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 September 30, 1998


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

     For the transition period from ______ to ______

                       Commission File Number: 0-22543

                         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 October 31, 1998, there
were  1,641,027   shares  issued  and  1,381,291   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  September  30,  1998  (unaudited)  and
          December 31, 1997

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

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

     Consolidated  Statements of Cash Flows for the Nine Months Ended  September
          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>
                                                                September 30,  December 31,
                                 Assets                              1998          1997
                                                                  (Unaudited) 
<S>                                                                <C>          <C> 

Cash and due from banks .........................................      8,243      10,766
Interest-bearing deposits in financial institutions .............      2,839       1,863
Federal funds sold and repurchase agreements ....................     32,610      17,655
                                                                    --------    --------
   Cash & cash equivalents ......................................     43,692      30,284

Securities available for sale ...................................     68,965      49,492
Securities held to maturity .....................................      3,444       6,006
Other investments ...............................................      2,328       2,269
Mortgage loans held for sale ....................................        174         789
Loans, net ......................................................    262,296     283,602
Premises & equipment net ........................................      9,024       9,095
Accrued interest receivable .....................................      2,926       3,169
Other real estate ...............................................      5,505       6,627
Other assets ....................................................      3,384       2,960
                                                                    --------    --------
   Total assets .................................................    401,738     394,293
                                                                    ========    ========

                  Liabilities and Stockholders' Equity
Deposits:
  Demand ........................................................     15,893      18,734
  Interest-bearing demand .......................................     58,008      51,198
  Savings .......................................................     36,585      38,273
  Time ..........................................................    161,007     161,431
  Time, over $100,000 ...........................................     44,462      45,895
                                                                    --------    --------
     Total deposits .............................................    315,955     315,531

Federal Home Loan Bank advances .................................     44,343       5,495
Note payable ....................................................      5,000        --
Subordinated debentures .........................................        900         900
Accrued interest payable & other liabilities ....................      3,840       3,329
                                                                    --------    --------
     Total liabilities ..........................................    370,038     325,255

Stockholders' Equity:
Convertible preferred stock, par value $.01, 96,542 shares issued          1        --
Common stock, $.01 par, 10,000,000 authorized, 1,641,027 issued .         16          24
Additional paid in capital ......................................     13,446      47,040
Unearned ESOP shares and stock awards ...........................     (4,492)     (3,476)
Retained earnings ...............................................     26,080      24,725
Treasury stock at cost ..........................................     (2,837)       --
Accumulated other comprehensive income and (loss)................       (514)        725
                                                                    --------    --------
     Total stockholders' equity .................................     31,700      69,038

Total liabilities & stockholders' equity ........................    401,738     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      Nine Months Ended 
                                                                       September 30,            September 30,
                                                                       1998      1997           1998      1997
<S>                                                                  <C>       <C>          <C>       <C> 
Interest income:
Interest and fees on loans .......................................     6,480     6,975         19,570    19,708
Interest-bearing deposits and federal funds sold .................       419       369          1,050       788
Interest and dividends on investment securities:
   U.S. Treasury .................................................        45        48            135        62
   U.S. Govt. agency and mortgage-backed .........................     1,106       898          3,288     2,577
   State, county & municipals ....................................        29        29             88        79
   Other .........................................................        93        41            250       129
                                                                          --        --            ---       ---
     Total interest income .......................................     8,172     8,360         24,381    23,343

Interest Expense:
Interest on deposits:
  Demand .........................................................       399       387          1,109     1,138
   Savings .......................................................       250       283            844       858
   Time ..........................................................     2,951     2,956          8,773     8,865
                                                                       -----     -----          -----     -----
                                                                       3,600     3,626         10,726    10,861
Interest on debt .................................................       758       170          1,700       692
                                                                         ---       ---          -----       ---
          Total interest expense .................................     4,358     3,796         12,426    11,553
                                                                       -----     -----         ------    ------
               Net interest income ...............................     3,814     4,564         11,955    11,790
                                                                       -----     -----         ------    ------
Provision for loan losses ........................................       226       320            561       624
                                                                         ---       ---            ---       ---
          Net interest income after provision for loan losses ....     3,588     4,244         11,394    11,166


