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                       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, 2006
                                   -----------------

                                       OR

[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934
         For the transition period from __________ to __________

                           Commission File No. 0-50322
                                               -------

                          COMMUNITY FIRST BANCORP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

        Maryland                                                 36-4526348
-------------------------------                               ----------------
(State or Other Jurisdiction of                               (I.R.S. Employee
Incorporation or Organization                                Identification No.)

2420 North Main Street, Madisonville, Kentucky                     42431
----------------------------------------------                     -----
(Address of Principal Executive Offices)                         (Zip Code)

                    Issuer's Telephone Number (270) 326-3500
                                              --------------

       Securities Registered Under Section 12(b) of the Exchange Act:   None
                                                                      --------

         Securities Registered Under Section 12(g) of the Exchange Act:
                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of class)

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:  (l) 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. [ ]

Indicate by check mark 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: $4.8 million

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates of the registrant was approximately $1.95 million as of March 22,
2007 based on the last sale ($6.96 per share) reported on the OTC Bulletin Board
as of that date. Solely for purposes of this  calculation,  the term "affiliate"
refers  to all  directors  and  executive  officers  of the  registrant  and all
stockholders beneficially owning more than 10% of the registrant's common stock.

As of March 22, 2007,  there were issued and  outstanding  336,120 shares of the
registrant's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Registrant's definitive Proxy Statement for the 2007 Annual
     Meeting of Stockholders. (Part III)

     Transitional Small Business Disclosure Format (Check One): YES [ ] NO [X]

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<PAGE>

                                     PART I
Forward Looking Statements

         When used in this  discussion and elsewhere in this Annual Report,  the
words or phrases "will likely  result," "are expected to," "will  continue," "is
anticipated,"   "estimate,"  "project,"  "intend"  or  similar  expressions  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private  Securities  Litigation Reform Act of 1995. The Company cautions readers
not to place undue reliance on any such forward-looking statements,  which speak
only as of the date made, and to advise readers that various factors,  including
regional and  national  economic  conditions,  unfavorable  judicial  decisions,
substantial  changes in levels of market interest rates,  credit and other risks
of lending and investment  activities  and  competitive  and regulatory  factors
could affect the Bank's financial  performance and could cause the Bank's actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

         The  Company  does  not  undertake  and   specifically   disclaims  any
obligations to update any  forward-looking  statements to reflect  occurrence of
anticipated  or  unanticipated  events or  circumstances  after the date of such
statements.

Item 1.  Description of Business
--------------------------------

         The  Company.   Community  First  Bancorp,  Inc.  (the  "Company")  was
incorporated  as a  Maryland  corporation  to become  the  holding  company  for
Community  First Bank (the "Bank") upon  completion  of its  conversion to stock
form. Community First Bancorp, Inc. does not engage in any activities other than
holding the stock of Community First Bank. At December 31, 2006, the Company had
total assets of $79.1 million, loans receivable of $72.8 million, total deposits
of $64.7 million and total equity of $2.4 million.

         Our   executive   offices  are  located  at  2420  North  Main  Street,
Madisonville,  Kentucky and our main telephone number is (270) 326-3500. We also
maintain a website at www.cfbky.com.

         The  Bank.  Community  First  Bank  is a  federal  stock  savings  bank
operating through two offices in Madisonville,  Kentucky. Founded in 1923 as the
Madisonville Building and Loan Association,  Community First Bank converted to a
federal  mutual  savings bank  charter and adopted its current name in 2002.  In
June 2003,  Community First Bank converted to stock form and became a subsidiary
of Community First Bancorp, Inc. Community First Bank is a member of the Federal
Home Loan Bank System.  Its deposits are insured up to applicable  limits by the
Federal Deposit Insurance Corporation.

         Community  First  Bank's  principal  business  consists  of  attracting
deposits from the general public and  originating  residential  mortgage  loans.
Community First Bank also offers  commercial and multi-family real estate loans,
various  types of consumer  loans and a limited  number of  commercial  business
loans.

Market Area

         We consider our primary market area to be the City of Madisonville  and
surrounding Hopkins County, Kentucky. Located in the Western Coalfield Region of
Kentucky,  Hopkins  County had a  population  of  approximately  46,161 in 2005.
Madisonville is located on US-41 (which will be part of the future Interstate 69
- designed to run North-South  through the United States  connecting  Canada and
Mexico) and just seven miles from the junction with the Western Kentucky Parkway
which  connects the  Lexington/Louisville  area to the western part of the state
and Interstate 24.  Madisonville is 49 miles south of Evansville,  Indiana,  104
miles northwest of Nashville,  Tennessee, and 153 miles southwest of Louisville,
Kentucky.  It is one half hour from Interstate 24. Commercial airline service is
available  at  the  Evansville   Regional  Airport  in  Evansville  Indiana  and
Owensboro-Daviess  County  Regional  Airport  (both  are  within 50 miles of the
city.) Madisonville is the county seat and largest city in Hopkins County and is
home to one of the major healthcare  facilities in the Commonwealth of Kentucky.
The city is 35 miles from  Kentucky's  Lake Region,  a popular  recreation  area
consisting of two of Kentucky's largest lakes - Kentucky Lake and Lake Barkley.

                                       2

<PAGE>

         The largest  employers in Madisonville and the surrounding  communities
include the Trover Regional Medical Center,  General  Electric  Aircraft Engine,
Carhartt,  Inc. and Lear  Corporation.  By industry,  the largest sectors of the
Madisonville  economy are healthcare and  manufacturing.  Land O' Frost, Inc., a
packaged  lunch meat  producer,  is in the process of  completing a $49 million,
175,000  square  foot  industrial  facility  that will bring 500 new jobs to the
area.  Additionally,  Fort Knox National recently  established a new call center
that will eventually add approximately 200 new jobs and Jennmar  Corporation,  a
manufacturer of mining support products, announced it will build a 45,000 square
foot plant which will generate over 40 new jobs.

         The 2005  unemployment  rate for Hopkins County was 6.1%, the same rate
as the  state-wide  rate.  The  median  household  income of $36,780 in 2005 for
Hopkins  County was below the median for  Kentucky as a whole of $41,175 and for
the United States of $49,747.  Projections  for median  household  income growth
through 2010 for Hopkins County exceed the  projections for growth in the United
States as a whole.  While the population of Madisonville  grew by  approximately
19% from 1990 to 2000,  Hopkins  County  as a whole  grew  less  than  1.0%.  By
comparison, the population of Kentucky grew by 9.6%.

Lending Activities

         Our loan  portfolio  consists  primarily of mortgage  loans  secured by
first  liens  on  one-  to  four-family  residences.   We  also  make  consumer,
residential  construction  and commercial  real estate and  commercial  business
loans.  While we have  continued  our historic  emphasis on one- to  four-family
lending, we have also sought to grow our portfolio of commercial mortgages.

         At December 31, 2006, our gross loans totaled $73.2  million,  of which
$54.7  million  were  first  mortgage  loans  secured  by  one-  to  four-family
residences.  We originate  adjustable-rate mortgage loans with rates that adjust
annually after an initial period of one, three, five or seven years during which
the  interest  rate is  fixed.  We offer  similar  terms on our  commercial  and
multi-family  mortgages.  Our  consumer  loans may have either fixed or variable
rates.

         Substantially  all of our  borrowers  are  located in  Hopkins  County,
Kentucky  and would be expected to be  similarly  affected by economic and other
conditions   in  this  area.  We  do  not  believe  that  there  are  any  other
concentrations of loans or borrowers exceeding 10% of total loans.

         The  following  table sets forth  information  concerning  the types of
loans held by the Company at the dates indicated.

<TABLE>
<CAPTION>
                                                                        At December 31,
                                                         ------------------------------------------------
                                                                 2006                        2005
                                                         --------------------        --------------------
                                                          Amount           %          Amount          %
                                                         -------        -----        -------        -----
<S>                                                    <C>            <C>          <C>            <C>
     Real estate mortgage loans:
       One- to four-family residential first...          $54,652        74.63%       $47,739        73.49%
       One- to four-family residential second..            2,734         3.73          1,755         2.70
       Multi-family............................            1,067         1.46            791         1.22
       Commercial..............................            7,371        10.06          7,356        11.32
       Construction............................            1,811         2.47          2,305         3.55
     Other loans:
       Consumer installment....................               90         0.12            194         0.30
       Commercial..............................            1,084         1.48            820         1.26
       Automobile..............................            3,377         4.61          2,898         4.46
       Deposit.................................              351         0.48            398         0.61
       Other                                                 703         0.96            710         1.09
                                                         -------       ------        -------       ------
                                                          73,240       100.00%        64,966       100.00%
                                                                       ======                      ======
     Less:
       Unearned interest.......................               --                          --
       Allowance for loan losses...............              404                         388
                                                         -------                     -------
          Total................................          $72,836                     $64,578
                                                         =======                     =======

</TABLE>

                                       3

<PAGE>

         The  following  table sets  forth the  estimated  maturity  of our loan
portfolio  at  December  31,  2006.  The table does not  include  the effects of
possible  prepayments or scheduled  repayments.  All mortgage loans are shown as
maturing based on the date of the last payment required by the loan agreement.

