##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

Form 10-KSB



---

(Mark One)

|x | Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------

For the fiscal year ended December 31, 2005.



| ̈ | Transition report under section 13 or 15(d) of the Securities and Exchange Act of 1934
|- | --------------------------------------------------------------------------------------

For the transition period

Commission file number 000-49909



---

Community First Financial Corporation

(Name of small business issuer in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 81-0556879                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1646 Graves Mill Road, Lynchburg, Virginia                     |  | 24112                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Issuers telephone number (434) 386-6300



---

Securities registered under
Section 12(b) of the Act:



|                 |  |                                     
|---------------- |  | ------------------------------------
|(Title of class) |  | Name of exchange on which registered
|                 |  | None                                

Securities registered under Section 12 (g) of the Act:



|                           |  |                                     
|-------------------------- |  | ------------------------------------
|Common Stock, No Par Value |  | None                                
|(Title of class)           |  | Name of exchange on which registered



---

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ̈

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

Indicate by checkmark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange
Act).    Yes ̈No  x

State issuers revenues for its most recent fiscal year $10,527,775

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. $23,827,683.00 based on $20.50 per share as of February 6, 2006.

(Applicable only to corporate
registrants) State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date 1,180,326 shares outstanding as of March 7, 2006.

Documents incorporated by reference. (1) Portions of the Annual Report to Shareholders for the year ended December 31, 2005 are incorporated into Part
II, Item 5 through 7

Transitional Small Business Disclosure Format:    Yes ̈No  x



---



---

##### Table of Contents

PART 1

Item 1. Description of Business

General

Community First Financial Corporation (CFFC, the Company or the Corporation) is a financial holding company organized under Virginia law during March 2002, commenced operations on
July 1, 2002 and was capitalized through the issuance of $9,686,130 in common stock. CFFC is the parent company of Community First Bank and its primary business activity is its investment in and management of the business of Community First
Bank (CFB or the Bank). CFB commenced operations on October 14, 1999 as a state charted, FDIC insured, commercial bank. The Bank is also a member of the Federal Reserve Bank System.

CFFC was organized by the directors of Community First Bank for the sole purpose of becoming Community First Banks parent holding company. On
July 1, 2002, CFFC and Community First bank completed a share exchange in which one share of Community First Banks common stock was exchanged for one share of CFFCs common stock, Community First Banks shareholders became the
shareholders of CFFC, and Community First Bank became CFFCs wholly-owned subsidiary. Community First Banks shareholders had approved the reorganization at the annual shareholders meeting held on May 13, 2002.

On May 13, 2002 the shareholders approved a change in the articles of incorporation which authorized the issue of up to 1,000,000 shares of
preferred stock and the issue of shares of new preferred stock from time to time in the future, in one or more series, and to fix and determine the relative rights and preferences of these shares, or of each series of shares, at the time of issuance
and without the further approval of shareholders.

During 2002 the Corporations Board of Directors created a series of preferred
stock consisting of 325,000 shares of non-cumulative, convertible preferred stock that provides for stated annual dividend of $.50 per share (Series A Preferred Stock). Through December 31, 2002, the Corporation had sold an
aggregate of 265,100 shares of these shares at a price of $10.00 per share in a private offering to a group of accredited investors, including certain of the Corporations directors and existing shareholders. An additional 34,900
was sold in 2003. The proceeds from the sale of those shares was used to enhance the capital position of the Bank, to purchase 62,700 shares of Highlands Community Bank common stock and for general corporate activities conducted by the Corporation.



1



---

##### Table of Contents

On October 18, 2005, the Corporations Board of Directors announced that it had entered into a
definitive agreement with American National Bankshares Inc., pursuant to which American National will acquire Community First Financial Corporation. The agreement provides that shareholders of Community First will have the right to receive either
0.9219 shares of American National common stock or $21.00 in cash, for each share of Community First common stock. Each preferred stock shareholder of Community First will have the right to receive either 1.1063 shares of American National common
stock or $25.50 in cash, for each share of Community First preferred stock. Per the agreement, cash consideration is limited to 50 percent of the total consideration. The total transaction value is estimated to be $33.9 million. The shareholders of
Community First will vote on the merger at a special meeting on March 27, 2006. Completion of the merger will require the approval of more than two-thirds of the outstanding shares of Community First common stock and Series A preferred stock.
Pending approval, the merger is expected to take effect on or about April 1, 2006.

Community First Bank, a Virginia banking
corporation headquartered in Lynchburg, Virginia, was incorporated under the laws of the Commonwealth of Virginia as a state chartered bank in 1998 and began banking operations on October 14, 1999. The bank is a community oriented financial
institution that provides varied banking services to small and medium-sized businesses, professionals and individuals located in its market area, which consists of the Greater Lynchburg Area. The Banks initial focus is on the Bedford and
Lynchburg County area, where it will be headquartered. The Bank strives to provide its customers with products comparable to statewide regional banks located in its market area, while maintaining the prompt response and level of service of a
community bank. Management believes this operating strategy has particular appeal in the Banks market area.

The Bank currently
conducts business from four full-service offices located at 1646 Graves Mill Road, 2301 Langhorne Road, 20479 Timberlake Road, Lynchburg, Virginia and 150 Front Street, Lovingston, Nelson County, Virginia. The Bank has no operating subsidiaries.

The Bank offers a full range of deposit services that are typically available in most banks and savings and loan associations, including
checking accounts, NOW accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored to the
Banks market area at rates competitive to those offered in the area. In addition, the Bank offers certain retirement account services, such as Individual Retirement Accounts (IRAs). All deposit accounts are insured by the Federal Deposit
Insurance Corporation (the FDIC) up to the maximum amount allowed by law (generally, $100,000 per depositor, subject to aggregation rules). The Bank solicits such accounts from individuals, businesses, associations and organizations, and
governmental authorities.



2



---

##### Table of Contents

The Bank also offers a full range of short-to-medium term commercial and personal loans. Commercial loans
include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate and improvements) and purchase of equipment and machinery. Consumer loans include secured
and unsecured loans for financing automobiles, home improvements, education and personal investments. Additionally, the Bank originates fixed and floating-rate mortgage loans and real estate construction and acquisition loans.

Other services offered by Community First Bank include safe deposit boxes, certain cash management services, travelers checks, direct deposit of
payroll and social security checks and automatic drafts for various accounts. The Bank also has become associated with a shared network of automated teller machines (ATMs) that may be used by Bank customers throughout Virginia and other states
located in the Mid-Atlantic region and nationally. The Bank also provides wealth management services including insurance and investment services.

Market Area

The Banks market area consists of Amherst, Bedford, Campbell and Nelson Counties and the City of
Lynchburg. The Banks primary service area is Bedford County and the city of Lynchburg. The population of the Lynchburg metropolitan statistical area was an estimated 232,538 people as of July 1, 2004.

Employees

As of December 31, 2005, the Bank had
45 full-time equivalent employees. None of its employees are represented by any collective bargaining agreements, and relations with employees are considered excellent.

Governmental Monetary Policies

The earnings and growth of the Bank are affected not only by general
economic conditions, but also by the monetary policies of various governmental regulatory authorities, particularly the Board of Governors of the Federal Reserve System (the Federal Reserve Board). The Federal Reserve Board implements
national monetary policy by its open market operations in United States Government securities, control of the discount rate and establishment of reserve requirements against both member and nonmember financial institutions deposits. These
actions have a significant effect on the overall growth and distribution of loans, investments and deposits, as well as the rates earned on loans, or paid on deposits.

Management of the Bank is unable to predict the effect of possible changes in monetary policies upon the future operating results of the Bank.



3



---

##### Table of Contents

Competition

The Bank competes as a financial intermediary with other commercial banks, savings and loan associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market
mutual funds and other financial institutions operating in the metropolitan Lynchburg market area and elsewhere. Many of the Banks non-bank competitors are not subject to the same extensive federal regulations that govern federally insured
banks and state regulations governing state chartered banks. As a result, such non-bank competitors may have certain advantages over the Bank in providing certain services.

The Banks market area is a highly competitive, highly branched banking market. Competition in the market area for loans to small businesses and
professionals, the Banks target market, is intense, and pricing is important. Most of the banks competitors have substantially greater resources and lending limits than the Bank and offer certain services, such as extensive and
established branch networks, that the Bank is not currently providing. Moreover, larger institutions operating in the market area have access to borrowed funds at lower cost than are presently available to the Bank. Deposit competition among
institutions in the market area also is strong. Competition for depositors funds comes from U.S. Government securities, private issuers of debt obligations and suppliers of other investment alternatives for depositors, among other sources. As
a result, the Bank has paid and may in the future pay, above-market rates to attract deposits.

Regulation

The Company is subject to the periodic reporting requirements of the Securities and Exchange Act of 1934 (the Exchange Act), as amended,
including the filing of periodic reports with the Securities and Exchange Commission (SEC). As an Exchange Act reporting company the Company is also subject to many provisions of the Sarbanes-Oxley Act of 2002 which is aimed at improving
corporate governance, public reporting and company performance. The company is also required to implement rules and regulations adopted by the SEC and the Public Company Accounting Oversight Board (PCAOB) which was authorized under the
Sarbanes-Oxley Act.

As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956, as
amended, and examination and reporting requirements of the Board of Governors of the Federal Reserve System.

The Bank is subject to
various state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of operations. The following is a brief summary of the
material provisions of certain statutes, rules and regulations that will affect the Bank. This summary is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below.