Noninterest income:
   Service charges on deposits ...................................       810       732          2,280     2,021
   Gain (Loss) on calls and sales of securities available for sale       162        -             665       (27)
   Insurance commissions .........................................       134       169            498       396
   Miscellaneous .................................................       221       178            731       300
                                                                         ---       ---            ---       ---
          Total noninterest income ...............................     1,327     1,079          4,174     2,690

Noninterest expenses:
   Salaries and employee benefits ................................     1,813     1,733          5,565     5,322
   ESOP & retirement expense .....................................       416       335          1,666       335
   Occupancy and equipment .......................................       548       561          1,647     1,647
   Deposit insurance premiums ....................................        45        47            136       105
   Other operating expense .......................................     1,011     1,299          3,340     3,588
                                                                       -----     -----          -----     -----
         Total noninterest expense ...............................     3,833     3,975         12,354    10,997
                                                                       -----     -----         ------    ------
         Earnings before income tax expense ......................     1,082     1,348          3,214     2,859
Income tax expense ...............................................       339       432          1,028       938
                                                                         ---       ---          -----       ---

               Net earnings ......................................       743       916          2,186     1,921
                                                                         ===       ===          =====     =====

Basic earnings per common share ..................................      0.46      0.41           1.18       N/A
Diluted earnings per common share ................................      0.43      0.41           1.11       N/A
Dividends per common share .......................................      0.18      0.15           0.48       N/A
</TABLE>
<PAGE>
                         COMMUNITY FIRST BANKING COMPANY
                 Consolidated Statements of Comprehensive Income
                      (Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
                                                                              Three Months Ended   Nine Months Ended
                                                                                   Sept. 30,           Sept. 30,
                                                                                  1998      1997     1998      1997
                                                                                  ----      ----     ----      ----
<S>                                                                             <C>       <C>      <C>       <C> 
Net earnings .................................................................      743       916    2,186     1,921
Other  comprehensive  income (loss),  net of  income  taxes:
 Unrealized  gains (losses) on securities available for sale .................   (1,935)      310   (1,877)      260
  Income tax on gains (losses) ...............................................     (658)      105     (638)       88
                                                                                   ----       ---     ----        --
    Unrealized gains (losses) arising during the period, net of tax ..........   (1,277)      205   (1,239)      172

  Less: Reclassification adjustment for gains included in net earnings .......      162      --        665      --
   Income tax on reclassification on adjustments .............................       55      --        226      --
                                                                                   ----       ---     ----        --
    Reclassification adjustment for gains included in net earnings, net of tax      107      --        439      --
                                                                                   ----       ---     ----        --
     Other comprehensive income (loss)........................................   (1,384)      205   (1,678)      172
                                                                                 ------       ---   ------       ---
COMPREHENSIVE INCOME (LOSS)...................................................     (641)    1,121      508     2,093
                                                                                   ====     =====      ===     =====
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>

                         COMMUNITY FIRST BANKING COMPANY 
                      Consolidated Statements of Cash Flows
                      (Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
                                                                                                 Nine Months Ended
                                                                                                Sept. 30,   Sept. 30
                                                                                                   1998        1997
                                                                                                   ----        ----
<S>                                                                                              <C>      <C> 

Net earnings .................................................................................     2,186      1,921
 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
  Depreciation, amortization and accretion ...................................................       973        996
  Provision for loan losses ..................................................................       561        624
  Gain on calls and sales of securities available for sale ...................................      (665)      --  
  Gain on sale of other real estate ..........................................................      (209)      --
  Loss (gain) on sales of premises and equipment, net ........................................        23        (19)
  ESOP and stock award compensation expense ..................................................     2,046       --
  Change in:
    Mortgage loans held for sale .............................................................       615         69
    Accrued interest receivable ..............................................................       243       (502)
    Other assets .............................................................................      (425)       135
    Accrued interest payable .................................................................     1,057        293
    Accrued expenses and other liabilities ...................................................       233      1,003
                                                                                                  ------     ------
       Net cash provided by operating activities .............................................     6,638      4,520
                                                                                                  ------     ------

Cash flows from investing activities:
  Proceeds from sales and calls of securities available for sale .............................    46,494     10,968
  Proceeds from calls and maturities of securities held to maturity ..........................     3,078      1,447
  Proceeds from maturities of other investments ..............................................       974       --
  Purchases of other investments .............................................................       (60)      --
  Proceeds from sales of other investments ...................................................                  220
  Purchases of securities available for sale .................................................   (69,071)   (20,676)
  Net change in loans ........................................................................    20,745    (30,984)
  Proceeds from sale of real estate ..........................................................     1,332         54
  Proceeds from sales of premises and equipment ..............................................        30         32
  Purchases of premises and equipment ........................................................    (1,003)    (1,624)
  Organization costs .........................................................................      --          (30)
                                                                                                  ------     ------
       Net cash provided by (used in) investing activities ...................................     2,519    (40,593)
                                                                                                  ------     ------