<TABLE>
<CAPTION>
                                               Due within            Due after             Due over 5
                                             one year after      1 through 5 years        years after
                                           December 31, 2006     December 31, 2006     December 31, 2006         Total
                                           -----------------     -----------------     -----------------         -----
                                                                           (In thousands)
<S>                                           <C>                    <C>                  <C>                 <C>
Real estate mortgage loans:
  One- to four-family residential first....     $  404                 $1,841               $52,406             $54,651
  One- to four-family residential second...          1                  2,117                   617               2,735
  Multi-family.............................         --                     --                 1,066               1,066
  Commercial...............................          7                  1,731                 5,634               7,372
  Construction.............................      1,811                     --                    --               1,811
Other loans:
  Consumer installment.....................         54                     36                    --                  90
  Commercial...............................        639                    315                   130               1,084
  Automobile...............................        124                  3,231                    22               3,377
  Deposit..................................        196                     81                    74                 351
  Other....................................        237                    123                   343                 703
                                                ------                 ------               -------             -------
      Total................................     $3,473                 $9,475               $60,292             $73,240
                                                ======                 ======               =======             =======
</TABLE>


         The next table sets forth at December  31, 2006,  the dollar  amount of
all loans due one year or more after December 31, 2006 which have  predetermined
interest rates and have floating or adjustable  interest rates.  The majority of
our floating or adjustable  rate loans are  mortgages  whose rates do not adjust
until after an initial period of one, three, five or seven years.

<TABLE>
<CAPTION>
                                                                   Predetermined         Floating or
                                                                        Rate           Adjustable Rates
                                                                   -------------       ----------------
                                                                             (In thousands)
<S>                                                                <C>                   <C>
     Real estate mortgage loans:
         One- to four-family residential first...........            $10,428               $43,819
         One- to four-family residential second..........                956                  1778
         Multi-family....................................                664                   402
         Commercial......................................              6,323                 1,042
         Construction....................................                 --                    --
     Other loans:
         Consumer installment............................                 36                    --
         Commercial......................................                445                    --
         Automobile......................................              3,253                    --
         Deposit.........................................                155                    --
         Other...........................................                466                    --
                                                                     -------               -------
              Total......................................            $22,726               $47,041
                                                                     =======               =======
</TABLE>

         One- to Four-Family  Residential  Loans.  Our primary lending  activity
consists of the  origination of one- to four-family  residential  first mortgage
loans  secured by property  located in our primary  market  area.  We  generally
originate one- to four-family residential mortgage loans in amounts up to 80% of
the lesser of the  appraised  value or the  purchase  price with a maximum  loan
amount of  $596,000  and a maximum  term of 30 years.  We will make  residential
mortgage loans with loan-to-value ratios greater than 80% as long as they comply
with  secondary  market  standards.  Currently  we do not sell our  loans in the
secondary  market,  but  instead  act  as  an  originator  by  taking  the  loan
application  and then  forwarding it to a secondary  market lender.  Although we
make  loans  on one- to  four-family  rental  properties,  the  majority  of our
residential first mortgages are on owner-occupied properties.

                                       4

<PAGE>

         The first mortgage loans that we originate for our portfolio  generally
have rates that adjust annually after an initial period of one,  three,  five or
seven  years  during  which  the  rate is  fixed.  We do not  originate  30-year
fixed-rate loans for our portfolio.

         The  interest  rate on  adjustable-rate  mortgage  loans is based on an
index plus a stated margin.  Adjustable-rate mortgage loans provide for periodic
interest rate adjustments  upward or downward of up to two percentage points per
year with a limit of six percentage points over the life of the loan.  Borrowers
on  adjustable-rate  mortgage loans must qualify at the fully adjusted rate. The
rates on our  adjustable-rate  mortgage loans are generally indexed to the rates
on one-year U.S. Treasury bills adjusted to a constant maturity. We also have in
our portfolio  adjustable-rate  mortgage  loans which are indexed to the average
cost of funds  for  savings  associations  in the 11th  Federal  Home  Loan Bank
District.  We discontinued using this index in 1996 because it tended to lag the
market  and such loans were less than 0.66% of the  portfolio  at  December  31,
2006.

         In addition  to one- to  four-family  first  mortgage  loans,  we offer
second mortgage loans. We offer second  mortgages to customers on whose property
we hold the first mortgage and to other  customers as well. Our second  mortgage
loans have fixed  terms of up to 10 years and have fixed rates of  interest.  We
only originate a second  mortgage if the aggregate  indebtedness  secured by the
property will not exceed 80% of its appraised  value.  We also offer home equity
lines of credit,  which are similar to our second mortgages,  but on a revolving
term.

         Adjustable-rate  mortgage  loans  decrease  the  risk  associated  with
changes in interest  rates by  periodically  repricing,  but involve other risks
because as interest  rates  increase,  the  underlying  payments by the borrower
increase, thus increasing the potential for default by the borrower. At the same
time, the marketability of the underlying  collateral may be adversely  affected
by higher interest rates. Upward adjustment of the contractual  interest rate is
also  limited by the maximum  periodic  and lifetime  interest  rate  adjustment
permitted  by the loan  documents,  and,  therefore  is  potentially  limited in
effectiveness  during periods of rapidly rising  interest rates. At December 31,
2006,  approximately 80.2% of the one- to four-family  residential loans we held
had adjustable  rates of interest.  Adjustable-rate  loans consist  primarily of
one, three,  five or seven year  adjustable-rate  mortgage loans whose rates may
not be currently adjusting.

         The mortgage loans we originate and hold generally include  due-on-sale
clauses.  These clauses give us the right to deem the loan  immediately  due and
payable in the event the borrower  transfers  ownership of the property securing
the mortgage loan without our consent.

         Residential Construction Loans. We make a limited number of residential
construction  loans  on  one-  to  four-family  residential  properties  to  the
individuals   who  will  be  the  owners  and  occupants   upon   completion  of
construction.  Borrowers are required to pay interest on disbursed  funds during
the construction  period,  which may not last beyond 12 months. The borrower may
pay off the loan with a permanent  loan from us at completion  of  construction.
Loan proceeds are disbursed  according to a draw schedule and the appraiser must
inspect the progress of the construction  before additional funds are disbursed.
Construction loans are offered on either a fixed or adjustable basis.

         Construction lending is generally considered to involve a higher degree
of credit risk than long-term financing of residential  properties.  Our risk of
loss on a  construction  loan is  dependent  largely  upon the  accuracy  of the
initial  estimate of the property's  value at completion of construction and the
estimated cost of  construction.  If the estimate of  construction  cost and the
marketability  of the  property  upon  completion  of the  project  prove  to be
inaccurate,  we may be  compelled  to advance  additional  funds to complete the
construction.  Furthermore, if the final value of the completed property is less
than the estimated amount,  the value of the property might not be sufficient to
assure the repayment of the loan.

         Commercial and Multi-Family  Real Estate Loans. We offer commercial and
multi-family real estate loans secured by apartment buildings,  churches, office
buildings,  and other commercial  properties.  Commercial and multi-family  real
estate  loans are made for terms of up to 20 years  and have  rates of  interest
that  are  fixed  for a  period  of one  to  seven  years  and  adjust  annually
thereafter.  The interest rates on commercial and multi-family loans are indexed
to the prime rate. Loan amounts may not exceed 70% of the appraised value of the
property.  Over  the  past  several

                                       5

<PAGE>

years,   we  have  sought  to  increase  our   originations  of  commercial  and
multi-family real estate loans in order to diversify the portfolio and serve the
needs of the market.

         At December 31,  2006,  our largest  commercial  real estate loan was a
$447,600 loan secured by a farm in Morganfield,  Kentucky  originated in October
2005. The 10-year fully  amortizing  loan bears a fixed rate of interest for the
life of the loan. The loan-to-value ratio at origination was 43% and the loan is
personally  guaranteed by the principal of the  corporate  borrower.  Our second
largest loan was a $402,900 loan secured by an apartment complex in Madisonville
originated in December  2003.  The 20-year fully  amortizing  loan bears a fixed
rate of interest for seven years and floats with the prime rate thereafter.  The
loan-to-value ratio at origination was 64% and the loan is personally guaranteed
by the principals of the corporate borrower.

         Commercial and  multi-family  real estate lending  entails  significant
additional risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related  borrowers.
The repayment of these loans typically is dependent on the successful  operation
of the real estate project  securing the loan.  These risks can be significantly
affected  by supply  and demand  conditions  in the market for office and retail
space and may also be subject to adverse conditions in the economy.  To minimize
these risks,  we generally  limit this type of lending to our market area and to
borrowers who are otherwise well known to us.

         Commercial  Business Loans. We engage in a limited amount of commercial
business  lending  primarily for the  accommodation of existing  customers.  Our
commercial  business loans  generally are secured by equipment or other tangible
assets. Our largest commercial  business loan at December 31, 2006 had a balance
of approximately  $124,200 and was made to a sand and gravel company and secured
by a truck and personally guaranteed by a principal of the borrower.

         Unlike  residential  mortgage  loans,  which  generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property whose value tends to be more
easily ascertainable,  commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself and the general economic environment.

         Consumer  Loans.  We offer various types of consumer  loans in order to
provide a wider range of financial  services to our  customers.  Consumer  loans
totaled $4.5  million,  or 6.2%,  of our total loans at December  31, 2006.  Our
consumer loans consist of automobile,  personal unsecured loans, passbook,  home
improvement  loans and  equipment  loans.  Passbook and  certificate  of deposit
secured  loans are offered up to the maximum of the deposit  balance and are due
on demand.

         We offer loans for both new and used  automobiles with maximum terms of
six years and maximum  loan  amounts up to 90% of the  manufacturer's  suggested
retail price on new cars. Used auto loans may not exceed 110% of NADA loan value
with the term to be  determined  by model year of auto.  All auto loans  require
full coverage  insurance with a loss payable to Community  First Bank.  Personal
unsecured  loans generally are made for amounts of $2,000 or less and terms of 6
months and may have fixed or variable interest rates.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         Loan  Solicitation,  Approval and  Underwriting.  Community  First Bank
obtains  loan  customers  from a  variety  of  sources,  including  advertising,
personal  solicitation,  repeat customers and referrals from existing customers,
realtors,  builders and others.  We also solicit  applications  for  residential
mortgages  through our website.  Although the President and Vice Presidents have
authority to originate loans up to the loans-to-one borrower limits, loans other
than single-family  owner-occupied  mortgages and residential  mortgage loans in
excess  of  $250,000  are  generally  submitted  to the Board of  Directors  for
approval.