4



---

##### Table of Contents

General.The Bank is under the supervision of, and subject to regulation and examination by, The
Federal Reserve Bank (FRB), The Federal Deposit Insurance Corp. (FDIC) and the Virginia State Corporation Commission Bureau of Financial Institutions (the Commission). As such, the Bank is subject to various statutes and regulations
administered by these agencies that govern, among other things, required reserves, investments, loans, lending limits, acquisitions of fixed assets, interest rates payable on deposits, transactions among affiliates and the Bank, the payment of
dividends, mergers and consolidations, and establishment of branch offices.

Mergers and Acquisitions.Under federal law enacted in
1995, previously existing restrictions on interstate bank acquisitions were abolished effective September 29, 1995, and, since such date, bank holding companies from any state have been able to acquire banks and bank holding companies located
in any other state. Effective June 1, 1997, the law allows banks to merge across state lines, subject to earlier opt-in or opt-out action by individual states. The law also allows interstate branch acquisitions and de
novo branching if permitted by the host state. Effective July 1, 1995, Virginia adopted early opt-in legislation which permits interstate bank mergers. Virginia law also permits interstate branch acquisitions and de novo
branching if reciprocal treatment is accorded Virginia banks in the state of the acquirer.

Dividends.The amount of dividends
payable by the bank depends upon its earnings and capital position, and is limited by federal and state law, regulations and policy. In addition, Virginia law imposes restrictions on the ability of all banks chartered under Virginia law to pay
dividends. Under such law, no dividend may be declared or paid that would impair a banks paid-in capital. Each of the Commission, the FRB and the FDIC have the general authority to limit dividends paid by the Bank if such payments are deemed
to constitute an unsafe and unsound practice. In particular, Section 38 of the Federal Deposit Insurance Act (FDIA) would prohibit the Bank from making a dividend if it were undercapitalized or if such dividend would
result in the institution becoming undercapitalized.

Capital Requirements.The various federal bank regulatory
agencies, including the FRB, have adopted risk-based capital requirements for assessing bank capital adequacy. In addition, Virginia chartered banks must also satisfy the capital requirements adopted by the Commission. The federal capital standards
define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, as adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements
more sensitive to differences in risk profile among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk
categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.



5



---

##### Table of Contents

The minimum requirement for the ratio of total capital risk-weighted assets (including certain
off-balance sheet obligations, such as stand-by letters of credit) is 8.0%. At least half of the risk-based capital must consist of common equity, retained earnings and qualifying perpetual preferred stock, less deductions for goodwill and various
other tangibles (Tier 1 capital). The remainder (Tier 2 capital) generally consists of a limited amount of subordinated debt, certain hybrid capital instruments and other debt securities, preferred stock and a limited amount
of the general valuation allowance for loan losses. The sum of Tier 1 and total capital to risk-weighted asset ratio of the Bank as of December 31, 2005 were 10.49% and 11.47%, respectively, exceeding the minimums required. The consolidated sum
of Tier 1 and total capital to risk-weighted asset ratio of the Corporation as of December 31, 2005 were 10.21% and 12.92%, respectively, exceeding the minimums required

The FRB also has adopted regulations, which supplement the risk-based guidelines to include a minimum leverage ratio of Tier 1 capital to quarterly
average assets (Leverage ratio) of 3%. The FRB has emphasized that the foregoing standards are supervisory minimums and that a banking organization will be permitted to maintain such minimum levels of capital only if it receives the
highest rating under the regulatory rating system and the banking organization is not experiencing or anticipating significant growth. All other banking organizations are required to maintain a Leverage ratio of at least 4.0% to 5.0% of Tier 1
capital. These rules further provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group
averages, without significant reliance on intangible assets. The tangible Tier 1 Leverage ratio is the ratio of a banking organizations Tier 1 capital, less deductions for intangibles otherwise includable in Tier 1 capital, to total tangible
assets. The Leverage ratio of the Bank as of December 31, 2005 was 9.31%, well above the minimum requirement. The consolidated Leverage ratio of the Corporation as of December 31, 2005 was 9.06%, also well above the minimum requirement.

In August 1995, the FRB and other federal banking agencies published a final rule modifying their existing risk-based capital standards to
provide for consideration of interest rate risk when assessing capital adequacy of a bank. Under the final rule, the FRB must explicitly include a banks exposure to declines in the economic value of its capital due to changes in interest rates
as a factor in evaluating a banks capital adequacy. In addition, in August 1995, the FRB and the other federal banking agencies published a joint policy statement for public comment that describes the process the banking agencies will use to
measure and assess the exposure of a banks net economic value to changes in interest rates. Under the policy statement, the FRB will consider results of supervisory and internal interest rate risk models as one factor in evaluating capital
adequacy.



6



---

##### Table of Contents

Deposit Insurance.Section 38 of the FDIA, as amended by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA), requires that the federal banking agencies establish five capital levels for insured depository institutions - well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically undercapitalized - and requires or permits such agencies to take certain supervisory actions as an insured institutions capital level falls. In
certain circumstances, a financial institutions low capital position can lead to enhanced restrictions by the FDIC. An adequately capitalized institution is restricted from accepting brokered deposits, and a significantly
undercapitalized institution must develop a capital restoration plan and is subject to a number of mandatory and discretionary supervisory actions. These powers and authorities are in addition to the traditional powers of the federal banking
agencies to deal with undercapitalized institutions.

As an institution with deposits insured by the Bank Insurance Fund (BIF),
the Bank also is subject to insurance assessments imposed by the FDIC. In September 1995, the BIF met its target reserve level and consequently, effective January 1996, the FDIC revised its risk-based assessment schedule, imposing assessments
ranging from 0.0% (subject to an annual minimum of $2,000) to 0.27% of an institutions average assessment base. The actual assessment to be paid by each BIF member is based on whether the institution is considered well capitalized,
adequately capitalized or undercapitalized, as such terms have been defined in applicable federal regulations, and whether such institution is considered by its supervisory agency to be financially sound or to have
supervisory concerns. The Bank was subject to a deposit insurance assessment, of $60,536 in fiscal 2005.

The Deposit Insurance Funds Act
of 1996 (the Funds Act) was enacted on September 30, 1996. Among other provisions, the Funds Act (i) requires that certain depository institutions pay a one-time special assessment (65.7 cents per $100 of SAIF-assessable
deposits) to the FDIC to capitalize the Savings Association Insurance Fund (SAIF) at its statutory required reserve ratio of 1.25% of insurable deposits, (ii) exempts certain depository institutions with SAIF-assessable deposits
that meet any of several specified criteria from paying the special assessment and (iii) authorizes the Financing Corporation (FICO) to impose periodic assessments on depository institutions that are members of the BIF, in addition
to institutions that are members of the SAIF, in order to spread the cost of the interest payments on the outstanding FICO bonds over a larger number of institutions. Until this change in the law, only SAIF-member institutions bore the cost of
funding these interest payments. FICO assessment rates for the fourth quarter of 2005 were set at 1.34% (per $100) annually for BIF-Assessable deposits and 1.34% (per $100) annually for SAIF-assessable deposits. These rates may be adjusted quarterly
to reflect changes in assessment bases for BIF and the SAIF. By federal law, the FICO rate on BIF-assessable deposits must be one-fifth the rate on SAIF-assessable deposits until the insurance funds are merged. As the Banks deposits are
insured by the BIF, the Funds Act is not expected to significantly impact the Banks financial condition and results of operation in the foreseeable future.



7



---

##### Table of Contents

Safety and soundness.The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, or critically undercapitalized, all such terms are defined under uniform regulations defining such capital levels issued by each of the federal banking agencies.

On December 19, 1991, the FDICIA was enacted into law. FDICIA requires each federal banking regulatory agency to prescribe, by
regulation or guideline, standards for all insured depository institution holding companies relating to (i) internal controls, information systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk
exposure; (v) asset growth; (vi) compensation, fees and benefits; and (vii) such other operational and managerial standards as the agency determines to be appropriate. The compensation standards would prohibit employment contracts or
other compensatory arrangements that provide excess compensation, fees or benefits or could lead to material financial loss. In addition, each federal banking regulatory agency must prescribe, by regulation or guideline, standards relating to asset
quality, earnings and stock valuation as the agency determines to be appropriate. On July 10, 1995 the federal banking agencies including the FRB adopted final rules and proposed guidelines concerning standards for safety and soundness required
to be prescribed by regulation pursuant to Section 39 of the FDIA. In general, the standards relate to (1) operational and managerial matters; (2) asset quality and earnings; and (3) compensation. The operational and managerial
standards cover (a) internal controls and informational systems, (b) internal audit systems, (c) loan documentation, (d) credit underwriting, (e) interest rate exposure, (f) asset growth, and (g) compensation, fees
and benefits.

Activities and Investments of Insured State-Chartered Banks. The activities and equity investments of
FDIC-insured, state chartered banks are generally limited to those that are permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally may not directly or indirectly acquire or retain any
equity investment of a type, or in an amount, that is not permissible for a national bank. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary, (ii) investing as
a limited partner in a partnership, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed
2% of the banks total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors, trustees and officers liability insurance coverage or bankers blanket bond group
insurance coverage for insured depository institutions, and (iv) acquiring or retaining the voting shares of a depository institution if certain requirements are met. In addition, an insured state-chartered bank may not, directly, or indirectly
through a subsidiary, engage as principal in any activity that is not permissible for a national bank unless the FDIC has determined that such activities would pose no risk to the insurance fund of which it is a member and the bank is in
compliance with applicable regulatory requirements. Any insured state-chartered bank directly or indirectly engaged in any activity that is not permitted for a national bank must cease the impermissible activity.



8



---

##### Table of Contents

Regulatory Enforcement Authority.Applicable banking laws include substantial enforcement powers
available to federal banking regulators. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions against banking
organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe practices.

Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

Gramm-Leach-Bliley Act.The Company is a financial holding company within the meaning of the Federal Gramm-Leach-Bliley Act (the GLB
Act). The GLB Act was adopted by Congress during 1999 and has dramatically changed various federal laws governing the banking, securities and insurance industries. The GLB Act has expanded opportunities for banks and bank holding companies to
provide services and engage in other revenue-generating activities that previously were prohibited to them.

With respect to bank holding
companies, the GLB Act in general (i) expands opportunities to affiliate with securities firms and insurance companies; (ii) overrides certain state laws that would prohibit certain banking and insurance affiliations; (iii) expands
the activities in which banks and bank holding companies may participate; (iv) requires that banks and bank holding companies engage in some activities only through affiliates owned or managed in accordance with certain requirements;
(v) reorganizes responsibility among various federal regulators for oversight of certain securities activities conducted by banks and bank holding companies; and (vi) requires banks to adopt and implement policies and procedures for the
protection of the financial privacy of their customers, including procedures that allow customers to elect that certain financial information not be disclosed to certain persons.

The GLB Act has expanded opportunities for Community First to provide other services and obtain other revenues in the future but, at present, it has not
had a significant effect on our operations as they are presently conducted. However, this expanded authority also may present us with new challenges as our larger competitors are able to expand their services and products into areas that are not
feasible for smaller, community oriented financial institutions. The economic effects of the GLB Act on the banking industry, and on competitive conditions in the financial services industry generally, may be profound.

Item 2. Description of Properties

As of
July 2000, Community First Bank conducted business from its main banking office located at 1646 Graves Mill Road, Lynchburg, Virginia. The Bank owns the two-story building, which contains approximately 7,500 square feet.

The Bank, in March 2001, established an office at 2301 Langhorne Road, Lynchburg, Virginia, which it leases. In April 2002 the Bank leased additional
space on the second floor of this office. Also, see Item 7, Certain Relationships and Related Transactions in this Form 10-KSB.



9



---

##### Table of Contents

The Bank established a permanent office at 150 Front Street, Lovingston, Virginia in April of 2003, which
is leased. In September of 2003, the bank established an office at 20479 Timberlake Road, Lynchburg, Virginia. The two-story building owned by the Bank contains approximately 4000 square feet. The Bank has purchased lots in Amherst and Bedford for
possible future offices.

Item 3. Legal Proceedings

The Company is not involved in any pending legal proceedings other than non-material legal proceedings occurring in the ordinary course of a business.

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

There were no matters
submitted to a vote of security holders during the quarter ended December 31, 2005.



10



---

##### Table of Contents

PART II

ITEM 5. Market for the Common Equity and Related Shareholder Matters

CFFC first issued shares of its common
stock during July 2002 in exchange for the outstanding shares of Community First Banks common stock in connection with CFFCs initial incorporation as Community First Banks parent holding company. As of January 12, 2005 the
Corporations common stock became eligible to be traded on the Over-the-Counter Bulletin Board under the trading name CYFC. Prior to the organization of CFFC, Community First Banks common stock was not listed on any exchange, neither was
there an active public trading market for the stock.

Between the date of issuance and January 12, 2005 (when the stock became
eligible to be traded on the Over-the-Counter Bulletin Board), to the knowledge of management, the common stock traded at a low of $10.00, and a high of $13.00. From January 12, 2005 and through March 31, 2005, trades were at a low of
$13.00 and a high of $22.00. Low and high prices of trades were $12.00 and $17.00, $12.00 and $15.00, and $14.50 and $20.75 for the quarters ended June 30, 2005, September 30, 2005 and December 31, 2005, respectively.

There were approximately 991 holders of record of Community First common stock as of December 31, 2005.

CFFC has not yet paid any cash dividends on its common stock. CFFC is a holding company, and its main source of revenue is dividends it receives from
Community First Bank. Therefore, CFFCs ability to pay dividends to its shareholders is subject to receiving dividends from Community First Bank. Community First Banks ability to pay dividends to CFFC will continue to depend on its
earnings and financial condition, capital requirements, general economic conditions, compliance with regulatory requirements that apply to Virginia banks, and other factors. Also, dividends by Community First Bank are subject to various laws and
regulatory restrictions, including the requirement that its capital be maintained at certain levels and that it only pay dividends from its retained earnings.

The Board of Directors of the Corporation declared a 6 for 5 stock split with respect to its issued and outstanding common stock payable in the form of a 20% stock dividend. Shareholders of record received six shares
for each five shares of common stock held. The stock split was effective October 25, 2004 to common stockholders of record on October 15, 2004. A total of 193,713 additional shares of common stock were issued as a result of this stock
split.



11



---

##### Table of Contents

On August 15, 2002, CFFC issued 325,000 shares of its Series A preferred Stock for cash in a limited
offering. Through December 31, 2002, the company had sold an aggregate of 265,100 shares of these shares at a price of $10.00 per share. In 2003 an additional 34,900 shares were sold. CFFC paid no underwriting discounts or commissions in
connection with the sale. The shares were sold only to persons who were accredited investors as defined in the Securities and Exchange Commissions Rule 501 (a). Each share is convertible into 1.2 shares of CFFCs common stock
at any time following two years after it is issued at the option of the holder of that share and, under certain circumstances, each share is convertible at the same rate at the option of CFFC. The full terms and conditions of such conversion are set
forth in CFFCs Private Placement Memorandum. The shares of Series A Preferred Stock were offered and sold without registration under the 1933 Act pursuant to the exemption from registration provided by Rule 506 of the 1933 Act.

The Board of Directors of the Corporation declared cash dividends in the amount of $.50 per outstanding share of convertible preferred stock in October
2004 and October 2005. The total amount of the preferred stock dividend was $150,000 for 2004 and 2005. These represent the five percent dividend payable for those years. No preferred stock dividends were paid in prior years.

On October 18, 2005, the Corporations Board of Directors announced that it had entered into a definitive agreement with American National
Bankshares Inc., pursuant to which American National will acquire Community First Financial Corporation. The agreement provides that shareholders of Community First will have the right to receive either 0.9219 shares of American National common
stock or $21.00 in cash, for each share of Community First common stock. Each preferred stock shareholder of Community First will have the right to receive either 1.1063 shares of American National common stock or $25.50 in cash, for each share of
Community First preferred stock. Per the agreement, cash consideration is limited to 50 percent of the total consideration. The total transaction value is estimated to be $33.9 million. The shareholders of Community First will vote on the merger at
a special meeting on March 27, 2006. Completion of the merger will require the approval of more than two-thirds of the outstanding shares of Community First common stock and Series A preferred stock. Pending approval, the merger is expected to
take effect on or about April 1, 2006.

ITEM 6. Managements Discussion and Analysis or Plan of Operations

This information is incorporated herein by reference from pages 62 through 65 of the 2005 Annual Report.

Statistical Information

The following statistical
information is furnished pursuant to the requirements of Guide 3 promulgated under the Securities Act of 1933.



12



---

##### Table of Contents

INDEX



|          |  |                                                             |  |     
|--------- |  | ----------------------------------------------------------- |  | ----
|          |  |                                                             |  | Page
|TABLE 1.  |  | Average Balance Sheets, Net Interest Income, and Rates      |  | 14  
|          |  |                                                            
|TABLE 2.  |  | Analysis of Change in Net Interest Income                   |  | 16  
|          |  |                                                            
|TABLE 3.  |  | Types of Investment Securities                              |  | 17  
|          |  |                                                            
|TABLE 4.  |  | Maturity Schedule of Selected Loans as of December 31, 2005 |  | 17  
|          |  |                                                            
|TABLE 5.  |  | Summary of Allowance for Loan Losses                        |  | 18  
|          |  |                                                            
|TABLE 6.  |  | Allocation of the Allowance for Loan Losses                 |  | 19  
|          |  |                                                            
|TABLE 7.  |  | Deposits                                                    |  | 20  
|          |  |                                                            
|TABLE 8.  |  | Return on Equity and Assets                                 |  | 21  
|          |  |                                                            
|TABLE 9.  |  | Interest Sensitivity Analysis                               |  | 21  
|          |  |                                                            
|TABLE 10. |  | Selected Historical Financial Information                   |  | 22  

Amounts in tables are in thousands.



13



---

##### Table of Contents

TABLE 1

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES

The following table depicts bank interest income on earnings assets and related average yields as well as interest expense on interest-bearing
liabilities and related average rates paid for the periods indicated.