Cash flows from financing activities:
  Net change in demand and savings deposits ..................................................     2,282     10,349
  Net change in time deposits ................................................................    (1,857)    (3,084)
  Payment of FHLB advances ...................................................................    (1,153)      --
  Proceeds from FHLB advances ................................................................    40,000    (10,403)
  Proceeds from note payable .................................................................     5,000       --
  Payment of subordinated debentures .........................................................      --       (1,100)
  Treasury stock purchased ...................................................................   (39,219)      --
  Cash dividends paid ........................................................................      (802)      (362)
  Net Proceeds from issuance of common stock .................................................      --       43,250
                                                                                                  ------     ------
      Net cash provided by financing activities ..............................................     4,251     38,650
                                                                                                  ------     ------
      Net change in cash and cash equivalents ................................................    13,408      2,576
                                                                                                  ------      -----
Cash and cash equivalents at beginning of year ...............................................    30,284     23,097
                                                                                                  ------     ------
Cash and cash equivalents at quarter end .....................................................    43,692     25,673
                                                                                                  ======     ======

Supplemental disclosure of cash flow information: Cash paid for:
     Interest ................................................................................    11,369     11,261
     Income taxes ............................................................................     1,250        935
</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 nine months ended September 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  month  period  ended
September  30, 1998 and 1997 and the nine month period ended  September 30, 1998
are presented based on the net earnings for the three and nine months divided by
the weighted  average number of shares  outstanding,  or 1,603,083 shares (three
months  ended  September  30,  1998),  2,220,477  shares  (three  months  ended
September 30, 1997) and 1,850,436 shares (nine months ended September 30, 1998).
Net  earnings  per common  share are not  presented  for the nine  months  ended
September 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  1,715,465  and  2,220,477
shares for the three months ended September 30, 1998 and 1997 respectively,  and
1,972,608 for the nine months ended September 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
nongovernmental 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  nongovernmental
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 September
30, 1998, the Company had  approximately  $23,000 of deferred  costs  associated
with organizing the Company. Upon adoption of this statement,  it is anticipated
that these deferred costs will be expensed.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
standardizes  the accounting  for  derivative  instruments by requiring that all
derivatives be recognized as assets and  liabilities and measured at fair value.
This statement is effective for fiscal years  beginning after June 15, 1999. The
Company does not believe the  provisions of SFAS No. 133 will have a significant
impact on the consolidated financial statements upon adoption.

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.  On  September  17, 1998 the Board of Directors of the
Company  approved a cash dividend of $.18 per share payable  October 1, 1998 for
stockholders  of record on September 17, 1998.  The dividends are accrued on the
September 30, 1998 consolidated balance sheet.


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


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

On September 30, 1998, the Company had total assets of $401.7  million  compared
to $394.3 million at December 31, 1997. This increase of $7.4 million or 1.9% is
primarily due to the purchase of available for sale  securities  which increased
$19.5 million or 39.4% during the nine month period. Securities purchased during
the first quarter of 1998 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.  This purchase of bonds was funded by borrowing
$40 million from the FHLB on the Bank's  available line of credit.  In the three
months ended  September  30, 1998 $20 million of these bonds were sold and $12.2
million of GNMA mortgage pool  securities  were purchased with a yield of 6.42%.
During the three months ended  September  30, 1998,  $10.9 million of securities
were called and, of this amount, $2.5 million were held to maturity securities.

Net loans decreased $21.3 million or 7.5% during the nine months ended September
30,1998.  This decrease in net loans can be attributed to increased  reliance on
the secondary market for mortgage loans, increased refinancing activity and more
stringent underwriting criteria in regards to consumer lending.