                                        6

<PAGE>

         Upon  receipt  of a  completed  loan  application  from  a  prospective
borrower,  a credit report is ordered.  Income and certain other  information is
verified. If necessary,  additional financial  information may be requested.  An
appraisal or other  estimate of value of the real estate  intended to be used as
security for the proposed loan is obtained.  Appraisals  are prepared by outside
fee appraisers who are approved by the Board of Directors.

         A title  opinion or title  insurance is generally  required on all real
estate  loans.  Borrowers  also must obtain fire and casualty  insurance.  Flood
insurance is also  required on loans  secured by property  which is located in a
flood zone.

         Loan Originations.  The following table sets forth certain  information
with respect to our loan  originations  for the periods  indicated.  We have not
purchased or sold any loans in the secondary market in recent years.

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                             -----------------------
                                                                              2006            2005
                                                                              ----            ----
                                                                                 (In thousands)
<S>                                                                      <C>             <C>
      Loans originated:
        Real estate mortgage loans:
           One- to four-family residential first...................          $16,439         $17,539
           One- to four-family residential second..................            2,416             991
           Multi-family............................................               --              --
           Commercial..............................................            1,198           2,903
           Construction............................................            1,770           2,201
        Other loans:
           Consumer installment....................................              226              72
           Commercial..............................................              772             680
           Automobile..............................................            2,382           2,054
           Passbook................................................              456             265
           Other...................................................              439             291
                                                                             -------         -------
              Total loans originated...............................          $26,098         $26,996
                                                                             =======         =======
</TABLE>

         Loans to One Borrower. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000 or 15% of our unimpaired
capital and unimpaired  surplus. We may lend an additional 10% of our unimpaired
capital  and  unimpaired  surplus  if the  loan  is  fully  secured  by  readily
marketable collateral. Our maximum  loans-to-one-borrower  limit was $596,000 at
December  31,  2006.  At  December  31,  2006,  our largest  loan  concentration
outstanding  had a balance of $927,100  and  consisted  of two loans  secured by
non-residential  commercial  properties  and two loans  secured by  multi-family
apartment complexes.  This was in excess of our  loans-to-one-borrower  limit at
the time of  origination  and we are attempting to reduce it through the sale of
the loan or a participation.

Nonperforming and Problem Assets

         Loan Delinquencies. Generally when a mortgage loan becomes 15 days past
due,  a notice  of  nonpayment  is sent to the  borrower.  If  payment  is still
delinquent after 30 days, the borrower will receive a formal delinquency notice.
The borrower  will be contacted by telephone or visited  personally  if the loan
remains  delinquent after 45 days. If the loan continues in a delinquent  status
for 120 days  past due and no  repayment  plan is in  effect,  the loan  will be
referred to an attorney for collection, with foreclosure commenced no later than
180 days.  The customer  will be notified  when  foreclosure  is  commenced.  At
December 31, 2006, our loans past due between 30 and 89 days totaled $512,000.

         Loans are  reviewed on a monthly  basis and are  generally  placed on a
non-accrual  status when the loan becomes more than 90 days  delinquent or when,
in our opinion,  the  collection  of additional  interest is doubtful.  Interest
accrued and unpaid at the time a loan is placed on nonaccrual  status is charged
against  interest  income.  Subsequent  interest  payments,  if any,  are either
applied to the  outstanding  principal  balance or recorded as interest  income,
depending on the assessment of the ultimate collectibility of the loan.

                                       7

<PAGE>

         Nonperforming  Assets.  The  following  table  sets  forth  information
regarding our  non-accrual  loans,  accruing  loans past due 90 days or more and
real estate owned. We did not have any troubled debt  restructurings  within the
meaning of SFAS No. 15 at the dates indicated below.

<TABLE>
<CAPTION>
                                                                At December 31,
                                                             ----------------------
                                                             2006              2005
                                                             ----              ----
                                                              (Dollars in thousands)
<S>                                                      <C>               <C>
Loans accounted for on a non-accrual basis:(1)
  Real estate:
    One- to four-family residential first..........        $  309            $  259
    One- to four-family residential second.........             7                 3
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
    Consumer installment...........................            --                --
    Commercial.....................................            --                --
    Automobile.....................................            17                 1
    Passbook.......................................            --                --
    Other..........................................             1                --
                                                           ------            ------
     Total.........................................        $  334            $  263
                                                           ======            ======

Accruing loans which are contractually
past due 90 days or more:
  Real estate:
    One- to four-family residential first..........        $   --            $   44
    One- to four-family residential second.........             6                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
    Consumer installment...........................            --                --
    Commercial.....................................            --                --
    Automobile.....................................                              --
    Passbook.......................................            --                --
                                                           ------            ------
    Other..........................................             3                --
                                                           ------            ------
    Total..........................................        $    9            $   44
                                                           ======            ======
    Total nonperforming loans......................        $  343            $  307
                                                           ======            ======
  Percentage of total loans........................          0.47%             0.47%
                                                           ======            ======

  Other non-performing assets(2)...................        $   11            $   --
                                                           ======            ======
</TABLE>
_______________
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a  nonaccrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         management's assessment of the collectibility of the loan.
(2)      Other  nonperforming  assets  represents  property acquired by the Bank
         through  foreclosure or  repossession.  This property is carried at the
         lower of its fair market value or the principal  balance of the related
         loan, whichever is lower.

         Non-accrual  loans at December 31, 2006  consisted  of 11 loans.  There
were eight accruing loans past due 90 days or more at December 31, 2006.

         During the year ended  December  31,  2006,  gross  interest  income of
approximately  $11,400  would have been  recorded  on loans  accounted  for on a
nonaccrual  basis if the loans had been current  throughout  the period.  Of the
$11,400; $5,200 was included in income during the year ended December 31, 2006.

                                       8

<PAGE>

         At  December  31,  2006,  there were no loans  which are not  currently
classified  as  non-accrual,  90 days past due or  restructured  but where known
information  about possible  credit problems of borrowers  causes  management to
have serious  concerns as to the ability of the borrowers to comply with present
loan repayment terms and may result in disclosure as  non-accrual,  90 days past
due or restructured.

         Classified Assets. Office of Thrift Supervision regulations provide for
a classification  system for problem assets of savings institutions which covers
all problem assets. Under this classification  system, problem assets of savings
institutions  such as ours  are  classified  as  "substandard,"  "doubtful,"  or
"loss." An asset is considered  substandard if it is  inadequately  protected by
the current net worth and paying  capacity of the borrower or of the  collateral
pledged, if any. Substandard assets include those characterized by the "distinct
possibility"  that the  savings  institution  will  sustain  "some  loss" if the
deficiencies  are not corrected.  Assets  classified as doubtful have all of the
weaknesses   inherent   in  those   classified   substandard,   with  the  added
characteristic  that the  weaknesses  present make  collection or liquidation in
full, on the basis of currently existing facts, conditions, and, values, "highly
questionable  and  improbable."  Assets  classified as loss are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
may be designated  "special  mention" because of potential  weakness that do not
currently warrant classification in one of the aforementioned categories.

         When  a  savings  institution   classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets.  When a savings  institution  classifies
problem assets as loss, it is required either to establish a specific  allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings institution's  determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the  Office  of  Thrift  Supervision,  which  may  order  the  establishment  of
additional  general or  specific  loss  allowances.  A portion  of general  loss
allowances  established to cover possible losses related to assets classified as
substandard or doubtful may be included in  determining a savings  institution's
regulatory capital.  Specific valuation  allowances for loan losses generally do
not qualify as regulatory capital.

         At  December  31,  2006,  we  had  $576,200  in  loans   classified  as
substandard and $24,100 in loans classified as doubtful.  Our substandard assets
at December 31, 2006 consisted of 12 residential  first  mortgages.  Reserves of
$73,200 have been allocated to the substandard assets.

         Foreclosed Real Estate.  Real estate acquired in settlement of loans is
carried at the lower of the  unpaid  loan  balance or fair value less  estimated
costs to sell.  Write-downs  from the unpaid  loan  balance to fair value at the
time of  foreclosure  are charged to the allowance  for loan losses.  Subsequent
write-downs to fair value, net of disposal costs, are charged to other expenses.
At December 31, 2006,  we owned one one- to  four-family  residential  property,
totaling $10,500, which we received through the process of foreclosure.

         Allowance   for  Loan  Losses.   The   allowance  for  loan  losses  is
management's  estimate of probable  inherent credit losses in the loan portfolio
at the  balance  sheet  date.  We  determine  the  allowance  based  on  ongoing
evaluations.  This  evaluation  is  inherently  subjective  because it  requires
material  estimates,  including the amounts and timing of cash flows expected to
be received on impaired loans. Those estimates may be susceptible to significant
change. Increases to the allowance are made by charges to the provision for loan
losses,  which is reflected in the statements of operations.  Loans deemed to be
uncollectible are charged against the allowance.  Recoveries of loans previously
charged off are credited to the  allowance.  See  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations -- Critical Accounting
Policies"  for  further  discussion  of  our  methodology  for  determining  the
allowance.

         We monitor  our  allowance  for loan losses and make  additions  to the
allowance as economic  and other  conditions  dictate.  Although we maintain our
allowance for loan losses at a level that we consider  adequate for the inherent
risk of loss in our loan  portfolio,  actual  losses could exceed the balance of
the allowance for loan losses and additional provisions for loan losses could be
required.  In addition,  our determination as to the amount of its allowance for
loan losses is subject to review by the Office of Thrift Supervision, as part of
its examination process.


                                       9

<PAGE>

After a review of the information  available,  the Office of Thrift  Supervision
might require the establishment of an additional allowance.