|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|------------------------------------------------------- |  | --------------- | ------- | - | ---------------------------- | - | ------------------- |  | ---- | --------------- |  | - | ---------------------------- | - | ------------------- | - | ----- |  | ---- | -
|                                                        |  | Average Balance |         |   | 2005 Interest Income/Expense |   | Average Yield/ Rate |  |      | Average Balance |  |   | 2004 Interest Income/Expense |   | Average Yield/ Rate |  
|Assets:                                                 |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Interest-bearing deposits with banks                    |  | $               | 240     |   |                              | $ | 7                   |  | 2.92 | %               |  | $ | 67                           |   |                     | $ | 1     |  | 1.07 | %
|Investment securities                                   |  |                 | 8,580   |   |                              |   | 299                 |  | 3.48 |                 |  |   | 7,602                        |   |                     |   | 243   |  | 3.19 |  
|Total loans (1)                                         |  |                 | 136,347 |   |                              |   | 9,473               |  | 6.95 |                 |  |   | 132,278                      |   |                     |   | 8,463 |  | 6.40 |  
|                                                        |  |                 |         |   |                              |  
|Federal funds sold                                      |  |                 | 579     |   |                              |   | 18                  |  | 3.11 |                 |  |   | 3,755                        |   |                     |   | 49    |  | 1.30 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total earning assets                                    |  |                 | 145,746 |   |                              | $ | 9,797               |  | 6.72 |                 |  |   | 143,702                      |   |                     | $ | 8,756 |  | 6.09 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Less: allowance for loan losses                         |  |                 | (1,386  | ) |                              |   |                     |  |      |                 |  |   | (1,528                       | ) |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |  
|Total non-earning assets                                |  |                 | 15,688  |   |                              |   |                     |  |      |                 |  |   | 13,317                       |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total Assets                                            |  | $               | 160,048 |   |                              |   |                     |  |      |                 |  | $ | 155,491                      |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Liabilities & Equity                                    |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Interest-bearing deposits:                              |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|NOW                                                     |  | $               | 20,502  |   |                              | $ | 242                 |  | 1.18 | %               |  | $ | 35,435                       |   |                     | $ | 553   |  | 1.56 | %
|Savings                                                 |  |                 | 4,826   |   |                              |   | 112                 |  | 2.32 |                 |  |   | 1,631                        |   |                     |   | 7     |  | 0.46 |  
|Money market                                            |  |                 | 8,897   |   |                              |   | 117                 |  | 1.32 |                 |  |   | 10,700                       |   |                     |   | 141   |  | 1.31 |  
|Time deposits >$100,000                                 |  |                 | 20,783  |   |                              |   | 760                 |  | 3.66 |                 |  |   | 18,522                       |   |                     |   | 556   |  | 3.00 |  
|Other time                                              |  |                 | 68,260  |   |                              |   | 2,427               |  | 3.56 |                 |  |   | 57,881                       |   |                     |   | 1,775 |  | 3.07 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total interest-bearing deposits                         |  |                 | 123,268 |   |                              |   | 3,658               |  | 2.97 |                 |  |   | 124,169                      |   |                     |   | 3,032 |  | 2.44 |  
|                                                        |  |                 |         |   |                              |  
|Other borrowings                                        |  |                 | 3,547   |   |                              |   | 184                 |  | 5.19 |                 |  |   | 2,571                        |   |                     |   | 104   |  | 4.05 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total interest bearing liabilities                      |  |                 | 126,815 |   |                              |   | 3,842               |  | 3.03 |                 |  |   | 126,740                      |   |                     |   | 3,136 |  | 2.47 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Noninterest-bearing liabilities:                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Demand deposits                                         |  |                 | 18,415  |   |                              |   |                     |  |      |                 |  |   | 14,622                       |   |                     |   |       |  |      |  
|Other liabilities                                       |  |                 | 608     |   |                              |   |                     |  |      |                 |  |   | 638                          |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total Liabilities                                       |  |                 | 145,838 |   |                              |   |                     |  |      |                 |  |   | 142,000                      |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |  
|Stockholders equity                                    |  |                 | 14,210  |   |                              |   |                     |  |      |                 |  |   | 13,491                       |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Total Liabilities & Equity                              |  | $               | 160,048 |   |                              |   |                     |  |      |                 |  | $ | 155,491                      |   |                     |   |       |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Net interest Income                                     |  |                 |         |   |                              | $ | 5,955               |  |      |                 |  |   |                              |   |                     | $ | 5,620 |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |                 |  |   |                              |   |                     |   |       |  |      |  
|Interest rate spread (2)                                |  |                 |         |   |                              |   |                     |  | 3.69 | %               |  |   |                              |   |                     |   |       |  | 3.62 | %
|Interest expense as a percent of average earning assets |  |                 |         |   |                              |   |                     |  | 2.64 | %               |  |   |                              |   |                     |   |       |  | 2.18 | %
|Net Interest margin (3)                                 |  |                 |         |   |                              |   |                     |  | 4.09 | %               |  |   |                              |   |                     |   |       |  | 3.91 | %

---

|(1) | Nonaccruing loans are included in average loans outstanding
|--- | -----------------------------------------------------------

|(2) | Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities
|--- | ------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest margin is net interest income expressed as a percentage of average earning assets
|--- | ----------------------------------------------------------------------------------------------



14



---

##### Table of Contents

TABLE 1CONTINUED

AVERAGE BALANCE, INCOME AND EXPENSE, YIELD RATES



|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|------------------------------------------------------- |  | --------------- | ------- | - | ---------------------------- | - | ------------------- |  | ---- | -
|                                                        |  | Average Balance |         |   | 2003 Interest Income/Expense |   | Average Yield/ Rate | 
|Assets:                                                 |  |                 |         |   |                              |   |                     |  |      |  
|Investment securities                                   |  | $               | 4,291   |   |                              | $ | 139                 |  | 3.24 | %
|Total loans (1)                                         |  |                 | 141,932 |   |                              |   | 9,129               |  | 6.43 |  
|                                                        |  |                 |        
|Federal funds sold                                      |  |                 | 3,786   |   |                              |   | 38                  |  | 1.00 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total earning assets                                    |  |                 | 150,009 |   |                              | $ | 9,306               |  | 6.20 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Less: allowance for loan losses                         |  |                 | (1,599  | ) |                              |   |                     |  |      |  
|Total non-earning assets                                |  |                 | 9,964   |   |                              |   |                     |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total Assets                                            |  | $               | 158,374 |   |                              |   |                     |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Liabilities & Equity                                    |  |                 |         |   |                              |   |                     |  |      |  
|Interest-bearing deposits:                              |  |                 |         |   |                              |   |                     |  |      |  
|NOW                                                     |  | $               | 29,536  |   |                              | $ | 598                 |  | 2.02 | %
|Savings                                                 |  |                 | 1,152   |   |                              |   | 8                   |  | 0.69 |  
|Money market                                            |  |                 | 10,038  |   |                              |   | 163                 |  | 1.62 |  
|Time deposits >$100,000                                 |  |                 | 21,864  |   |                              |   | 701                 |  | 3.21 |  
|Other time                                              |  |                 | 68,863  |   |                              |   | 2,373               |  | 3.45 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total interest-bearing deposits                         |  |                 | 131,453 |   |                              |   | 3,843               |  | 2.92 |  
|                                                        |  |                 |        
|Short-term borrowings                                   |  |                 | 1,270   |   |                              |   | 37                  |  | 2.91 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total interest bearing liabilities                      |  |                 | 132,723 |   |                              |   | 3,880               |  | 2.92 |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Noninterest-bearing liabilities:                        |  |                 |         |   |                              |   |                     |  |      |  
|Demand deposits                                         |  |                 | 13,039  |   |                              |   |                     |  |      |  
|Other liabilities                                       |  |                 | 600     |   |                              |   |                     |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total Liabilities                                       |  |                 | 146,362 |   |                              |   |                     |  |      |  
|                                                        |  |                 |        
|Stockholders equity                                    |  |                 | 12,012  |   |                              |   |                     |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Total Liabilities & Equity                              |  | $               | 158,374 |   |                              |   |                     |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Net interest Income                                     |  |                 |         |   |                              | $ | 5,426               |  |      |  
|                                                        |  |                 |         |   |                              |   |                     |  |      |  
|Interest rate spread (2)                                |  |                 |         |   |                              |   |                     |  | 3.28 | %
|Interest expense as a percent of average earning assets |  |                 |         |   |                              |   |                     |  | 2.59 | %
|Net Interest margin (3)                                 |  |                 |         |   |                              |   |                     |  | 3.62 | %

---

|(1) | Nonaccruing loans are included in average loans outstanding
|--- | -----------------------------------------------------------

|(2) | Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities
|--- | ------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest margin is net interest income expressed as a percentage of average earning assets
|--- | ----------------------------------------------------------------------------------------------



15



---

##### Table of Contents

TABLE 2

VOLUME AND RATE ANALYSIS

The following table describes the impact on the companys interest income and interest expense resulting from changes in average balances and
average rates over the period indicated. The changes in interest due to both volume and rate have been allocated to each equally.



|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|--------------------------------------------------------------------------------------- |  | ----------------------------------------- | ---- | - | ----------------------------------------- | - | ---- | ----------------------------- |  | - | ---------------------------------------- | - |  | ----------------------------------------- | ---- | - | ----------------------------- | - | ---- | - |  | - | ---- | -
|                                                                                        |  | Years Ended December 31,2005/2004         |      |   | Years Ended December 31,2004/2003         |  
|                                                                                        |  | Increase (decrease)due to Average Balance |      |   | Increase(decrease) Change in Average
Rate |   |      | Total ornetincrease(decrease) |  |   | Increase(decrease)due to Average Balance |   |  | Increase(decrease) change in Average
Rate |      |   | Total ornetincrease(decrease) |  
|Interest-earning assets:                                                                |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Interest-bearing deposits with banks                                                    |  | $                                         | 5    |   |                                           | $ | 1    |                               |  | $ | 6                                        |   |  | $                                         | 1    |   |                               | $ |     |   |  | $ | 1    |  
|Taxable securities                                                                      |  |                                           | 34   |   |                                           |   | 22   |                               |  |   | 56                                       |   |  |                                           | 106  |   |                               |   | (2   | ) |  |   | 104  |  
|Federal funds sold and securities purchased under resale agreements                     |  |                                           | (99  | ) |                                           |   | 68   |                               |  |   | (31                                      | ) |  |                                           |     |   |                               |   | 11   |   |  |   | 11   |  
|Totals loans (net of unearned)                                                          |  |                                           | 283  |   |                                           |   | 727  |                               |  |   | 1,010                                    |   |  |                                           | (619 | ) |                               |   | (47  | ) |  |   | (666 | )
|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Income on interest-earning assets                                                       |  |                                           | 223  |   |                                           |   | 818  |                               |  |   | 1,041                                    |   |  |                                           | (512 | ) |                               |   | (38  | ) |  |   | (550 | )
|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Interest-bearing liabilities:                                                           |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Interest-bearing demand deposits (NOW accounts)                                         |  | $                                         | (176 | ) |                                           | $ | (135 | )                             |  | $ | (311                                     | ) |  | $                                         | 92   |   |                               | $ | (137 | ) |  | $ | (45  | )
|Money market deposits                                                                   |  |                                           | (24  | ) |                                           |   | (   | )                             |  |   | (24                                      | ) |  |                                           | 9    |   |                               |   | (31  | ) |  |   | (22  | )
|Savings deposits                                                                        |  |                                           | 74   |   |                                           |   | 31   |                               |  |   | 105                                      |   |  |                                           | 2    |   |                               |   | (3   | ) |  |   | (1   | )
|Certificates of deposit of $100,000 & over                                              |  |                                           | 83   |   |                                           |   | 121  |                               |  |   | 204                                      |   |  |                                           | (100 | ) |                               |   | (45  | ) |  |   | (145 | )
|Other time deposits                                                                     |  |                                           | 369  |   |                                           |   | 283  |                               |  |   | 652                                      |   |  |                                           | (337 | ) |                               |   | (261 | ) |  |   | (598 | )
|Federal funds purchased, securities sold under repurchase agreements, subordinated debt |  |                                           | 51   |   |                                           |   | 29   |                               |  |   | 80                                       |   |  |                                           | 53   |   |                               |   | 14   |   |  |   | 67   |  
|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Expense of interest-bearing liabilities                                                 |  |                                           | 377  |   |                                           |   | 329  |                               |  |   | 706                                      |   |  |                                           | (281 | ) |                               |   | (463 | ) |  |   | (744 | )
|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  
|Net change in net interest income                                                       |  |                                           | (154 | ) |                                           |   | 489  |                               |  |   | 335                                      |   |  |                                           | (231 | ) |                               |   | 425  |   |  |   | 194  |  
|                                                                                        |  |                                           |      |   |                                           |   |      |                               |  |   |                                          |   |  |                                           |      |   |                               |   |      |   |  |   |      |  