Other  real  estate  decreased  $1.1  million  primarily  from  the  sale of one
foreclosed  commercial  property and two  residential  properties. Other assets
increased $.4 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
September 30 1998 increasing $.4 million or .13%. Demand deposits increased $4.0
million or 5.7%, savings deposits decreased $.4 million or .3% and time deposits
decreased  $1.4  million  or 3.1%.  FHLB  advances  increased  $38.8  million at
September  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 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 stock  repurchase  plan.  Accrued interest
payable and other liabilities increased $511,000 or 15.4% during the nine months
ended  September 30, 1998. This increase was primarily the result of an increase
of $1,057,000 in accrued interest payable due to the increase in FHLB advances.

On  January  8,  1998,  96,542  shares of  unregistered  restricted  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 would to purchase up to 600,000 shares of
its common stock through open market  purchases.  On August 20, 1998 the Company
completed  cumulative common stock repurchases of 600,000 shares. Also on August
20, 1998, the Company's  Board of Directors  authorized the  negotiation for the
repurchase  of 172,535  shares from a single  shareholder.  The  purchase of the
172,535  shares was  concluded on August 21, 1998.  The total of 772,535  shares
were  retired  during the first nine months of 1998 at an average cost of $47.13
per share.

On August 25,  1998 the Board of  Directors  of the Company  authorized  a stock
repurchase program for treasury to fund the future requirements for common stock
as required  under the Management  Recognition  Plan and 1997 Stock Option Plan.
The Company intends to repurchase an aggegrate  number of shares of common stock
not to exceed 337,898  shares.  In accordance  with this plan 71,918 shares have
been purchased at an average price of $39.02 per share as of September 30, 1998.

On September 25, 1998 the Company and First Citizens Corporation (FSTC), Newnan,
Georgia announced the execution of a definitive agreement whereby First Citizens
Bank, a  wholly-owned  subsidiary of FSTC,  would acquire three  branches of the
Bank that are  located  in  Wal*Mart  Superstores  in  Newnan,  Stockbridge  and
Fayetteville,  Georgia. The transaction is subject to regulatory  approval.  The
purchase price will be determined based on deposit and loan balances at a cutoff
date  following the receipt of all  regulatory  approvals.  On November 9, 1998,
First Citizens  requested that the terms of the agreement be  renegotiated.  The
Company  is  currently  renegotiating  the terms of the  transaction  with First
Citizens,  and although no assurance can be given,  management  anticipates this
transaction  will be  consummated  on or before  December 31,  1998.  Management
believes  the  transaction  will not  adversely  effect the Bank's  earnings  or
financial condition.

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

GENERAL.  Net earnings totaled $743,000 for the three months ended September 30,
1998,  a decrease  of 18.9%  from the  $916,000  earned in the same  three-month
period in 1997.  This decrease is the result of lower net interest income caused
by both  lower  interest  income  and  higher  interest  expense.  The lower net
interest margin was partially offset by an increase in non-interest income and a
reduction of non-interest expense. These and other significant  fluctuations are
discussed below.

NET INTEREST  INCOME.  Net interest  income for the three months ended September
30, 1998 decreased  $750,000 or 16.4% compared to the same three-month period in
1997. Total interest income  decreased  $188,000 or 2.2%, while interest expense
increased $562,000 or 14.8%. The decrease in earnings on interest bearing assets
was  caused  by a  smaller  loan  portfolio  and  higher  levels  of  investment
securities.  The loan  portfolio  mix  continues  to move away from  residential
mortgage loans and into higher yielding commercial loans. The average balance of
loans by type for the third quarters of 1998 and 1997 were as follows:

                                    Average Balances
                                   Three Months Ended
                                     September 30,
                                    1998       1997
                                    ----       ----
                                    (In thousands)
Mortgage loans                    117,241   132,110
Consumer loans                     59,053    68,176
Credit card loans                   3,542     4,370
Commercial loans                   87,558    83,600
                                  -------   -------
                                  267,394   288,256
                                  =======   =======

Interest  and fee  income  on loans  decreased  $495,000  or 7.1% for the  third
quarter 1998 compared to the same quarter in 1997,  while the average balance of
loans decreased $20.9 million or 7.2%. Interest income on federal funds sold and
interest bearing deposits  increased $49,000 or 13.3% for the three months ended
September 30, 1998  compared to the same three months ended  September 30, 1997.
Interest income on investment  securities  increased $257,000 or 25.4% while the
average balance of investment securities increased $29.2 million or 52.5%.