         The  following  table sets forth an analysis of our  allowance for loan
losses for the periods indicated.

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                              -------------------------
                                                                2006              2005
                                                              -------           -------
                                                               (Dollars in thousands)

<S>                                                          <C>               <C>
Balance at beginning of period.....................           $   388           $   320
                                                              -------           -------
Loans charged-off:
  Real estate mortgage loans:
    One- to four-family residential first..........                (4)               (5)
    One- to four-family residential second.........                (3)               --
    Multi-family...................................                --                --
    Commercial.....................................                --                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................               (10)               --
    Commercial.....................................                --                --
    Automobile.....................................               (29)               (6)
    Deposit........................................                --                --
    Other..........................................                (1)               (5)
                                                              -------           -------
Total charge-offs..................................               (47)              (16)
                                                              -------           -------
Recoveries:
  Real estate mortgage loans:
    One- to four-family residential first..........                --                --
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                 1                --
    Commercial.....................................                --                --
    Automobile.....................................                --                --
    Deposit........................................                --                --
    Other..........................................                --                 6
                                                              -------           -------
Total recoveries...................................                 1                 6
                                                              -------           -------

Net loans charged-off..............................               (46)              (10)
                                                              -------           -------
Provision for loan losses..........................                62                78
                                                              -------           -------

Balance at end of period...........................           $   404           $   388
                                                              =======           =======

Ratio of net charge-offs to average
   loans outstanding during the period.............              0.07%             0.02%
                                                              =======           =======
</TABLE>

                                       10

<PAGE>

         The following  table  illustrates  the  allocation of the allowance for
loan losses for each category of loan.  The  allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not  restrict our use of the  allowance to absorb  losses in other loan
categories.

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                 ------------------------------------------------------
                                                        2006                           2005
                                                 -----------------------        -----------------------
                                                             Percent of                     Percent of
                                                             Loans in Each                  Loans in Each
                                                             Category to                    Category to
                                                 Amount      Total Loans        Amount      Total Loans
                                                 ------      -----------        ------      -----------
                                                                  (Dollars in thousands)
<S>                                             <C>            <C>             <C>            <C>
Real estate mortgage loans:
    One- to four-family residential first         $ 318          78.71%          $ 285          73.49%
    One- to four-family residential second           12           2.97              11           2.70
    Multi-family.........................             3           0.74               5           1.22
    Commercial...........................            23           5.69              44          11.32
    Construction.........................             0           0.00              14           3.55
Other loans:
    Consumer installment.................             1           0.25               1           0.30
    Commercial...........................             9           2.23               5           1.26
    Automobile...........................            34           8.42              17           4.46
    Passbook.............................             0           0.00               2           0.61
    Other................................             4           0.99               4           1.09
                                                  -----         ------           -----         ------

     Total...............................         $ 404         100.00%          $ 388         100.00%
                                                  =====         ======           =====         ======
</TABLE>

Investment Activities

         Investment  Securities.  We are  required  by  federal  regulations  to
maintain a minimum  amount of liquid  assets  which may be invested in specified
short-term securities and certain other investments.  The level of liquid assets
varies depending upon several factors,  including:  (i) the yields on investment
alternatives;  (ii) our  judgment  as to the  attractiveness  of the yields then
available in relation to other opportunities;  (iii) expectation of future yield
levels;  and (iv) our  projections as to the  short-term  demand for funds to be
used in loan  origination  and other  activities.  At  December  31,  2006,  our
investment  securities  portfolio  consisted primarily of Federal Home Loan Bank
bonds of various maturities.

         Our  securities   portfolio  at  December  31,  2006  did  not  contain
securities  of any issuer with an  aggregate  book value in excess of 10% of our
equity, excluding those issued by the United States Government or its agencies.

         Mortgage-Backed  Securities.  We  have  invested  from  time to time in
residential mortgage-backed securities.  Mortgage-backed securities can serve as
collateral for borrowings  and,  through  repayments,  as a source of liquidity.
Mortgage-backed  securities represent a participation interest in a pool of one-
to four-family or other type of mortgages.  Principal and interest  payments are
passed  from  the  mortgage  originators,   through  intermediaries   (generally
quasi-governmental agencies) that pool and repackage the participation interests
in the  form  of  securities,  to  investors  such  as us.  Our  mortgage-backed
securities  portfolio  consists  primarily  of  participations  or  pass-through
certificates  issued by the Government National Mortgage  Association  ("GNMA").
GNMA  certificates are guaranteed as to principal and interest by the full faith
and credit of the United States. Our  mortgage-backed  securities  portfolio was
classified as "held-to-maturity" at December 31, 2006.

         Expected  maturities  will differ from  contractual  maturities  due to
scheduled  repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.

                                       11

<PAGE>

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate or adjustable
mortgage loans. Mortgage-backed securities are generally referred to as mortgage
participation certificates or pass-through certificates.  The interest rate risk
characteristics  of the  underlying  pool  of  mortgages  (i.e.,  fixed-rate  or
adjustable-rate)  and the  prepayment  risk,  are  passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages.

         The  following  table sets forth the carrying  value of our  investment
securities and mortgage-backed portfolio at the dates indicated.

                                                             At December 31,
                                                        -----------------------
                                                         2006             2005
                                                        ------         --------
                                                             (In thousands)
Securities available-for-sale:
   U.S. government and agency securities...........     $  728         $  1,703
Securities held-to-maturity:
   Mortgage-backed securities......................         55               66
                                                        ------         --------
      Total investments............................     $  783         $  1,769
                                                        ======         ========


         The  following  table sets forth the  scheduled  maturities,  amortized
cost, market values and average yields for our investment  portfolio at December
31, 2006.  The amortized cost and fair value of  mortgage-backed  securities are
presented  in the  held-to-maturity  category  by  contractual  maturity  in the
following table.  Expected  maturities of mortgage-backed  securities may differ
from  contracted  maturities  because  borrowers  may have the  right to call or
prepay obligations without call or prepayment penalties.

<TABLE>
<CAPTION>
                                          One Year or Less          One to Five Years          Five to Ten Years
                                          ----------------          -----------------          -----------------
                                                    Weighted                    Weighted                    Weighted
                                       Amortized    Average      Amortized      Average       Amortized     Average
                                         Cost        Yield          Cost         Yield          Cost         Yield
                                         ----        -----          ----         -----          ----         -----
                                                                    (Dollars in thousands)
<S>                                   <C>             <C>         <C>             <C>          <C>            <C>
Securities available-for-sale:
  U.S. government and
     agency securities...............  $    251        3.38%       $  500          3.01%        $     0        0.00%
Securities held-to-maturity:
  Mortgage-backed securities.........         0                         8          8.00%             14        8.00%
                                       --------                    ------                       -------

     Total...........................  $    251                    $  508                       $    14
                                       ========                    ======                       =======
</TABLE>

<TABLE>
<CAPTION>
                                         After Ten Years              Total Investment Securities
                                    ---------------------------   -------------------------------------
                                                     Weighted
                                     Amortized        Average    Amortized      Market         Average
                                       Cost            Yield        Cost        Value           Yield
                                       ----            -----        ----        -----           -----
                                                     (Dollars in thousands)
<S>                                <C>               <C>        <C>          <C>              <C>
Securities available-for-sale:
  U.S. government and
     agency securities.............  $      0          0.00%      $    751     $    728         3.13%
Securities held-to-maturity:
  Mortgage-backed securities.......        33          8.55%            55           58         8.33%
                                     --------                     --------     --------

     Total.........................  $     33                     $    806     $    786
                                     ========                     ========     ========
</TABLE>

                                       12

<PAGE>

Sources of Funds

         Deposits are our major  external  source of funds for lending and other
investment  purposes.  Funds are also  derived  from the  receipt of payments on
loans and  prepayment  of loans and,  to a much  lesser  extent,  maturities  of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.

         Deposits.  We attract  deposits  principally  from  within our  primary
market area through the offering of a selection of deposit instruments including
regular savings accounts,  money market accounts, and term certificate accounts.
Deposit account terms vary according to the minimum balance  required,  the time
period the funds must remain on deposit,  and the  interest  rate.  The interest
rates  we pay  on  deposits  are  set  weekly  at the  direction  of our  senior
management.  Interest rates are determined based on our liquidity  requirements,
interest  rates paid by our  competitors,  and our growth  goals and  applicable
regulatory restrictions and requirements.

         Like most savings  institutions,  Community First Bank has historically
relied  primarily on  certificates  of deposit for funding.  In order to attract
funds in prior years,  we had paid higher rates on  certificate  accounts  which
caused  our  cost of funds  to  increase.  Recently,  Community  First  Bank has
attempted  to reduce its reliance on  certificate  accounts by  attracting  more
transaction accounts, such as checking, NOW and money market accounts. As higher
rate certificates mature, we expect to reduce our cost of funds.

         The following table sets forth the average  balances and rates paid for
the Bank's various categories of deposits for the past two fiscal years.

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                -----------------------------------------------
                                                         2006                     2005
                                                ----------------------   ----------------------
                                                Average       Average     Average      Average
                                                Balance        Rate       Balance        Rate
                                                -------        ----       -------        ----
                                                             (Dollars in thousands)
<S>                                           <C>           <C>         <C>          <C>
Non-interest-bearing demand............        $  6,348          --%     $  4,968          --%
Interest-bearing demand................           4,671        0.81%        4,726        0.44%
Passbook savings.......................           3,955        1.10%        3,807        0.39%
Certificates of deposit................          45,836        4.27%       38,325        3.41%
                                               --------                  --------
     Total.............................        $ 60,810                  $ 51,826
                                               ========                  ========
</TABLE>

         At December 31, 2006, time  certificates in amounts of $100,000 or more
constituted $12.7 million,  or 19.6%, of our total deposit base. The majority of
these  certificates  represent  deposits  from  long-standing   customers.   The
following  table  classifies our time  certificates  of $100,000 or more by time
remaining to maturity as of December 31, 2006.