16



---

##### Table of Contents

TABLE 3

SECURITIES HELD FOR RESALE AND INVESTMENT

MATURITY DISTRIBUTION AND AVERAGE YIELD

Book Value of Investments



|                                          |  |              |       |      |   |       
|----------------------------------------- |  | ------------ | ----- | ---- | - | ------
|                                          |  | December 31,
|                                          |  | 2005         |       | 2004
|Securities Available for Sale:            |  |              |       |      |   |       
|                                          |  |             
|Fair Value:                               |  |              |       |      |   |       
|U.S. Government Agencies and Corporations |  | $            | 7,093 |      | $ | 10,186
|Equity Securities                         |  |              | 322   |      |   | 322   
|                                          |  |              |       |      |   |       
|                                          |  | $            | 7,415 |      | $ | 10,508
|                                          |  |              |       |      |   |       

Maturities of Investments at December 31, 2005



|                                   |  |                |       |                  |   |                      |  |      |  
|---------------------------------- |  | -------------- | ----- | ---------------- | - | -------------------- |  | ---- | -
|                                   |  | Amortized Cost |       | FairMarket Value |   | WeightedAverageYield | 
|Within one year                    |  | $              | 2,000 |                  | $ | 1,965                |  | 2.66 | %
|After one year to five years       |  |                | 5,255 |                  |   | 5,128                |  | 3.08 | %
|After five years through ten years |  |                | 0     |                  |   | 0                    |  | 0    |  
|                                   |  |                |       |                  |   |                      |  |      |  
|                                   |  | $              | 7,255 |                  | $ | 7,093                |  | 2.97 | %
|                                   |  |                |       |                  |   |                      |  |      |  

Other than U.S. Government Agencies, the Bank held no issues that exceeded 10% of
Shareholders Equity at December 31, 2005.

TABLE 4

LOAN PORTFOLIO AND MATURITY SCHEDULE OF SELECTED LOANS



|                          |  |              |         |   |      |   |         |  
|------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                          |  | December 31, |        
|                          |  | 2005         |         |   | 2004 |  
|Commercial                |  | $            | 20,506  |   |      | $ | 19,109  |  
|Real Estate:              |  |              |         |   |      |   |         |  
|Mortgage                  |  |              | 101,790 |   |      |   | 93,696  |  
|Construction              |  |              | 10,699  |   |      |   | 10,513  |  
|Consumer and other        |  |              | 5,645   |   |      |   | 7,405   |  
|                          |  |              |         |   |      |   |         |  
|                          |  |              | 138,640 |   |      |   | 130,723 |  
|Net deferred loan fees    |  |              | (220    | ) |      |   | (189    | )
|Allowance for loan losses |  |              | (1,386  | ) |      |   | (1,392  | )
|                          |  |              |         |   |      |   |         |  
|Loans, net                |  | $            | 137,034 |   |      | $ | 129,142 |  
|                          |  |              |         |   |      |   |         |  

The following table presents the maturities of loans for the Bank. Maturities of loans are not readily available
by loan category.



|                                                     |  |                   |        
|---------------------------------------------------- |  | ----------------- | -------
|                                                     |  | December 31, 2005
|Aggregate Maturities of Loan balances which are due: |  |                   |        
|Within one year                                      |  | $                 | 57,927 
|Over one year through five years                     |  |                   | 63,806 
|Over five years                                      |  |                   | 16,687 
|                                                     |  |                   |        
|Total Loans                                          |  | $                 | 138,420
|                                                     |  |                   |        



17



---

##### Table of Contents

There were no restructured loans at December 31, 2005 and December 31, 2004. The Bank had
$680,641 and $901,519 in non-performing loans, repossessed or foreclosed properties at December 31, 2005 and 2004, respectively.

The
Bank is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit and standby letters of credit. This information is incorporated by reference in
this report from note 16 on pages 54 and 55 of the 2005 Annual Report to Stockholders.

The Bank also has certain concentrations of credit
risk. This information is incorporated by reference in this report from note 16 on page 55 of the 2005 Annual Report to Stockholders.

TABLE 5

SUMMARY OF ALLOWANCE FOR LOAN LOSSES

The following table shows the Banks loan loss and recovery experience for the past three years.

The Bank tries to maintain an allowance for loan losses that represents an estimate of all losses in the Banks loan portfolio. To achieve this
goal, the loan loss provision must be sufficient to cover charged off loans plus growth in the loan portfolio. The loan loss provision is a charge against earnings necessary to maintain the allowance for loan losses at managements targeted
level. In considering the provision for loan loss, an evaluation of the loan portfolio is conducted. Loans in non-accrual status and loans past due over ninety days are considered in this evaluation as well as other loans the Bank feels may be a
potential loss. The status of non-accrual and past due loans varies from quarter to quarter based on seasonality and cash flow of customers.



|                                 |  |      |       |   |      |   |        |      |  |   |       |  
|-------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                 |  | 2005 |       |   | 2004 |   |        | 2003 | 
|Balance beginning of period      |  | $    | 1,392 |   |      | $ | 2,129  |      |  | $ | 1,302 |  
|Loans charged off:               |  |      | (497  | ) |      |   | (1,230 | )    |  |   | (83   | )
|                                 |  |      |      
|Recoveries                       |  |      | 89    |   |      |   | 8      |      |  |   | 7     |  
|                                 |  |      |       |   |      |   |        |      |  |   |       |  
|Net loans charged off            |  |      | (408  | ) |      |   | (1,222 | )    |  |   | (76   | )
|                                 |  |      |      
|Provision for loan losses        |  |      | 402   |   |      |   | 485    |      |  |   | 903   |  
|                                 |  |      |       |   |      |   |        |      |  |   |       |  
|Balance end of period            |  | $    | 1,386 |   |      | $ | 1,392  |      |  | $ | 2,129 |  
|                                 |  |      |       |   |      |   |        |      |  |   |       |  
|Net charge-offs to Average loans |  |      | 0.30  | % |      |   | 0.92   | %    |  |   | 0.05  | %



18



---

##### Table of Contents

TABLE 6

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

A breakdown of the allowance for loan losses along with the percent of loans in each major category is provided in the following table. Management of the
Bank does not believe that the allowance for loan losses can be fragmented by category with any precision that would be useful to investors. The breakdown of the allowance for loan losses is based primarily upon those factors discussed above in
computing the allowance as a whole. Because all of these factors are subject to change, the breakdown is not necessarily indicative of the category of future losses.



|                         |  |                   |       |                                                  |                   |   |           |   |                                                  |  |        |  
|------------------------ |  | ----------------- | ----- | ------------------------------------------------ | ----------------- | - | --------- | - | ------------------------------------------------ |  | ------ | -
|                         |  | December 31, 2005 |       |                                                  | December 31, 2004 |  
|                         |  | Allowance         |       | Percentage ofloans in eachcategory to totalloans |                   |   | Allowance |   | Percentage ofloans in eachcategory to totalloans | 
|Commercial               |  | $                 | 205   |                                                  | 14.79             | % |           | $ | 203                                              |  | 14.62  | %
|Real Estate Mortgage     |  |                   | 1,017 |                                                  | 73.42             |   |           |   | 998                                              |  | 71.68  |  
|Real Estate Construction |  |                   | 107   |                                                  | 7.72              |   |           |   | 112                                              |  | 8.04   |  
|Consumer                 |  |                   | 57    |                                                  | 4.07              |   |           |   | 79                                               |  | 5.66   |  
|                         |  |                   |       |                                                  |                   |   |           |   |                                                  |  |        |  
|Total                    |  | $                 | 1,386 |                                                  | 100.00            | % |           | $ | 1,392                                            |  | 100.00 | %
|                         |  |                   |       |                                                  |                   |   |           |   |                                                  |  |        |  