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  September 30, 1998
and 1997 was 3.82% and 4.42% respectively. This decrease resulted primarily from
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 1.19 basis points for the quarter  ended  September  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  September  30, 1998 compared to the three
months ended  September 30, 1997.  Average yields paid on total funding  sources
increased by 14 basis points for the quarter  ended  September 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 September 30, 1998 and 1997.  (dollars in thousands)  
<TABLE>
<CAPTION>

                                                    Quarter ended September 30, 1998         Quarter ended September 30, 1997
                                                   Average       Interest    Effective       Average       Interest   Effective
                                                   Balance        Yield         Rate         Balance        Yield        Rate
<S>                                                <C>           <C>           <C>           <C>           <C>          <C>
Loans                                               267,395         6,480        9.83%         288,256       6,975        9.81%
Interest Bearing Deposits & FF Sold                  28,740           419        5.91%          26,153         369        5.73%
Securities                                           87,015         1,273        5.93%          57,801       1,015        7.12%
--------------------------------------------------------------------------------------------------------------------------------
                                                    383,149         8,172        8.65%         372,210       8,360        9.11%
--------------------------------------------------------------------------------------------------------------------------------
Demand Deposits                                      74,536           399        2.17%          73,365         387        2.14%
Savings                                              37,064           250        2.73%          37,120         283        3.10%
Certificates of Deposit                             204,348         2,951        5.86%         206,486       2,956        5.81%
Borrowings                                           50,272           758        6.11%          11,550         170        5.97%
--------------------------------------------------------------------------------------------------------------------------------
                                                    366,220         4,358        4.83%         328,521       3,797        4.69%
--------------------------------------------------------------------------------------------------------------------------------
Net interest income & spread                                        3,814        3.82%                       4,563        4.42%

</TABLE>

PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $226,000 for the
three months ended  September 30, 1998 compared to $320,000 for the three months
ended September 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 $125,000  while the net total loans  outstanding  has
decreased  $21.3 million.  At September 30, 1998, the loan loss reserve was $2.9
million or 1.13% of total loans  compared to $2.1 million or .70% of total loans
at September 30, 1997.  Management deemed the allowance for loan losses adequate
at September 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  $5.9  million  or 1.5% of total  assets  at
September  30, 1998,  and $8.2 million or 2.1% of total assets at September  30,
1997. The majority of nonperforming assets or $4.9 million at September 30, 1998
and  September  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  $248,000,  or 22.9%, for the
three  months  ended  September  30, 1998 versus the same three  months in 1997.
Service charges on deposits  increased $78,000 or 10.5% for the third 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 381 accounts or 1.9%
as of September  30, 1998 compared to September  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
$162,000  were  from the sale and call of  securities  owned by the Bank and the
Company.  Income from insurance  commissions  decreased $34,000 or 20.5% for the
three months ended  September 30, 1998 versus the same three months in 1997 as a
result of lower loan volume and stricter underwriting  standards.  Miscellaneous
income  increased  $43,000 for the quarter ended  September 30, 1998 compared to
the same  three  months in 1997  primarily  from the gain on sales of other real
estate owned totaling $39,000.

NONINTEREST EXPENSES.  Total noninterest expenses decreased $139,000 or 3.5% for
the three months ended  September  30, 1998 as compared to the same three months
in 1997. This decrease is primarily the result of other operating  expense which
decreased  $288,000 or 22.1%.  Other operating expense  reductions include lower
expenses and losses on demand deposit  accounts which decreased  $59,000 for the
three months ended September  30,1998 compared to the same three months in 1997.
The Bank received a refund of $33,000 in September 1998 of a  contribution  made
in April of 1997 to help fund a regional revolving loan fund to create jobs in a
four county area served by the Bank.  This  regional  development  center  never
materialized  and the donation  was returned to the Bank.  Salaries and employee
benefits  increased $80,000 for the three months ended September 30, 1998 verses
the  same  three  months  in  1997.  This  is due  primarily  to the  Management
Recognition Plan (MRP) expense recorded for the three months ended September 30,
1998 of  $122,000.  The MRP was not in  place  during  the  three  months  ended
September 30, 1997. ESOP and retirement  expense increased $80,000 for the three
months ended  September 30, 1998 compared to the same three months in 1997. This
resulted from the increase in the average  market value of the  Company's  stock
price for the three  months  ended  September  30,  1998 which was  $42.53/share
verses  $34.38/share for the same three months in 1997.  Occupancy and equipment
expense  decreased  slightly  ($13,000  or  2.0%)  for the  three  months  ended
September  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.