                                                            Certificates
        Maturity Period                                      of Deposit
        ---------------                                      ----------
                                                           (In thousands)

        Three months or less..............................   $   3,215
        Over three through six months.....................       2,954
        Over six through 12 months........................       4,200
        Over 12 months....................................       2,301
                                                             ---------
                                                             $  12,670
                                                             =========

                                       13

<PAGE>

         Federal  Home  Loan  Bank  Borrowings.  Advances  (borrowings)  may  be
obtained from the Federal Home Loan Bank of Cincinnati to supplement  our supply
of lendable  funds.  Advances from the Federal Home Loan Bank of Cincinnati  are
typically  secured  by a pledge  of our stock in the  Federal  Home Loan Bank of
Cincinnati  and a portion of our first  mortgage  loans.  Each Federal Home Loan
Bank credit program has its own interest rate, which may be fixed or adjustable,
and range of maturities.  At December 31, 2006, our borrowings  from the Federal
Home Loan Bank consisted of $10.4 million in short-term, variable-rate advances.

         Correspondent  Bank and  Other  Borrowings.  In order to  maintain  the
regulatory capital levels of Community First Bank, we have borrowed funds at the
holding company level for capital infusions.  Community First Bancorp,  Inc. has
previously  borrowed  up  to  $1.25  million  on  a  line  of  credit  from  our
correspondent bank for this purpose. The line of credit provides for an interest
rate at the prime rate plus 25 basis points  (currently 8.50%) and is secured by
all of our stock in Community  First Bank. In December 2005 the line of credit's
principal  balance was reduced by $400,000  using the proceeds from an unsecured
loan from four  members of our Board of  Directors.  The four  directors  loaned
these funds for the sole purpose of paying down the  outstanding  line of credit
with a  correspondent  bank.  This loan paid the four directors a fixed interest
rate of 7.50%.  Subsequently,  one  director  took  shares  of  common  stock in
exchange for his note.

         In May 2006,  the line of credit was renewed at the same  interest rate
until November 15, 2006. In order to obtain the renewal, we were required to pay
the  line  down to  $750,000.  The  maturity  date on the  line  of  credit  was
subsequently extended to February 15,  2007. In April 2007, the Company paid off
the line of credit from its correspondent bank with the proceeds from a $767,000
loan from another bank.  The new loan has a one-year term with interest equal to
the prime rate  payable at  maturity.  The new loan is secured by the  Company's
stock in the Bank. The three directors who continue to have loans outstanding to
Community  First  Bancorp,  Inc.  have agreed to extend their notes to April 15,
2007 with accrued interest being capitalized.

         Analysis  of  Short-Term  Borrowings.  The  following  table sets forth
certain  information at the dates and for the periods  indicated  regarding each
category of short-term  borrowings  whose average balance during the last fiscal
year exceeded 30% of stockholders' equity at year end.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                      -----------------------
                                                                        2006            2005
                                                                        ----            ----
                                                                       (Dollars in thousands)
<S>                                                             <C>               <C>
Amounts outstanding at end of period:
   FHLB advances.................................................   $  10,425        $  13,000
   Correspondent bank borrowings.................................         750              850
Weighted average rate paid:
   FHLB advances.................................................        5.17%            3.59%
   Correspondent bank borrowings.................................        8.50             7.50
Maximum amount of borrowings outstanding at any month end:
   FHLB advances.................................................   $  12,500        $  14,000
   Correspondent bank borrowings.................................         850            1,250
Average borrowings outstanding:
    FHLB advances................................................   $   9,871        $  11,197
   Correspondent bank borrowings.................................         393               34
Approximate weighted average rate paid ..........................
    FHLB advances................................................        5.15%            3.46%
   Correspondent bank borrowings.................................        8.21             7.50
</TABLE>

                                       14

<PAGE>

Competition

         We compete for deposits with other insured financial  institutions such
as local commercial banks,  thrift  institutions,  credit unions and multi-state
regional  banks in our market  area.  We also  compete for funds with  insurance
products sold by local agents and  investment  products such as mutual funds and
other securities sold by local and regional brokers.  According to data from the
Federal  Deposit  Insurance   Corporation,   we  held  approximately   11.0%  of
FDIC-insured deposits in Hopkins County as of June 30, 2006, the latest date for
which such data was available.  Such data does not cover deposits held by credit
unions. We have  historically  competed for deposits by paying higher rates than
our local competitors.

         Our competition for loans depends on market  conditions and the type of
lending. Our competition for residential mortgages comes primarily from mortgage
bankers and brokers who primarily originate long-term fixed-rate loans on behalf
of secondary market  investors.  While we also originate  long-term,  fixed-rate
loans on  behalf  of  secondary  market  investors,  our  principal  residential
mortgage loan offerings are our various adjustable-rate  mortgage loans which we
market based on flexibility of terms and superior service.  We compete primarily
against other local depository institutions for commercial and multi-family real
estate loans. We compete for these lending opportunities  primarily on the basis
of our flexibility and  responsiveness as a locally owned and oriented community
bank. We compete  against other local  financial  institutions  and a variety of
other lenders including  finance  companies and automobile  dealers for consumer
loans and second  mortgages.  We generally  compete for these loans based on our
variety of lending solutions, customer relationships and quality of service.

                                   REGULATION

General

         As a federally chartered,  FDIC-insured savings institution,  Community
First  Bank  is  subject  to  extensive  regulation  by  the  Office  of  Thrift
Supervision  and the Federal  Deposit  Insurance  Corporation.  Community  First
Bank's lending activities and other investments must comply with various federal
and  state  statutory  and  regulatory  requirements,  and the  Office of Thrift
Supervision  periodically  examines  Community  First Bank for  compliance  with
various regulatory requirements.  The Federal Deposit Insurance Corporation also
has authority to conduct  periodic  examinations.  We must file reports with the
Office  of  Thrift  Supervision  describing  our  activities  and our  financial
condition,  and we must obtain  approvals  from  regulatory  authorities  before
entering into certain transactions, such as the conversion or mergers with other
financial  institutions.  We are also  subject to certain  reserve  requirements
promulgated by the Board of Governors of the Federal  Reserve  System  ("Federal
Reserve  System").  Our  relationship  with our depositors and borrowers is also
regulated to a great extent by federal and state law, especially in such matters
as the  ownership  of savings  accounts and the form and content of our mortgage
documents.  This  supervision  and  regulation is primarily  intended to protect
depositors.  The  regulatory  structure  also gives the  regulatory  authorities
extensive  discretion  in  connection  with their  supervisory  and  enforcement
activities  and  examination  policies,  including  policies with respect to the
classification  of assets and the  establishment  of adequate loan loss reserves
for regulatory  purposes.  Any change in  regulations,  whether by the Office of
Thrift  Supervision,  the Federal  Deposit  Insurance  Corporation  or any other
government agency, could have a material adverse impact on our operations.

Regulation of Community First Bank

         Insurance of Deposits.  The Federal Deposit  Insurance  Corporation has
adopted a risk-based assessment system for insured depository  institutions that
takes  into  account  the  risks   attributable  to  different   categories  and
concentrations  of assets and liabilities.  The system assigns an institution to
one  of  three  capital   categories  (1)  well   capitalized;   (2)  adequately
capitalized; and (3) undercapitalized.  These three categories are substantially
similar to the prompt  corrective  action  categories  described above, with the
"undercapitalized"  category including  institutions that are  undercapitalized,
significantly   undercapitalized  and  critically  undercapitalized  for  prompt
corrective  action  purposes.  The Federal Deposit  Insurance  Corporation  also
assigns  an  institution  to one  of  three  supervisory  subgroups  based  on a
supervisory evaluation that the institution's primary federal regulator provides
to the Federal Deposit  Insurance  Corporation and information  that the Federal
Deposit  Insurance  Corporation  determines to be relevant to the

                                       15

<PAGE>

institution's  financial  condition and the risk posed to the deposit  insurance
fund.  Assessments  currently  range  from  0 to 27  cents  per  $100  deposits,
depending on the institution's capital group and supervisory subgroup.

         Under the Federal  Deposit  Insurance  Reform Act of 2005 (the  "Reform
Act"),  which was signed into law on February 15, 2006:  (i) the Bank  Insurance
Fund (which formerly insured the deposits of banks) and the Savings  Association
Insurance  Fund (which  formerly  insured the deposits of savings  associations)
were  merged  into a new  combined  fund,  called  the  Deposit  Insurance  Fund
effective March 31, 2006, (ii) the current $100,000 deposit  insurance  coverage
will be indexed for inflation  (with  adjustments  every five years,  commencing
January 1, 2011); and (iii) deposit insurance  coverage for retirement  accounts
has been  increased  to  $250,000  per  participant  subject to  adjustment  for
inflation.

         The  FDIC  is  authorized  to set the  reserve  ratio  for the  Deposit
Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits.
If the Deposit  Insurance  Fund's reserves exceed the designated  reserve ratio,
the FDIC is required to pay out all or, if the reserve  ratio is less than 1.5%,
a portion of the excess as a dividend to insured  depository  institutions based
on the  percentage  of insured  deposits  held on December 31, 1996 adjusted for
subsequently  paid  premiums.  Insured  depository  institutions  that  were  in
existence on December 31, 1996 and paid assessments prior to that date (or their
successors) are entitled to a one-time credit against future  assessments  based
on their past  contributions  to the Bank Insurance Fund or Savings  Association
Insurance Fund.