19



---

##### Table of Contents

TABLE 7

DEPOSITS

The average balance and rates for certain categories of deposits for the last three years are shown in the following table.



|                                    |  |                |         |              |      |   |                 |      |              |  |      |                 |  |              |         |  |      |  
|----------------------------------- |  | -------------- | ------- | ------------ | ---- | - | --------------- | ---- | ------------ |  | ---- | --------------- |  | ------------ | ------- |  | ---- | -
|                                    |  | 2005           |         |              | 2004 |   |                 | 2003 |             
|                                    |  | AverageBalance |         | Average Rate |      |   | Average Balance |      | Average Rate |  |      | Average Balance |  | Average Rate |        
|Noninterest-bearing demand deposits |  | $              | 18,415  |              |      |   |                 | $    | 14,622       |  |      |                 |  | $            | 13,039  |  |      |  
|Interest-bearing deposits:          |  |                |         |              |      |   |                 |      |              |  |      |                 |  |              |         |  |      |  
|Now                                 |  |                | 20,502  |              | 1.18 | % |                 |      | 35,435       |  | 1.56 | %               |  |              | 29,536  |  | 2.02 | %
|Savings                             |  |                | 4,826   |              | 2.32 | % |                 |      | 1,631        |  | .46  | %               |  |              | 1,152   |  | .69  | %
|Money market                        |  |                | 8,897   |              | 1.32 | % |                 |      | 10,700       |  | 1.31 | %               |  |              | 10,038  |  | 1.62 | %
|Time deposits >$100,000             |  |                | 20,783  |              | 3.66 | % |                 |      | 18,522       |  | 3.00 | %               |  |              | 21,864  |  | 3.21 | %
|Other time                          |  |                | 68,260  |              | 3.56 | % |                 |      | 57,881       |  | 3.07 | %               |  |              | 68,863  |  | 3.45 | %
|                                    |  |                |         |              |      |   |                 |      |              |  |      |                 |  |              |         |  |      |  
|Total interest-bearing deposits     |  |                | 123,268 |              | 2.97 | % |                 |      | 124,169      |  | 2.44 | %               |  |              | 131,453 |  | 2.92 | %
|                                    |  |                |         |              |      |   |                 |      |              |  |      |                 |  |              |         |  |      |  
|Total deposits                      |  | $              | 141,683 |              |      |   |                 | $    | 138,791      |  |      |                 |  | $            | 144,492 |  |      |  
|                                    |  |                |         |              |      |   |                 |      |              |  |      |                 |  |              |         |  |      |  

Maturities of CDs >$100,000 at

December 31, 2005



|                                   |  |        |        |         |        |  
|---------------------------------- |  | ------ | ------ | ------- | ------ | -
|                                   |  | Amount |        | Percent |       
|Three months or less               |  | $      | 2,584  |         | 12.02  | %
|Over three months to twelve months |  |        | 8,134  |         | 37.83  | %
|One year through five years        |  |        | 10,783 |         | 50.15  | %
|Over five years                    |  |        |       |         | 0.00   | %
|                                   |  |        |        |         |        |  
|Total                              |  | $      | 21,501 |         | 100.00 | %
|                                   |  |        |        |         |        |  



20



---

##### Table of Contents

TABLE 8

RETURN ON EQUITY AND ASSETS

The ratio of net income to average total assets and average stockholders equity and certain other ratios for the periods indicated are as follows:



|                                      |  |      |   |  |      |   |  |      |  
|------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                      |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Return on average assets              |  | .55  | % |  | .55  | % |  | .64  | %
|Return on average equity              |  | 6.24 | % |  | 6.38 | % |  | 8.46 | %
|                                      |  |      |  
|Average equity to average assets      |  | 8.88 | % |  | 8.68 | % |  | 7.58 | %
|Dividend payout ratio on common stock |  | 0.00 | % |  | 0.00 | % |  | 0.00 | %

TABLE 9

INTEREST SENSITIVITY ANALYSIS

Static Gap Schedule

(in thousands)



|                           |  |          |        |   |            |   |        |             |  |   |           |   |  |           |         |   |            |   |       |            |  |   |        |   |  |   |        |   |  |   |         |  
|-------------------------- |  | -------- | ------ | - | ---------- | - | ------ | ----------- |  | - | --------- | - |  | --------- | ------- | - | ---------- | - | ----- | ---------- |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                           |  | Floating |        |   | 0-3 Months |   |        | 3-12 Months |  |   | 1-3 Years |   |  | 3-5 Years |         |   | 5-15 Years |   |       | > 15 Years |  |   | TOTAL  |  
|Assets                     |  |          |        |   |            |   |        |             |  |   |           |   |  |           |         |   |            |   |       |            |  |   |        |   |  |   |        |   |  |   |         |  
|                           |  |          |        |   |            |   |        |            
|Loans                      |  | $        | 54,948 |   |            | $ | 14,051 |             |  | $ | 27,632    |   |  | $         | 22,852  |   |            | $ | 9,229 |            |  | $ | 7,851  |   |  | $ | 1,857  |   |  | $ | 138,420 |  
|Int -bearing Bank Deposits |  |          | 0      |   |            |   | 0      |             |  |   | 250       |   |  |           | 0       |   |            |   | 0     |            |  |   | 0      |   |  |   | 0      |   |  |   | 250     |  
|Fed Funds                  |  |          | 0      |   |            |   | 0      |             |  |   | 0         |   |  |           | 0       |   |            |   | 0     |            |  |   | 0      |   |  |   | 0      |   |  |   | 0       |  
|Investments                |  |          | 0      |   |            |   | 0      |             |  |   | 1,965     |   |  |           | 5,128   |   |            |   | 0     |            |  |   | 0      |   |  |   | 0      |   |  |   | 7,093   |  
|Totals                     |  | $        | 54,948 |   |            | $ | 14,051 |             |  | $ | 29,847    |   |  | $         | 27,980  |   |            | $ | 9,229 |            |  | $ | 7,851  |   |  | $ | 1,857  |   |  | $ | 145,763 |  
|                           |  |          |        |   |            |   |        |            
|Liabilities                |  |          |        |   |            |   |        |             |  |   |           |   |  |           |         |   |            |   |       |            |  |   |        |   |  |   |        |   |  |   |         |  
|                           |  |          |        |   |            |   |        |            
|Interest-bearing           |  |          |        |   |            |   |        |             |  |   |           |   |  |           |         |   |            |   |       |            |  |   |        |   |  |   |        |   |  |   |         |  
|Transaction accounts       |  | $        | 7,918  |   |            | $ | 0      |             |  | $ | 0         |   |  | $         | 5,973   |   |            | $ | 0     |            |  | $ | 0      |   |  | $ | 0      |   |  | $ | 13,891  |  
|Money market/Savings       |  |          | 5,568  |   |            |   | 0      |             |  |   | 0         |   |  |           | 8,012   |   |            |   | 0     |            |  |   | 0      |   |  |   | 0      |   |  |   | 13,580  |  
|Certificates<$100M         |  |          | 0      |   |            |   | 15,700 |             |  |   | 28,886    |   |  |           | 20,962  |   |            |   | 5,722 |            |  |   | 0      |   |  |   | 0      |   |  |   | 71,270  |  
|Certificates>$100M         |  |          | 0      |   |            |   | 2,584  |             |  |   | 8,134     |   |  |           | 7,023   |   |            |   | 3,760 |            |  |   | 0      |   |  |   | 0      |   |  |   | 21,501  |  
|Subordinated Debt          |  |          | 0      |   |            |   | 0      |             |  |   | 0         |   |  |           | 0       |   |            |   | 0     |            |  |   | 2,500  |   |  |   | 0      |   |  |   | 2,500   |  
|Fed Funds                  |  |          | 5,878  |   |            |   | 0      |             |  |   | 0         |   |  |           | 0       |   |            |   | 0     |            |  |   | 0      |   |  |   | 0      |   |  |   | 5,878   |  
|Totals                     |  | $        | 19,364 |   |            | $ | 18,284 |             |  | $ | 37,020    |   |  | $         | 41,970  |   |            | $ | 9,482 |            |  | $ | 2,500  |   |  | $ | 0      |   |  | $ | 128,620 |  
|                           |  |          |        |   |            |   |        |            
|Gap                        |  | $        | 35,584 |   |            | $ | (4,233 | )           |  | $ | (7,173    | ) |  | $         | (13,990 | ) |            | $ | (253  | )          |  | $ | 5,351  |   |  | $ | 1,857  |   |  | $ | 17,143  |  
|                           |  |          |        |   |            |   |        |            
|Cumulative Gap             |  | $        | 35,584 |   |            | $ | 31,351 |             |  | $ | 24,178    |   |  | $         | 10,188  |   |            | $ | 9,935 |            |  | $ | 15,286 |   |  | $ | 17,143 |   |  | $ | 17,143  |  
|                           |  |          |        |   |            |   |        |            
|Cumulative Gap/EA          |  |          | 24.41  | % |            |   | 21.51  | %           |  |   | 16.59     | % |  |           | 6.99    | % |            |   | 6.82  | %          |  |   | 10.49  | % |  |   | 11.76  | % |  |   | 11.76   | %
|                           |  |          |        |   |            |   |        |            
|Cumulative RSA/RSL         |  |          | 2.84   | % |            |   | 1.83   | %           |  |   | 1.32      | % |  |           | 1.09    | % |            |   | 1.08  | %          |  |   | 1.12   | % |  |   | 1.13   | % |  |   | 1.13    | %



