices,  one interior teller window, an enlarged lobby and more parking area to
better serve walk-in customers.  Other operating expense decreased by $93,000 in
the second  quarter of 1998 versus the same  quarter of 1997.  This  decrease is
primarily due to reduced losses on demand deposit accounts.

INCOME  TAXES.  Income tax  expense  for the  quarter  ended  June 30,  1998 was
$355,000 or 32.6% of pretax  income and  $317,000 or 33.3% of pretax  income for
the same three month period in 1997. The difference  between these rates and the
statutory  rate is  primarily  the  result  of  interest  income  on tax  exempt
securities.

COMPARISON OF RESULTS OF  OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
     1997

GENERAL.  Net  earnings  totaled  $1.4 million for the six months ended June 30,
1998,  an increase of 43.7% from the $1.0 million  earned in the same  six-month
period in 1997.  This  increase  in  earnings  results  from an  increase in net
interest income of 12.7% and an increase in non-interest  income of 63.8%. These
increases in income were partially offset by an increase in non-interest expense
of 19.2%. These and other significant fluctuations are discussed below.

NET INTEREST  INCOME.  Total  interest  income  increased  $1.2 million or 8.2%.
Interest  income on loans  increased  $357,000 or 2.8% for the six months  ended
June 30, 1998  compared to the same six months in 1997.  The average  balance of
loans  decreased  $1.1  million or .4%,  but the yield on loans  increased by 30
basis  points for the same six months in 1998  compared to 1997.  This  resulted
from a shift in the loan portfolio away from residential mortgage loans and into
higher yielding  commercial loans.  Interest income on interest bearing deposits
and federal funds sold increased  $213,000 or 51.0% while the average balance on
these interest bearing deposits  increased $6.2 million (38.8%) and the yield on
the same increased 47 basis points.  Interest income from  securities  increased
$656,000 or 35.8% while the yield on securities  decreased 1.15% and the average
balance of securities  increased  $31.4 million (61.5%) for the six months ended
June 30,  1998  compared to the same six months in 1997.  The higher  volume and
lower yields on investments  resulted from some higher yielding securities being
called  and lower  yields on newly  purchased  securities;  the  higher  average
balance of securities resulted from the arbitrage  transaction  mentioned in the
comparison  of the Company's  financial  condition at June 30, 1998 and December
31, 1997.

The net interest rate spread for the six months ended June 30, 1998 and 1997 was
3.73% and 3.96%  respectively.  This  decrease was  primarily  the result of the
increase in the amount of investment  securities and the average rates earned on
these  securities.  Average yields paid on total funding sources  increased by 3
basis points for the quarter ended June 30, 1998 compared to the same quarter in
1997.  Interest  expense on borrowings  increased $420,000 or 80.5% for the
first six months of 1998  compared  to the same six months in 1997.  The average
balance of  borrowings  increased  $15.0  million  (83.0%)  and the rate paid on
borrowings decreased 8 basis points during the first six months of 1998 compared
to the same six months in 1997.

The following table presents  average  balances and associated  rates earned and
paid for all interest  earning assets and interest  bearing  liabilities for the
six  months  ended  June 30,  1998 and  1997.  (dollars  in  thousands)  
<TABLE>
<CAPTION>
                                         Six months ended June 30, 1998      Six months ended June 30, 1997
                                         Average     Interest  Effective     Average    Interest   Effective
                                         Balance      Yield       Rate       Balance      Yield      Rate
                                         ------------------------------     -------------------------------
<S>                                     <C>          <C>         <C>        <C>         <C>         <C>
    
Loans                                    273,865      13,090      9.64%      275,003     12,734       9.34%
Interest Bearing Deposits & FF Sold       22,137         632      5.76%       15,951        419       5.29%
Securities                                82,470       2,487      6.08%       51,072      1,830       7.23%
                                          ------       -----      ----        ------      -----       ---- 
                                         378,472      16,209      8.64%      342,026     14,983       8.83%
                                         -------      ------      ----       -------     ------       ---- 
Demand Deposits                           55,144         710      2.59%       51,446        752       2.95%
Savings                                   39,007         595      3.07%       40,975        575       2.83%
Certificates of Deposit                  204,650       5,822      5.74%      210,896      5,908       5.65%
Borrowings                                32,969         942      5.76%       18,018        522       5.84%
                                          ------         ---      ----        ------        ---       ---- 
                                         331,769       8,068      4.90%      321,335      7,757       4.87%
                                         -------       -----      ----       -------      -----       ---- 
Net interest income & spread                           8,141      3.73%                   7,226       3.96%
</TABLE>


PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $335,000 for the
six months  ended June 30, 1998  compared to $304,000  for the six months  ended
June 30,  1997.  This  increase has been deemed  appropriate  by  management  to
reflect  the  higher  risk  associated  with the  change in loan  portfolio  mix
described under "Net Interest Income" above.