         Pursuant to the Reform Act,  the FDIC has  determined  to maintain  the
designated  reserve ratio at its current 1.25%.  The FDIC has also adopted a new
risk-based  premium system that provides for quarterly  assessments  based on an
insured  institution's  ranking  in one of four risk  categories  based on their
examination  ratings and capital  ratios.  Beginning  in 2007,  well-capitalized
institutions  with the CAMELS ratings of 1 or 2 will be grouped in Risk Category
I and will be assessed  for deposit  insurance at an annual rate of between five
and seven basis points with the assessment rate for an individual institution to
be  determined  according  to a  formula  based  on a  weighted  average  of the
institution's  individual  CAMEL  component  ratings plus either five  financial
ratios or the  average  ratings  of its  long-term  debt.  Institutions  in Risk
Categories  II,  III and IV will be  assessed  at annual  rates of 10, 28 and 43
basis points, respectively.

         Regulatory   Capital   Requirements.   Office  of  Thrift   Supervision
regulations  require savings  institutions to meet three capital standards:  (1)
tangible  capital  equal to at least  1.5% of total  adjusted  assets,  (2) core
capital equal to at least 4.0% of adjusted  total assets (3.0% for the strongest
institutions),  and (3) total risk-based capital equal to at least 8.0% of total
risk-weighted assets. In addition,  the Office of Thrift Supervision may require
a savings  institution that has a risk-based  capital ratio of less than 8.0%, a
ratio of Tier 1 capital to risk-weighted  assets of less than 4.0% or a ratio of
Tier 1  capital  to  adjusted  total  assets  of less  than  4.0%  (3.0%  if the
institution has received the highest rating on its most recent examination) take
certain actions to increase its capital ratios. If the institution's  capital is
significantly  below the minimum  required  levels or if it is  unsuccessful  in
increasing  its  capital   ratios,   the  Office  of  Thrift   Supervision   may
significantly restrict its activities.

         Core  capital  is  defined as common  stockholders'  equity  (including
retained  earnings),  non-cumulative  perpetual  preferred  stock  and  minority
interests  in  the  equity  accounts  of  consolidated   subsidiaries,   certain
non-withdrawable  accounts and pledged  deposits of mutual savings  associations
and qualifying  supervisory  goodwill,  less intangible  assets (other than core
deposit intangibles,  servicing assets,  purchased credit card relationships and
other  qualifying  intangible  assets) and investments in certain  subsidiaries.
Tier 1 has the same definition as core capital.  Tangible  capital is defined as
core  capital  less  supervisory  goodwill,  non-mortgage  servicing  assets and
purchased   credit  card   relationships   and  less  certain   investments   in
subsidiaries.

         Total   risk-based   capital  equals  the  sum  of  core  capital  plus
supplementary  capital. The components of supplementary  capital include,  among
other items,  cumulative perpetual preferred stock, perpetual subordinated debt,
mandatory convertible subordinated debt,  intermediate-term preferred stock, and
the portion of the  allowance for loan losses not  designated  for specific loan
losses.  Overall,  supplementary  capital is limited to 100% of core capital.  A
savings institution must calculate its risk-weighted  assets by multiplying each
asset and  off-balance  sheet item by various risk factors as  determined by the
Office  of  Thrift  Supervision,  which  range  from 0% for  cash  to  100%  for
delinquent loans,  property acquired through foreclosure,  commercial loans, and
other assets.  At December 31, 2006, we were in compliance  with all  regulatory
capital requirements.

                                       16

<PAGE>
         Community  First Bank  currently  meets the  criteria  to be treated as
adequately  capitalized under Office of Thrift  Supervision  regulations.  As an
adequately  capitalized  institution,  Community  First  Bank is not  subject to
various sanctions that may be imposed on undercapitalized  institutions. As long
as Community First Bank is well capitalized or adequately capitalized, it may be
eligible  for  expedited  treatment  of its  regulatory  applications  and lower
examination and deposit insurance assessment rates.

         Dividend and Other Capital Distribution  Limitations.  Office of Thrift
Supervision  regulations  require  Community  First  Bank to give the  Office of
Thrift  Supervision  30 days  advance  notice  of any  proposed  declaration  of
dividends to Community First Bancorp,  Inc. The Office of Thrift Supervision may
prohibit the payment of dividends to Community First Bancorp,  Inc. In addition,
Community First Bank may not declare or pay a cash dividend on its capital stock
if the effect would be to reduce Community First Bank's regulatory capital below
the amount required for the liquidation  account  established at the time of the
conversion to stock form.

         Savings  associations  must  submit  notice  to the  Office  of  Thrift
Supervision prior to making a capital  distribution  (which includes  dividends,
stock  repurchases and amounts paid to stockholders in another  institution in a
cash merger) if (a) they would not be well capitalized  after the  distribution,
(b) the distribution  would result in the retirement of any of the association's
common or preferred stock or debt counted as its regulatory  capital, or (c) the
association is a subsidiary of a holding  company.  A savings  association  must
make  application  to  the  Office  of  Thrift  Supervision  to  pay  a  capital
distribution  if  (x)  the  association  would  not  be  adequately  capitalized
following the distribution,  (y) the association's  total  distributions for the
calendar year exceed the  association's net income for the calendar year to date
plus its net income (less distributions) for the preceding two years, or (z) the
distribution  would  otherwise  violate  applicable  law  or  regulation  or  an
agreement with or condition imposed by the Office of Thrift Supervision.

         A savings institution is prohibited from making a capital  distribution
if,  after  making  the   distribution,   the  savings   institution   would  be
undercapitalized  (i.e.,  not meet  any one of its  minimum  regulatory  capital
requirements).  Further,  a savings  institution  cannot  distribute  regulatory
capital that is needed for its liquidation account.

         Qualified  Thrift  Lender  Test.  Savings   institutions  must  meet  a
Qualified  Thrift  Lender  test.  To satisfy the test,  the Bank must either (i)
qualify as a "domestic building and loan association" under the Internal Revenue
Code by  maintaining  at least 60% of our total  assets  in  specified  types of
assets,  including cash,  certain  government  securities,  loans secured by and
other  assets  related  to  residential  real  property,  educational  loans and
investments  in premises  of the  institution  or (ii)  maintain at least 65% of
Community First Bank's  portfolio  assets (total assets less intangible  assets,
property we use in  conducting  our business and liquid  assets in an amount not
exceeding 20% of total assets) in Qualified Thrift Investments. Qualified Thrift
Investments consist primarily of residential  mortgage loans and mortgage-backed
and  other   securities   related  to  domestic,   residential  real  estate  or
manufactured  housing.  The  shares of stock  Community  First  Bank owns in the
Federal  Home  Loan  Bank  of  Cincinnati  also  qualify  as  Qualified   Thrift
Investments.  Subject to an aggregate limit of 20% of portfolio  assets,  we may
also count the following as Qualified Thrift Investments:  (i) 50% of the dollar
amount of residential  mortgage loans  originated for sale; (ii)  investments in
the  capital  stock or  obligations  of any  service  corporation  or  operating
subsidiary as long as such subsidiary  derives at least 80% of its revenues from
domestic  housing related  activities;  (iii) 200% of the dollar amount of loans
and investments to purchase,  construct or develop  "starter  homes," subject to
certain  other  restrictions;  (iv) 200% of the  dollar  amount of loans for the
purchase,  construction  or  development  of  domestic  residential  housing  or
community centers in "credit needy" areas or loans for small businesses  located
in such  areas;  (v) loans for the  purchase,  construction  or  development  of
community  centers;  (vi) loans for personal,  family,  household or educational
purposes,  subject to a maximum of 10% of portfolio assets;  and (vii) shares of
the Federal Home Loan  Mortgage  Corporation  or the Federal  National  Mortgage
Association stock.

         If Community First Bank satisfies the Qualified  Thrift Lender test, it
will continue to enjoy full borrowing privileges from the Federal Home Loan Bank
of  Cincinnati.  If Community  First Bank does not satisfy the test, it may lose
its borrowing  privileges  and become  subject to the  activities  and branching
restrictions  applicable to national banks. Compliance with the Qualified Thrift
Lender test is determined on a monthly basis in nine out of every 12 months.  As
of December 31, 2006,  Community First Bank was in compliance with the Qualified
Thrift Lender requirement.
                                       17
<PAGE>

         Transactions With Affiliates. Generally, transactions between a savings
institution  and  its  affiliates  are  subject  to  certain  limitations.  Such
transactions  must be on  terms  as  favorable  to the  savings  institution  as
comparable  transactions  with  non-affiliates.  In addition,  certain  types of
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution.  Community
First Bank's affiliates  include  Community First Bancorp,  Inc. and any company
under  common  control  with  Community  First  Bank.  In  addition,  a  savings
institution  may not extend  credit to any affiliate  engaged in activities  not
permissible  for a  bank  holding  company  or  acquire  the  securities  of any
affiliate  that is not a subsidiary.  The Office of Thrift  Supervision  has the
discretion  to treat  subsidiaries  of savings  institution  as  affiliates on a
case-by-case basis.

         Loans to  Directors,  Executive  Officers and  Principal  Stockholders.
Community  First  Bank's  loans to its  directors,  executive  officers  and our
principal  stockholders  may not be made on  terms  more  favorable  than  those
afforded  to  other  borrowers,  except  loans  made  as part  of a  benefit  or
compensation program widely available to the Bank's employees and which does not
give more  preferential  terms to  directors,  executive  officers or  principal
stockholders than to other employees.  In addition,  Community First Bank cannot
make loans in excess of certain levels to directors,  executive  officers or 10%
or greater stockholders (or any of their affiliates) unless the loan is approved
in  advance  by a  majority  of the  Board of  Directors  with any  "interested"
director not voting.  We are also prohibited from paying any overdraft of any of
our  executive  officers  or  directors.  We are also  subject to certain  other
restrictions on the amount and type of loans to executive officers and directors
and must annually report such loans to our regulators.