21



---

##### Table of Contents

TABLE 10

COMMUNITY FIRST FINANCIAL CORPORATION

Selected Historical Financial Information

(In Thousands, Except Shares and Per Share
Data and Ratios)



|                                                            |  |                          |         |   |      |         |   |      |         |   |      |         |   |      |        |  
|----------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | ------- | - | ---- | ------- | - | ---- | ------- | - | ---- | ------ | -
|                                                            |  | Years Ended December 31, |        
|                                                            |  | 2005                     |         |   | 2004 |         |   | 2003 |         |   | 2002 |         |   | 2001 |       
|STATEMENT OF INCOME DATA:                                   |  |                          |         |   |      |         |   |      |         |   |      |         |   |      |        |  
|Total interest income                                       |  | $                        | 9,797   |   |      | 8,756   |   |      | 9,306   |   |      | 7,347   |   |      | 5,578  |  
|Total interest expense                                      |  |                          | 3,842   |   |      | 3,136   |   |      | 3,881   |   |      | 3,534   |   |      | 3,069  |  
|Net interest income                                         |  |                          | 5,955   |   |      | 5,620   |   |      | 5,425   |   |      | 3,813   |   |      | 2,509  |  
|Provision for loan losses                                   |  |                          | 402     |   |      | 485     |   |      | 903     |   |      | 785     |   |      | 359    |  
|Total non-interest income                                   |  |                          | 730     |   |      | 580     |   |      | 1,018   |   |      | 626     |   |      | 263    |  
|Total non-interest expense                                  |  |                          | 5,007   |   |      | 4,401   |   |      | 4,230   |   |      | 3,303   |   |      | 2,298  |  
|Income tax expense                                          |  |                          | 389     |   |      | 453     |   |      | 294     |   |      |        |   |      |       |  
|Net income (loss)                                           |  |                          | 887     |   |      | 861     |   |      | 1,016   |   |      | 351     |   |      | 115    |  
|Preferred stock dividends                                   |  |                          | 150     |   |      | 150     |   |      |        |   |      |        |   |      |       |  
|Net income (loss) available to common shareholders          |  |                          | 737     |   |      | 711     |   |      | 1,016   |   |      | 351     |   |      | 115    |  
|                                                            |  |                          |         |   |     
|PER SHARE DATA (re-stated for 6 for 5 stock split in 2004): |  |                          |         |   |      |         |   |      |         |   |      |         |   |      |        |  
|Net income                                                  |  | $                        | .63     |   |      | .61     |   |      | .87     |   |      | .30     |   |      | .10    |  
|Net income  assuming dilution                              |  | $                        | .55     |   |      | .55     |   |      | .66     |   |      | .29     |   |      | .10    |  
|Cash dividend                                               |  | $                        | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00   |  
|Stock Dividend                                              |  |                          | 0       |   |      | 20      | % |      | 0       |   |      | 0       |   |      | 0      |  
|Book Value                                                  |  | $                        | 10.03   |   |      | 9.39    |   |      | 8.78    |   |      | 7.91    |   |      | 7.61   |  
|                                                            |  |                          |         |   |     
|BALANCE SHEET DATA:                                         |  |                          |         |   |      |         |   |      |         |   |      |         |   |      |        |  
|Federal funds sold under resale agreements                  |  | $                        | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00   |  
|Securities available-for-sale                               |  |                          | 7,415   |   |      | 10,508  |   |      | 9,914   |   |      | 3,863   |   |      | 3,993  |  
|Securities held-to-maturity                                 |  |                          | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00    |   |      | 0.00   |  
|Loans, net                                                  |  |                          | 137,035 |   |      | 129,142 |   |      | 133,605 |   |      | 120,631 |   |      | 75,622 |  
|Total assets                                                |  |                          | 162,480 |   |      | 156,538 |   |      | 159,899 |   |      | 139,752 |   |      | 86,615 |  
|Total deposits                                              |  |                          | 138,952 |   |      | 139,440 |   |      | 143,267 |   |      | 122,498 |   |      | 74,392 |  
|Total stockholders equity                                  |  |                          | 14,520  |   |      | 13,848  |   |      | 13,176  |   |      | 11,815  |   |      | 8,839  |  
|                                                            |  |                          |         |   |     
|SELECTED RATIOS:                                            |  |                          |         |   |      |         |   |      |         |   |      |         |   |      |        |  
|Return on average assets                                    |  |                          | .55     | % |      | .55     | % |      | .64     | % |      | .32     | % |      | .16    | %
|Return on average equity                                    |  |                          | 6.24    | % |      | 6.38    | % |      | 8.46    | % |      | 3.90    | % |      | 1.31   | %
|Dividend payout ratio on common stock                       |  |                          | 0.00    | % |      | 0.00    | % |      | 0.00    | % |      | 0.00    | % |      | 0.00   | %
|Average equity to average assets                            |  |                          | 8.88    | % |      | 8.68    | % |      | 7.58    | % |      | 8.22    | % |      | 12.37  | %
|Allowance for loan losses to loans, net of unearned income  |  |                          | 1.00    | % |      | 1.07    | % |      | 1.57    | % |      | 1.07    | % |      | 1.25   | %



22



---

##### Table of Contents

Item 7. Financial Statements

This information is incorporated herein by reference from pages 35 through 61 of the 2005 Annual Report.

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

Larrowe & Company, P.L.C. served as the Companys independent public accountants for the period from October 14, 1999 through
December 31, 2005.

For the period from October 14, 1999 through December 31, 2005, the independent auditors report
with respect to the Companys financial statements neither contained an adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements
with Larrowe & Company on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Larrowe & Company, would have caused it to make
a reference to the subject matter of the disagreement in connection with its report.

There have been no disagreements between the Company
and its independent accountants for the Banks most recent three fiscal years.

Item 8A. Controls and Procedures

As of the end of the period covered by the report, an evaluation was performed under the supervision and with the participation of the Companys management,
including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have not been any changes in the Companys internal control over financial reporting that
occurred during the Companys last quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goal under every
potential condition, regardless of how remote. In addition, the operation of any system of controls and procedures is dependent upon the employees responsible for executing it. While we have evaluated the operation of our disclosure controls and
procedures and found them effective, there can be no assurance that they will succeed in every instance to achieve their objective.



23



---

##### Table of Contents

Item 8B. Other Information

The Company filed a Form 8K on October 18, 2005 to announce that Community First Financial Corporations Board of Directors had entered into a definitive agreement with American National Bankshares Inc., on
October 18, 2005, pursuant to which American National will acquire Community First Financial Corporation. The agreement provides that shareholders of Community First will have the right to receive either 0.9219 shares of American National
common stock or $21.00 in cash, for each share of Community First common stock. Each preferred stockholder of Community First will have the right to receive either 1.1063 shares of American National common stock or $25.20 in cash, for each share of
Community First preferred stock. Per the agreement, cash consideration is limited to 50 percent of the total consideration. The total transaction value is estimated to be $33.9 million.



24



---

##### Table of Contents

PART III

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

The following is information on Directors of the Company:



|                       |  |     |  |                |  |                                                                                                                                                            
|---------------------- |  | --- |  | -------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                   |  | Age |  | Director Since |  | Principal Occupation Last Five Years                                                                                                                       
|R. Thomas Beach        |  | 54  |  | 2002           |  | Private Investor                                                                                                                                           
|                       |  |     | 
|Frank C. Crist, Jr.    |  | 60  |  | 2002           |  | President, Brady & Crist Dentists, Inc., Chief Executive Officer of Community First Financial Corporation and Community First Bank as of September 20, 2005
|                       |  |     | 
|John L. Wynne          |  | 60  |  | 2002           |  | Former President and Chief Executive Officer, CFFC; President and Chief Executive Officer, Community First Bank 1999-Sptember 20, 2005                     
|                       |  |     | 
|T. Scott Garrett. M.D. |  | 49  |  | 2003           |  | General Surgeon                                                                                                                                            
|                       |  |     | 
|Thomas S. Mignogna     |  | 72  |  | 2002           |  | President/Owner TSM Associates, Inc. Retired President
and Chairman, Limitorque Corporation                                                                
|                       |  |     | 
|Larry H. Redmond       |  | 64  |  | 2002           |  | Radiologist, Radiology Consultants of Lynchburg                                                                                                            
|                       |  |     | 
|A. C. Coleman, Jr.     |  | 64  |  | 2002           |  | Chairman of the Board Coleman-Adams Construction,
Inc.                                                                                                     
|                       |  |     | 
|Daniel P. Thornton     |  | 50  |  | 2002           |  | National Accounts Manager Progress Printing
Company                                                                                                        

The following is information on the executive officers of the Company who are not directors of the
Company:



|                    |  |      |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------------------- |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Francis F. Falls    |  | (65) |  | President of Community First Financial Corporation and Community First Bank as of September 20, 2005; prior to joining the Bank Mr. Falls was Vice president of Metro-County Bank from March
1997 to June 1999. He was an Independent Insurance Agent from January 1996 to March 1997. Mr. Falls was Vice President - Operations for Piedmont Trust Bank from 1981 to October 1994
|                    |  |     
|James M. Thomas     |  | (46) |  | Senior Vice President  Business Banking of Community First Bank; prior to joining the Bank Mr. Thomas was Vice President  P&E Banking for MainStreet Bank-Central (formally First
Community Bank) from November 1994 to July 1999.                                                                                                                                              
|                    |  |     
|Walter G. Mason, II |  | (51) |  | Senior Vice President  Retail Banking of Community First Bank; prior to joining the Bank Mr. Mason was Vice President for MainStreet Bank-Central (formerly First Community Bank) from
January 1989 to July 1999.                                                                                                                                                                



25



---

##### Table of Contents

The Company has adopted a Code of Ethics that applies to the directors, executives and employees of the Company and the
Bank, including the Companys Chief Executive Officer, Chief Financial Officer, Controller and other persons performing similar functions. A copy of this Code of Ethics is available on the Company website at www.cfbonline.com.