OTHER INCOME. Total noninterest income increased $1.1 million, or 63.8%, for the
six months  ended  June 30,  1998  versus  the same six months in 1997.  Service
charges  on  deposits  increased  $182,000  or 14.2% for the first  half of 1998
versus  the  same  period  in 1997  because  of an  increase  in the  number  of
transaction accounts and the fee structure on these accounts. Gains on the sales
and calls of  available  for sale  securities  were from the sale of bank stocks
owed by the  Company  and the  call  of one  security  owned  by the  bank.  The
Company's  investments were sold to help fund the purchase of a block of 238,700
shares of the  Company's  common  stock on June 2, 1998.  There were no sales of
securities   during  the  first  six  months  of  1997.  Income  from  insurance
commissions  increased  $227,000 or 60.1% for the six months ended June 30, 1998
versus the same six months in 1997. This increase was due to a $169,000 thousand
commission  rebate on insurance sales received during the first quarter of 1998.
Miscellaneous  income increased  $287,000 for the six months ended June 30, 1998
compared  to the same six  months  in 1997  primarily  from the gain on sales of
other real estate owned  totaling  $184,000 in 1998  compared to $12,000 for the
same period in 1997.

NONINTEREST EXPENSES. Total noninterest expenses increased $1.4 million or 19.2%
for the six months  ended June 30,  1998 as  compared  to the same six months in
1997. This increase is primarily the result of  compensation  expense related to
the ESOP and  Management  Recognition  Plan (MRP) which totaled $1.5 million for
the six months  ended June 30,  1998.  The ESOP and MRP were not in place during
the six months ended June 30, 1997.  Occupancy and equipment  expense  increased
slightly  ($11,000  or 1.0%) for the six months  ended June 30,  1998 versus the
same six months in 1997.  This  increase is  primarily  the result of  increased
depreciation expense.  Deposit insurance premiums increased $33,000 or 57.2% for
the six months ended June 30, 1998 compared to the same six months of 1997. This
is the result of a credit for $34,000  received in the first quarter of 1997 for
overpayment of the special SAIF  assessment  paid in the fourth quarter of 1996.
Other operating  expense decreased by $87,000 or 3.6% in the first six months of
1998 verses 1997.

INCOME  TAXES.  Income tax  expense  for the six months  ended June 30, 1998 was
$690,000 or 32.3% of income  before tax and  $506,000 or 33.5% of income  before
tax for the same six month period in 1997.  The  difference  between these rates
and the statutory rate is the result of interest income on tax exempt securities
and the dividend received deduction on some preferred stock dividends.

LIQUIDITY AND CAPITAL RESOURCES.  The Company's  liquidity,  represented by cash
and cash  equivalents,  is a product of its  operating,  investing and financing
activities.  The Company's primary sources of funds are deposits,  amortization,
prepayments  and  maturities  of  outstanding  loans,  maturities  of investment
securities,  mortgage-backed  securities and other  short-term  investments  and
funds provided from operations.  While scheduled loan  amortization and maturing
investment securities, mortgage-backed securities and short-term investments are
relatively  predictable sources of funds, deposit flows and loan prepayments are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition.  The  Company  manages  the  pricing of its  deposits to maintain a
steady  deposit  balance.  In  addition,  the Company  invests  excess  funds in
overnight  deposits and other short-term  interest-earning  assets which provide
liquidity to meet lending  requirements.  The Company has generally been able to
generate enough cash through the retail deposit market, its traditional  funding
source,  to offset the cash utilized in investing  activities.  As an additional
source of funds, the Bank may borrow from the FHLB of Atlanta. At June 30, 1998,
the Bank had  outstanding  advances  from the FHLB of  Atlanta  in the amount of
$44.4  million.  Such  advances were used in the Bank's  normal  operations  and
investing  activities.  On June 2, 1998 the Company  borrowed $5 million to help
fund the  repurchase of 234,700  shares of the Company's  stock.  The note bears
interest at prime less one percent with interest only payable  September 2, 1998
and interest and the entire principal balance payable on December 2, 1998.

At June 30, 1998,  total  stockholders'  equity was $45.8 million,  or 11.03% of
total assets compared to $69.0 million, or 17.5% of total assets at December 31,
1997.  This decrease is primarily  due to treasury  stock  purchases  during the
first  six  months  of 1998 in  accordance  with  the  Company's  planned  stock
repurchase program.

As of June  30,  1998,  the  Bank's  regulatory  capital  was in  excess  of all
applicable regulatory requirements. At June 30,1998, the Bank's total risk-based
capital, tier 1 risk-based capital and tier 1 leverage ratios amounted to 14.9%,
13.9% and 9.88%, respectively, compared to regulatory requirements of 8.0%, 4.0%
and 4.0%, respectively.