         Federal Home Loan Bank System.  Community First Bank is a member of the
Federal Home Loan Bank of Cincinnati,  which is one of 12 regional  Federal Home
Loan Banks.  Each Federal Home Loan Bank serves as a reserve or central bank for
its  members  within its  assigned  region.  It is funded  primarily  from funds
deposited  by  savings  institutions  and  proceeds  derived  from  the  sale of
consolidated obligations of the Federal Home Loan Bank System. It makes loans to
members (i.e.,  advances) in accordance with policies and procedures established
by the Board of Directors of the Federal Home Loan Bank.

         As a member,  Community First Bank is required to purchase and maintain
stock in the Federal Home Loan Bank of Cincinnati in an amount equal to at least
1% of its aggregate unpaid  residential  mortgage loans, home purchase contracts
or similar  obligations  at the  beginning of each year, or 1/20 of its advances
from the Federal Home Loan Bank of Cincinnati, whichever is greater. At December
31, 2006,  Community First Bank had $764,500 in Federal Home Loan Bank stock, at
cost, which was in compliance with this requirement.

         Federal  Reserve  System.  The  Federal  Reserve  System  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking  accounts) and non-personal  time  certificates.  At December 31, 2006,
Community  First Bank's  reserves met the minimum level  required by the Federal
Reserve System.

Regulation of Community First Bancorp, Inc.

         General.  Community  First Bancorp,  Inc. is registered and required to
file reports with the Office of Thrift  Supervision and is subject to regulation
and examination by the Office of Thrift Supervision.  In addition, the Office of
Thrift   Supervision  has  enforcement   authority  over  the  Company  and  any
non-savings  institution  subsidiaries.   This  permits  the  Office  of  Thrift
Supervision  to restrict  or  prohibit  activities  that it  determines  to be a
serious risk to Community First Bank. This regulation is intended  primarily for
the  protection  of  Community  First's  depositors  and not for the  benefit of
stockholders.  Community  First  Bancorp,  Inc. is also required to file certain
reports with, and comply with the rules and  regulations  of, the Securities and
Exchange Commission under the federal securities laws.

                                       18

<PAGE>

         Activities  Restrictions.  As a savings and loan holding company formed
after May 4, 1999, Community First Bancorp, Inc. and its non-savings association
subsidiaries  are subject to  statutory  and  regulatory  restrictions  on their
business  activities.  Under  the Home  Owners'  Loan  Act,  as  amended  by the
Gramm-Leach-Bliley  Act (the "GLB Act"), the non-banking activities of Community
First Bancorp, Inc. are restricted to certain activities specified by statute or
Office of Thrift Supervision  regulation,  which include performing services and
holding  properties  used  by  a  savings  association  subsidiary,   activities
authorized for multiple savings and loan holding  companies as of March 5, 1987,
and non-banking  activities  permissible for bank holding companies  pursuant to
the Bank Holding Company Act of 1956 (the "BHC Act") or authorized for financial
holding companies pursuant to the GLB Act.  Furthermore,  no company may acquire
control of Community  First  Bancorp,  Inc.  unless the acquiring  company was a
unitary  savings  and loan  holding  company on May 4, 1999 (or became a unitary
savings and loan holding company  pursuant to an application  pending as of that
date) or the  company  is only  engaged in  activities  that are  permitted  for
multiple savings and loan holding  companies or for financial  holding companies
under the BHC Act as amended by the GLB Act.

         Restrictions on Acquisitions. Community First Bancorp, Inc. must obtain
approval from the Office of Thrift  Supervision  before acquiring control of any
other savings institution or savings and loan holding company, substantially all
the  assets  thereof  or in excess of 5% of the  outstanding  shares of  another
savings  institution  or  savings  and loan  holding  company.  Community  First
Bancorp,  Inc.'s  directors and officers or persons owning or  controlling  more
than 25% of Community  First Bancorp,  Inc.'s stock must also obtain approval of
the  Office  of Thrift  Supervision  before  acquiring  control  of any  savings
institution or savings and loan holding company.

         The Office of Thrift  Supervision  may only approve  acquisitions  that
will result in the  formation  of a multiple  savings and loan  holding  company
which controls savings  institutions in more than one state if: (i) the multiple
savings and loan holding company involved  controls a savings  institution which
operated a home or branch office in the state of the  institution to be acquired
as of March 5, 1987;  (ii) the acquiror is authorized to acquire  control of the
savings  institution  pursuant to the  emergency  acquisition  provisions of the
Federal  Deposit  Insurance Act; or (iii) the statutes of the state in which the
institution to be acquired is located  specifically  permit  institutions  to be
acquired by  state-chartered  institutions or savings and loan holding companies
located in the state  where the  acquiring  entity is  located  (or by a holding
company that controls such state-chartered savings institutions).

Item 2.   Description of Property
---------------------------------

         The following  table sets forth certain  information  regarding our two
offices.

<TABLE>
<CAPTION>
                                                        Book Value at
                               Year       Owned or       December 31,       Approximate
                              Opened       Leased            2006         Square Footage
                              ------       ------            ----         --------------
                                                    (Dollars in thousands)
<S>                           <C>        <C>               <C>                <C>
Main Office:
2420 North Main Street
Madisonville, KY  42431        2004         Owned           $1,204             8,400

Branch Office:
240 South Main Street
Madisonville, KY 42431         1959         Owned           $ 642              4,200
</TABLE>

         The book value of the Bank's  investments  in  premises  and  equipment
totaled  $1,846,000  at December 31, 2006.  See Note 4 of Notes to  Consolidated
Financial  Statements.  In addition,  we have acquired two buildings adjacent to
our South Main  Street  office  for future  expansion  of parking  and  improved
vehicle access. The properties are currently being rented out for a total rental
income of $500 per  month.  Our  aggregate  investment  in these  properties  is
$200,000.

                                       19

<PAGE>

Item 3. Legal Proceedings
-------------------------

         We are, from time to time, a party to legal proceedings  arising in the
ordinary  course of our business,  including  legal  proceedings  to enforce our
rights against borrowers.  We are not currently a party to any legal proceedings
which  are  expected  to  have  a  material  adverse  effect  on  our  financial
statements.

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

         There  were no  matters  submitted  to a vote of the  security  holders
during the fourth quarter of fiscal year 2006.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Small
--------------------------------------------------------------------------
Business Issuer Purchases of Equity Securities
----------------------------------------------


         (a) Market  Information.  The  Company's  common stock is quoted on the
Over-the-Counter   Bulletin  Board  ("OTCBB")  under  the  symbol:  "CFBC."  The
following table sets forth high and low sales information  reported on the OTCBB
for the Common Stock for each quarter  during the past two fiscal  years.  These
quotes reflect  inter-dealer prices without mark-ups,  mark-downs or commissions
and may not necessarily reflect actual transactions.

                                   2006                        2005
                             -----------------         -------------------
                              High        Low             High        Low
                              ----        ---             ----        ---
       Fourth Quarter        $8.50      $7.00           $10.90      $9.00
       Third Quarter          8.50       7.10            11.50      10.90
       Second Quarter         8.90       6.90            12.75      10.75
       First Quarter          9.00       6.90            13.50      12.50

         Holders.  As of December 31, 2006, there were 138 record holders of the
Common Stock.

         Dividends.  We have  not  paid  cash  dividends  in the past and do not
anticipate  paying any cash dividends in the foreseeable  future. We expect that
we will retain all  earnings,  if any, in order to provide more funds to operate
our business. Any payment of dividends is subject to the discretion of our board
of directors,  which will consider a number of factors,  including our prospects
for  future  earnings,  financial  condition,  cash needs and  general  business
conditions.

         (b) Use of Proceeds. Not applicable.

         (c) Issuer Purchases of Equity Securities. Not applicable.

                                       20

<PAGE>

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

<TABLE>
<CAPTION>
                                                                   At or for the Year Ended December 31,
                                                                   -------------------------------------
                                                                      2006           2005           2004
                                                                      ----           ----           ----
                                                                    (In thousands, except per share data)
<S>                                                             <C>            <C>            <C>
Selected Financial Condition Data:
     Assets ...................................................   $   79,075     $   71,729     $   63,503
     Loans receivable, net ....................................       72,836         64,578         51,932
     Cash and cash equivalents ................................        1,986          2,009          5,793
     Investment securities:
         Available-for-sale ...................................          728          1,703          2,215
         Held-to-maturity .....................................           55             66             89
     Deposits .................................................       64,679         54,477         46,466
     Advances from Federal Home Loan Bank .....................       10,425         13,000         13,000
     Stockholders' equity .....................................        2,436          2,720          3,164

Selected Operations Data:
     Interest income ..........................................   $    4,359     $    3,556     $    2,692
     Interest expense .........................................        2,643          1,783          1,079
                                                                  ----------     ----------     ----------
         Net interest income ..................................        1,716          1,773          1,613
     Provision for loan losses ................................           63             79            164
                                                                  ----------     ----------     ----------
         Net interest income after provision for loan losses...        1,653          1,694          1,449
     Other income .............................................          435            346            216
     Other expenses ...........................................        2,763          2,479          2,581
                                                                  ----------     ----------     ----------
         Income (loss) before federal income tax
             expense (benefit) ................................         (675)          (439)          (916)
     Federal income tax expense (benefit) .....................           --             --            116
                                                                  ----------     ----------     ----------
         Net income (loss) ....................................   $     (675)    $     (439)    $   (1,032)
                                                                  ==========     ==========     ==========

Per Share Data:
     Earnings per share - Basic ...............................   $    (2.14)    $    (1.58)    $    (3.71)
     Earnings per share - Diluted .............................        (2.14)         (1.58)         (3.71)
     Book value per share .....................................         7.74           9.79          11.40
Performance Ratios:
     Return on average assets .................................        (0.90)%        (0.65)%        (2.00)%
     Return on average equity .................................       (24.93)        (11.41)        (27.85)
     Interest rate spread .....................................         2.61           2.65           3.41
     Net interest margin ......................................         2.62           2.85           3.48
     Ratio of average interest-earning assets to average
        interest-bearing liabilities ..........................       100.20         105.18         103.09
     Ratio of noninterest expense to average total assets .....         3.69           3.69           5.00
Asset Quality Ratios:
     Nonperforming assets to total assets at end of period ....         0.46           0.43           0.46
     Nonperforming loans to total loans at end of period ......         0.47           0.47           0.57
     Allowance for loan losses to total loans at end
        of period .............................................         0.55           0.60           0.61
     Allowance for loan losses to nonperforming loans
        at end of period ......................................       117.78         126.80         108.09
     Net charge-offs to average loans outstanding .............         0.07           0.02           0.06

Capital Ratios:
     Equity to total assets at end of period ..................         3.08           3.79           4.95
     Average equity to average assets .........................         3.61           4.36           7.18
     Tier 1/core capital to adjusted total assets (1) .........         4.51           5.47           6.05
     Tier 1 capital to risk-based assets (1) ..................         4.51           5.47           6.05
     Total capital to risk-based capital (1) ..................         8.47          10.22          11.78
</TABLE>

__________
(1) Community First Bank only.

                                       21

<PAGE>

         Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations.  The  information in this section should also be read
with  our  Consolidated  Financial  Statements  and  Notes  to the  Consolidated
Financial Statements, which are included elsewhere in this document.