The Board of Directors has appointed an Audit Committee consisting of the following nonemployee directors: Mr. R. Thomas Beach, Dr. Frank C. Crist, Jr.,
DDS, Mr. Thomas S. Mignogna, Dr. Larry H. Redmond and Mr. Daniel P. Thornton. The Board of Directors has also determined that Mr. Mignogna qualifies as an Audit Committee financial expert within the
meaning of applicable regulations of the SEC, promulgated pursuant to the Sarbanes-Oxley Act of 2002.



26



---

##### Table of Contents

Item 10. Executive Compensation

The following table sets forth the cash compensation of Community Firsts Chief Executive Officer and three next most highly compensated officers for
the fiscal years ended December 31, 2005, 2004, and 2003. No other officer received in excess of $100,000 for these years.

Summary
Compensation Table



|                                  |  |                          |  |        |            |       |   |                            |  |   |           |    
|--------------------------------- |  | ------------------------ |  | ------ | ---------- | ----- | - | -------------------------- |  | - | --------- | ---
|Name and Capacity in Which Served |  | Year ending December 31, |  | Salary |            | Bonus |   | All Other CashCompensation | 
|John L. Wynne,                    |  | 2005                     |  | $      | 149,999.97 |       |   | None                       |  | $ | 11,450.00 | (2)
|President and                     |  | 2004                     |  |        | 159,999.96 |       |   | None                       |  |   | None      |    
|CEO (3)                           |  | 2003                     |  |        | 159,999.96 |       |   | None                       |  |   | None      |    
|                                  |  |                          |  |       
|J. Michael Thomas                 |  | 2005                     |  | $      | 111,822.98 |       |   | None                       |  | $ | 13,177.96 | (2)
|Vice-President                    |  | 2004                     |  |        | 99,750.00  |       |   | None                       |  |   | 5,122.24  |    
|Business Banking                  |  | 2003                     |  |        | 99,750.00  |       |   | 9,500.00                   |  |   | 7,388.73  |    
|                                  |  |                          |  |       
|F.F. Falls                        |  | 2005                     |  | $      | 121,039.51 |       |   | None                       |  | $ | 963.54    | (2)
|President                         |  | 2004                     |  |        | 107,166.71 |       | $ | 20,475.00                  |  |   | 2,768.25  |    
|                                  |  | 2003                     |  |        | 102,375.12 |       |   | 9,750.00                   |  |   | 3,750.00  |    
|                                  |  |                          |  |       
|Walter G. Mason                   |  | 2005                     |  | $      | 103,906.25 |       |   | None                       |  | $ | 4,163.19  | (2)
|Vice-President                    |  | 2004                     |  |        | 99,750.00  |       |   | None                       |  |   | 1,534.61  |    
|                                  |  | 2003                     |  |        | 99,750.00  |       | $ | 9,500.00                   |  |   | None      |    

---

|(1) | Other compensation for John L. Wynne consists of director fees for 2005.
|--- | ------------------------------------------------------------------------

|(2) | Other compensation for the remaining officers consists of profit-sharing contribution and cash payment for unused health insurance, vacation and other benefits for 2005, 2004 and
2003.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | John L. Wynne resigned as President and CEO of Community First Financial Corporation and Community First Bank on September 20, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



27



---

##### Table of Contents

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the beneficial ownership of the common stock beneficially owned by each director, each executive officer and all current
directors and executive officers of Community First as a group as of February 6, 2006:



|                                                                     |  |                                                               |     |  |                  |  
|-------------------------------------------------------------------- |  | ------------------------------------------------------------- | --- |  | ---------------- | -
|Name of Beneficial Owner                                             |  | Amount and Nature of Beneficial
Ownership of Common Stock (1) |     |  | Percent of Class |  
|R. Thomas Beach                                                      |  | 125,400                                                       | (2) |  | 10.7             | %
|A.C. Coleman                                                         |  | 42,240                                                        | (3) |  | 3.6              |  
|Frank C. Crist, Jr.                                                  |  | 68,700                                                        | (4) |  | 5.9              |  
|T. Scott Garrett                                                     |  | 20,880                                                        |     |  | 1.8              |  
|Thomas S. Mignona                                                    |  | 20,400                                                        | (5) |  | 1.7              |  
|Larry H. Redmond                                                     |  | 24,480                                                        |     |  | 2.1              |  
|Daniel P. Thornton                                                   |  | 16,200                                                        |     |  | 1.4              |  
|John L. Wynne (6)                                                    |  | 147,863                                                       | (7) |  | 12.3             |  
|                                                                     |  |                                                              
|All current executive officers and directors as a group (11 persons) |  | 574,566                                                       |     |  | 43.0             | %

---

|(1) | Includes shares which may be deemed beneficially owned by virtue of family relationships, joint ownership, voting power or investment power. Includes currently exercisable options
to purchase 36,000 shares (Mr. Wynne) and 12,000 shares (each of the other directors), at $8.33 per share.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes shares owned by spouse, an affiliate company, and as custodian for a minor child.
|--- | ------------------------------------------------------------------------------------------

|(3) | Includes shares owned by family limited partnership.
|--- | ----------------------------------------------------

|(4) | Includes shares owned by family limited partnership and by spouse as custodian for a minor child.
|--- | -------------------------------------------------------------------------------------------------

|(5) | Includes shares owned jointly with spouse and by spouse as custodian for minor children.
|--- | ----------------------------------------------------------------------------------------

|(6) | Mr. Wynne resigned as President and Chief Executive Officer of Community First and Community First Bank on September 20, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes shares owned by affiliate company, as beneficiary of trust and as custodian for minor children.
|--- | --------------------------------------------------------------------------------------------------------



28



---

##### Table of Contents

Item 12. Certain Relationships and Related Transactions

This information is incorporated herein by reference from Note 14, page 53 of the Companys 2005 Annual Report.

Item 13. Exhibits



|(a) | Exhibits
|--- | --------

3.1 & 3.2 The Companys Articles of
Incorporation and By Laws (Item (a) (2)), required to be filed under this section, have been previously filed with the Securities and Exchange Commission as an exhibit to the Companys Form 8-K filed on July 11, 2002, and are
incorporated herein by reference.

10.2 The Companys Stock Incentive Plan, required to be filed under this section, has been previously filed with
the Board of Governors of the Federal Reserve System as an exhibit to the Banks Form 10-QSB filed for the quarter ended June 30, 2001, and is incorporated herein by reference.



|13.0 | 2005 Annual Report to Stockholders, Exhibit A.
|---- | ----------------------------------------------



|31.1 | Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ------------------------------------------------------------------------------------------------



|31.2 | Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ------------------------------------------------------------------------------------------------



|32 | Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|-- | ----------------------------------------------------------------------------------------------------------------------------

Item 14. Principal Accountant Fees and Services

As Community First Financial Corporations independent accountants for 2005 and 2004, Larrowe & Company, PLC provided various audit and non-audit services for which Community First was billed for fees as further described
below. None of the hours expended on Larrowe & Company, PLCs audit of Community Firsts financial statements were attributed to work performed by persons other than the principal accountants full-time, permanent employees.
Community Firsts Audit committee has considered whether Larrowe & Company, PLCs provision of non-audit services is compatible with maintaining its independence.

Audit Fees. Larrowe & Company, PLC audited Community Firsts annual financial statements included in its 2005 and 2004 Annual
Reports on Form 10-KSB and, during those years, it reviewed the financial statements included in Community Firsts Quarterly Reports on Form 10-QSB. The aggregate amount of fees billed to Community First for those services was $58,900 in 2005
and $56,469 in 2004.



29



---

##### Table of Contents

Audit-Related Fees. Larrowe & Company, PLC performed certain assurance and related
services that were related to the performance of the above noted audits and reviews of Community Firsts annual and quarterly financial statements in 2005 and 2004. The aggregate amount of fees billed to Community First for those services was
$27,000 in 2005 and $6,468 in 2004. A portion of these fees for 2005 related to the review of public documents in accordance with the pending merger.

Tax Fees. Larrowe & Company, PLC rendered professional services to Community First for tax compliance, tax advice, and tax planning in 2005 and 2004. The aggregate amount of fees billed to Community
First for those services was $3,250 in 2005 and $3,101 in 2004.

All Other Fees. Larrowe & Company, PLC provided no other
services to Community First during 2005 and 2004

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



|               |  |                      |  |                
|-------------- |  | -------------------- |  | ---------------
|               |  | COMMUNITY FIRST BANK
|               |  |                     
|March 27, 2006 |  | By:                  |  | /s/ F. F. Falls
|               |  |                      |  | F. F. Falls    
|               |  |                      |  | President      



30



---

##### Table of Contents

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                             |  |                |  |               
|---------------------------- |  | -------------- |  | --------------
|Signatures                   |  | Title          |  | Date          
|/s/ John L. Wynne            |  |                |  |               
|John L. Wynne                |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ R. Thomas Beach          |  |                |  |               
|R. Thomas Beach              |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ A. C. Coleman, Jr.       |  |                |  |               
|A. C. (Buzzy) Coleman, Jr.   |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ Frank C. Crist, Jr., DDS |  |                |  |               
|Frank C. Crist, Jr., DDS     |  | CEO & Director |  | MARCH 27, 2006
|                             |  |               
|/s/ T. Scott Garrett         |  |                |  |               
|T. Scott Garrett             |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ Thomas S. Mignogna       |  |                |  |               
|Thomas S. Mignogna           |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ Dr. Larry H. Redmond     |  |                |  |               
|Dr. Larry H. Redmond         |  | Director       |  | MARCH 27, 2006
|                             |  |               
|/s/ Daniel P. Thornton       |  |                |  |               
|Daniel P. Thornton           |  | Director       |  | MARCH 27, 2006



31