YEAR 2000 ISSUES. The Company is currently addressing the many areas affected by
the Year 2000 computer issue. A Year 2000 plan has been approved by the Board of
Directors  which includes  contacting all of the software  vendors that maintain
the computer  programs that the Company relies upon. This plan provides that the
Company will obtain  assurances  from these software  vendors that their product
will be Year 2000 compliant. All systems potentially affected will be evaluated.
The plan also includes  contacting  large commercial loan customers to determine
their  readiness for this issue.  At this time, it is anticipated  that many, if
not all of these  changes,  should be ready for  testing by December  31,  1998.
Since many of the programs used by the Company are  "off-the-shelf"  as compared
to "highly  customized,"  the cost to address  these  matters is not expected to
have a material impact on future operating results or financial condition.  This
area is changing  very  rapidly and the actual  results may differ from what has
been anticipated.

The Company has  identified  all hardware and software that need  date-sensitive
testing to comply with the Year 2000  issue.  Vendors  and  suppliers  have been
contacted for information concerning their product's readiness for the Year 2000
issue. The Company is utilizing both inside and outside resources for testing of
all  hardware and  software.  The  Company's  main  supplier of core  processing
software and the Company's core processing  service  provider will begin testing
of their products during the second and third quarters of 1998. FDIC guidance on
testing year 2000  compliance of service  providers  states that proxy tests are
acceptable compliance tests. In proxy testing, the service provider tests with a
representative sample of financial  institutions who use a particular service on
the same platform.  Test results are shared with all similarly  situated clients
of the service  provider.  The most recent  update  from the  Company's  service
provider  indicates  the first  phase of testing is  targeted  for July 31, 1998
completion. To date the Company's service provider has completed a nightly batch
update on the proxy banks of the loans and deposits applications for the work of
December 31, 1999 and the update of January 3, 2000, and is currently  verifying
the results of both of these  updates.  The  Company  internally  has  completed
testing  hardware  and has begun  internal  software  testing.  All  testing and
corrective  processes  for Year 2000  problems  are  expected to be completed by
December 31, 1998.

The total  budget for the Year 2000  efforts  has not been  completed.  To date,
$252,000 has been set aside to address  obsolescence in existing  hardware.  All
expenses  associated  with year 2000  corrections  will be  expensed in the year
incurred and will be funded through normal operating cash flow.

The costs and completion dates for testing and corrections of Year 2000 problems
are based on management's best estimates,  which were derived utilizing numerous
assumptions  of future events  including the continued  availability  of certain
resources,  third party modification plans and other factors. However, there can
be no guarantee  that these  estimates will be achieved and actual results could
differ  materially  from those  plans.  Specific  factors  that might cause such
material  differences include, but are not limited to, the availability and cost
of  personnel  trained in this area,  the  ability  to locate  and  correct  all
relevant computer programs, and similar uncertainties.


PART II.  OTHER INFORMATION

      ITEM 1.  LEGAL PROCEEDINGS

            None.

      ITEM 2.  CHANGES IN SECURITIES

            None.

      ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

            None.

      ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
          
               (a)  Annual meeting of shareholders was held on April 23, 1998.

               (b)  Matters  voted upon at the Annual  Meeting on April 23, 1998
                    included  the  following  items and the number of votes cast
                    included:
                                                              Votes   
                 Election of Class I Directors   Votes For   Withheld

                  Gary M. Bullock                 1,986,475    5,104
                  Jerry L. Clayton                1,986,475    5,104
                  Dean B. Talley                  1,984,625    6,954

                                                        Votes     
                 Ratification of Auditor    Votes For  Against   Abstentions

                  Porter Keadle Moore, LLP  1,984,013   3,221      4,345
                   
               There were no broker non-votes,  as no discretionary  issues were
               presented for approval.
                    

      ITEM 5.  OTHER INFORMATION

               Pursuant  to Rule  14a-4(c)(1)  promulated  under the  Securities
               Exchange  Act of  1934,  as  amended,  shareholders  desiring  to
               present a proposal for consideration at the Company's 1999 Annual
               Meeting of Shareholders must notify the Company in writing at its
               principal office,  110 Dixie Street,  Carrollton,  Georgia 30117,
               attn:  Corporate  Secretary,  of the contents of such proposal no
               later than  February  9, 1999.  Failure to timely  submit  such a
               proposal  will  enable the proxies  appointed  by  management  to
               exercise their  discretionary  voting authority when the proposal
               is raised at the  Annual  Meeting  of  Shareholders  without  any
               discussion of the matter in the proxy statement.

      ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

          (a) The following exhibit is filed herewith:

               Exhibit 27 Financial Data Schedule

          (b) No reports on Form 8-K were filed  during the quarter  ended June
          30, 1998.


<PAGE>

                                   SIGNATURES

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        COMMUNITY FIRST BANKING COMPANY


Date:  May 12, 1998       /s/ Gary D. Dorminey
                         ----------------------
                              Gary D. Dorminey
                                 President
                       (Principal Executive Officer)



Date:  May 12, 1998      /s/ C. Lynn Gable
                        -------------------
                             C. Lynn Gable
                        Chief Financial Officer
                     (Principal Financial Officer)