INCOME TAXES.  Income tax expense for the quarter  ended  September 30, 1998 was
$339,000 or 31.4% of pretax  income and  $317,000 or 32.1% 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 NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997

GENERAL.  Net earnings  totaled $2.2 million for the nine months ended September
30,  1998,  an  increase  of  13.8%  from the $1.9  million  earned  in the same
nine-month period in 1997. This increase in earnings results from an increase in
net  interest  income of 1.4% and an increase in  non-interest  income of 48.2%.
These  increases in income were partially  offset by an increase in non-interest
expense of 11.1%. These and other significant fluctuations are discussed below.

NET INTEREST  INCOME.  Total  interest  income  increased  $1.0 million or 4.4%.
Interest and fee income on loans  decreased  $138,000 or .7% for the nine months
ended  September 30, 1998 compared to the same nine months in 1997.  The average
balance  of  loans  decreased  $7.3  million  or  2.6%,  but the  yield on loans
increased by 18 basis points for the same nine 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  $262,000 or 33.4% while the
average  balance on these  interest  bearing  deposits  increased  $5.0  million
(25.8%) and the yield on the same  increased 33 basis  points.  Interest  income
from  securities  increased  $913,000  or 32.1%  while the  yield on  securities
decreased  1.21% and the average  balance of securities  increased $31.4 million
(59.0%) for the nine months ended  September  30, 1998 compared to the same nine
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 discussed earlier.

The net interest  rate spread for the nine months ended  September  30, 1998 and
1997 was 3.82% and 4.22% 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 9
basis points for the nine months ended  September  30, 1998 compared to the same
quarter in 1997. Interest expense on borrowings increased $1.0 million or 145.6%
for the first nine months of 1998 compared to the same nine months in 1997.  The
average balance of borrowings increased $22.9 million (144.2%) and the rate paid
on  borrowings  increased  3 basis  points  during the first nine months of 1998
compared to the same nine 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
nine months ended  September 30, 1998 and 1997.  (dollars in thousands) 
<TABLE>
<CAPTION>

                                                  Nine Months ended September 30, 1998      Nine Months ended September 30, 1997
                                                     Average      Interest   Effective         Average     Interest  Effective
                                                     Balance       Yield       Rate           Balance       Yield      Rate
<S>                                                 <C>           <C>         <C>            <C>          <C>        <C>
Loans                                                 273,623       19,570     9.56%           280,903      19,708     9.38%
Interest Bearing Deposits & FF Sold                    24,338        1,051     5.77%            19,351         788     5.44%
Securities                                             84,761        3,760     5.93%            53,315       2,847     7.14%
-------------------------------------------------------------------------------------------------------------------------------
                                                      382,721       24,381     8.52%           353,569      23,343     8.83%
-------------------------------------------------------------------------------------------------------------------------------
Demand Deposits                                        72,175        1,109     2.05%            70,408       1,138     2.16%
Savings                                                38,359          844     2.94%            39,690         858     2.89%
Certificates of Deposit                               204,549        8,772     5.73%           209,426       8,865     5.66%
Borrowings                                             38,736        1,700     5.87%            15,862         692     5.83%
-------------------------------------------------------------------------------------------------------------------------------
                                                      353,820       12,426     4.70%           335,386      11,553     4.61%
-------------------------------------------------------------------------------------------------------------------------------
Net interest income & spread                                        11,955     3.82%                        11,790     4.22%
</TABLE>

PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $561,000 for the
nine months ended  September  30, 1998  compared to $624,000 for the nine months
ended  September  30,  1997.  The loan loss  reserve  balance has  increased  by
$842,000 from September 30, 1997 to the same date in 1998.

OTHER INCOME. Total noninterest income increased $1.5 million, or 55.2%, for the
nine  months  ended  September  30,  1998  versus the same nine  months in 1997.
Service  charges  on  deposits  increased  $259,000  or 12.8% for the first nine
months 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  for the nine months ended
September  30, 1998 totaling  $665,000  were from the sale of equity  securities
owed by the Company and the sale and call of securities  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.  Income from  insurance
commissions  increased $102,000 or 25.8% for the nine months ended September 30,
1998 versus the same nine months in 1997.  This  increase  was due to a $169,000
commission  rebate on insurance sales received during the first quarter of 1998.
Miscellaneous  income increased $431,000 for the nine months ended September 30,
1998 compared to the same nine months in 1997  primarily  from the gain on sales
of other real estate owned totaling  $223,000 in 1998 compared to $9,000 for the
same period in 1997. Other increases in miscellaneous income for the nine months
ended  September  30, 1998 versus the same nine  months in 1997  include  higher
return  item  charges by  $93,000,  greater  gains on sales of loans by $63,000,
higher income from real estate owned of $31,000 and higher check cashing fees of
$17,000.

NONINTEREST EXPENSES. Total noninterest expenses increased $1.4 million or 12.3%
for the nine months ended September 30, 1998 as compared to the same nine months
in 1997. This increase is primarily the result of  compensation  expense related
to the ESOP and Management Recognition Plan (MRP) which totaled $2.0 million for
the nine months ended September 30, 1998 and $335,000 for the three months ended
September  30,  1997.  The ESOP and MRP were not in place  during  the first six
months of 1997.  Occupancy and equipment expense remained  relatively  unchanged
for the nine  months  ended  September  30,  1998 versus the same nine months in
1997.  Deposit insurance premiums increased $31,000 or 29.8% for the nine months
ended  September 30, 1998 compared to the same nine 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 $248,000 or 6.9% in the first nine months
of 1998 verses 1997.  This decrease was primarily from lower losses and expenses
on transaction accounts.

INCOME  TAXES.  Income tax expense for the nine months ended  September 30, 1998
was $1.0  million or 32.0% of income  before tax and $938,000 or 32.8% of income
before tax for the same nine 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 September 30,
1998, the Bank had  outstanding  advances from the FHLB of Atlanta in the amount
of $44.3  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 the entire principal  balance payable on
December 2, 1998.

At September 30, 1998, total stockholders' equity was $31.7 million, or 7.89% 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  nine  months  of 1998 in  accordance  with the  Company's  planned  stock
repurchase programs.

As of September  30, 1998,  the Bank's  regulatory  capital was in excess of all
applicable  regulatory  requirements.  At  September  30,1998,  the Bank's total
risk-based  capital,  tier 1  risk-based  capital  and  tier 1  leverage  ratios
amounted  to  11.3%,  10.3%  and  7.3%,  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 (Plan) has been approved by the
Board of Directors  which  addresses  whether our computer,  communications  and
other  operating  systems will operate  accurately  after December 31, 1999. The
Plan  addresses  internal  and  external  interfaces  with third party  computer
systems that  communicate  with our system.  A committee has been established to
administer  the  Plan.  

As of  September  30,  1998 the  Company  has  completed  the  inventory  of its
information  systems and identified  critical systems.  All systems  potentially
affected will be evaluated.  The plan also includes  contacting large commercial
loan  customers to determine  their  readiness  for this issue.  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  internal and external  resources  for testing of all
hardware and software.

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 Company's main supplier
of core processing  software and the Company's core processing  service provider
has  completed  its  first  phase of  testing  of their  products  for year 2000
compliance.  The bank received  documentation  from its service  provider  dated
September 10, 1998 stating that its tests were  conclusive  that the application
software will operate at and beyond the year 2000, and that the item  processing
software is year 2000 compliant.  The documentation  included proxy test results
from a sample of the banks  tested.  The next phase of testing by the  Company's
service provider will include connectivity  testing,  sensitive date testing and
specific  institution  testing.  The  results of these tests will be provided as
they are completed by the service provider over the next 15 months.

The Company  internally  has completed  testing  hardware and has begun internal
software testing.  Testing of internal mission critical  processes for Year 2000
problems are expected to be  completed by December 31, 1998.  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.  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.  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.

The Company is in the process of developing a  contingency  plan related to year
2000 issues.  While management  believes that the Company's internal systems and
hardware will be year 2000 ready,  the  contingency  plan will address  internal
scenarios as well as external systems beyond the Bank's control.


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

            None


      ITEM 5.  OTHER INFORMATION

            None

      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
          September 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:       November 9, 1998       /s/ Gary D. Dorminey
                                  ----------------------
                              Gary D. Dorminey
                                 President
                       (Principal Executive Officer)



Date:       November 9, 1998      /s/ C. Lynn Gable
                                 -------------------
                             C. Lynn Gable
                        Chief Financial Officer
                     (Principal Financial Officer)