Community First Bancorp, Inc.

         Community  First  Bancorp,  Inc. is the holding  company for  Community
First Bank, a federal  savings bank  headquartered  in  Madisonville,  Kentucky.
Community First Bank operates from its main office at 2420 North Main Street and
a branch  office at 240  South  Main  Street,  both in  Madisonville,  Kentucky.
Community First Bank's lending  activities  consist primarily of the origination
of loans secured by residential and commercial  properties in its primary market
area of Madisonville.

         Founded  in  1923  as the  Madisonville  Building  & Loan  Association,
Community  First Bank  historically  operated as a  traditional  thrift from its
South Main Street  location,  offering  long-term  mortgages and small  consumer
loans to local  residents and funding these loans with  certificates of deposit.
In late 2001, the Board of Directors  brought in current  management to effect a
turn-around.  As part of its new strategy,  Community  First Bank  remodeled and
updated  its  existing  office,  opened  a new  main  office  and  substantially
broadened its product lines.  In 2003,  Community  First Bank converted to stock
form  and  raised  $2.7  million  in  capital,  which  has  allowed  us to  grow
significantly.  Since the stock conversion, we have more than doubled our assets
making us one of the fastest growing financial  institutions in the Commonwealth
of Kentucky during this period.

Performance Overview

         We incurred  losses for the years ended December 31, 2006 and 2005. For
the years ended December 31, 2006 and 2005, we had losses of $675,000 ($2.14 per
diluted share) and $439,000 ($1.58 per diluted share), respectively.  Our losses
are  primarily  attributable  to the  increase  in overhead  resulting  from the
opening of our new main office in March 2004 and expenses  related to our change
in data  processors in 2004.  In addition,  we had $227,000 in losses in the 4th
quarter  which were  attributed to the  write-off of  accumulated  nonreconciled
items in our primary correspondent account and various suspense accounts.

         To offset the increase in expenses,  we have grown and  diversified our
loan portfolio in order to increase our profitability.  Since December 31, 2003,
our loan portfolio has grown from $35.6 million to $73.2 million at December 31,
2006, an increase of 105.6%.  Within the portfolio,  residential  mortgages have
declined  to 78% of the  portfolio  at  December  31,  2006 from over 85% of the
portfolio  at  December  31,  2003.  During  this same  period,  our  commercial
mortgages have grown from $2.4 million,  or 6.61% of the portfolio,  at December
31, 2003 to $7.4 million, or 10.1% of the portfolio, at December 31, 2006.

         During this period of growth,  our asset  quality has remained  strong.
Our ratio of  non-performing  assets to total  assets has not been  greater than
0.7% since 2003.  We believe  that our asset  quality  reflects a strong  credit
culture and disciplined underwriting.

         The  growth and  diversification  in our loan  portfolio  has driven an
increase in interest  income from $2.2  million for the year ended  December 31,
2003 to $4.4 million for the year ended December 31, 2006, an increase of 90.9%.
Despite the increase in interest income,  our net interest income has only grown
by  $368,000,  or 23.3%,  during this period as interest  expense has grown at a
faster rate,  increasing from $833,000 during the fiscal year ended December 31,
2003 to $2.6  million  during  the fiscal  year ended  December  31,  2006.  The
increase in  interest  expense  reflects  deposit  growth from $33.2  million at
December 31, 2003 to $64.7 million at December 31, 2006 and our increased use of
Federal  Home Loan Bank  advances  which grew from $5.0  million at December 31,
2003 to $10.4  million at December 31, 2006.  Additionally  contributing  to the
increase in interest  expense has been the  successive  increases in the federal
funds rate by the Federal Reserve since June 2004,  which have affected our cost
of funds to a greater degree than the yields on our earning assets.

                                       22

<PAGE>

         As a result of these factors, our interest rate spread and net interest
margin  narrowed to 2.61% and 2.62%,  respectively,  for the year ended December
31,  2006 from 2.69% and 2.85%,  respectively  for the year ended  December  31,
2005.

         Since 2003, our  non-interest  income has grown as we have  diversified
our income sources.  Non-interest income has increased from $195,000 during 2003
to $435,000 in 2006.  The increase in  non-interest  income has  primarily  been
driven by additional  fees and service charges on deposits  including  overdraft
charges  which  have  increased  over  tenfold  since  we  dropped  our  fee for
overdrafts to $9.95 in 2002.

         Other  expenses  have climbed from $1.6 million in 2003 to $2.8 million
in 2006 after  decreasing  in 2005 due to the opening of our new main office and
expenses  incurred in connection  with the  conversion  of our computer  system.
Other expenses  declined to $2.5 million in 2005 due primarily to the absence of
conversion-related  expenses. Other expense, however, continues to trend upwards
due to our growth.

         Our operating losses have adversely  affected our stockholders'  equity
which has  declined  from $4.2  million at December  31, 2003 to $2.4 million at
December 31, 2006. On a percentage basis, stockholders' equity has declined from
9.87% of assets at December  31, 2003 to 3.08% of assets at December  31,  2006.
Despite the decline in  consolidated  equity,  Community First Bank has remained
adequately  capitalized  for  regulatory  capital  purposes as  Community  First
Bancorp,  Inc. has primarily  used  borrowings at the holding  company level for
capital infusions.

         During  the first  quarter  of 2007,  the  Company  commenced  a rights
offering of 750,000 shares at $7.25 per share to existing stockholders as of the
close of business on December  29, 2006.  Unsubscribed  shares were offered on a
best efforts basis to members of the local  community.  The Company reserved the
right  to   increase   the   number  of  shares   sold  by   112,500   to  cover
oversubscriptions  and other  purchases.  Pursuant to the rights  offering,  the
Company  sold a total of 8,032 shares for gross  proceeds of $58,232.  Estimated
expenses of the offering  were  $132,271.  The excess of expenses  over proceeds
will be charged against earnings during the first quarter.

         Going forward,  the Company intends to more actively manage its balance
sheet for profitability.  Our strategies include increasing our level of deposit
funding and reducing our reliance on Federal Home Loan Bank borrowings and other
high cost  funding.  We also  intend to improve  the  overall  yield on our loan
portfolio by allowing  lower  yielding loans to run off and replacing them where
feasible with higher-yielding  loans that satisfy our conservative  underwriting
criteria.  When combined with our ongoing cost-control  efforts, we believe that
these  strategies  will ultimately put the Bank into the black. In the meantime,
the Company will continue to investigate capital-raising options, including both
debt and equity.

Application of Critical Accounting Policies

         Allowance for Loan Losses.  Our consolidated  financial  statements are
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States and  follow  general  practices  within  the  financial  services
industry.  The most significant  accounting policies followed by Community First
Bancorp, Inc. are presented in Note 1 to the consolidated  financial statements.
These  policies,  along with the  disclosures  presented in the other  financial
statement  notes  and in  this  financial  review,  provide  information  on how
significant  assets and liabilities  are valued in the financial  statements and
how those values are determined.  Based on the valuation techniques used and the
sensitivity  of financial  statement  amounts to the methods,  assumptions,  and
estimates underlying those amounts,  management has identified the determination
of the  allowance  for loan losses to be the  accounting  area that requires the
most  subjective  or complex  judgments,  and as such  could be most  subject to
revision as new information becomes available.

         The  allowance  for loan  losses  represents  management's  estimate of
probable credit losses inherent in the loan portfolio. Determining the amount of
the  allowance  for loan losses is  considered  a critical  accounting  estimate
because it requires significant judgment and the use of estimates related to the
amount and timing of expected  future cash flows on  impaired  loans,  estimated
losses on loans  based on  historical  loss  experience,  and  consideration  of
current  economic  trends and  conditions,  all of which may be  susceptible  to
significant change.

                                       23

<PAGE>

         The loan  portfolio  also  represents  the  largest  asset  type on the
consolidated  balance sheet.  Note 1 to the  consolidated  financial  statements
describes the methodology used to determine the allowance for loan losses, and a
discussion  of the factors  driving  changes in the amount of the  allowance for
loan losses is included under Asset Quality below.

         Loans that exhibit  probable or observed credit  weaknesses are subject
to individual review.  Where  appropriate,  reserves are allocated to individual
loans based on management's estimate of the borrower's ability to repay the loan
given the  availability  of  collateral,  other  sources  of cash flow and legal
options available to the Company. Included in the review of individual loans are
those that are  impaired  as  provided  in  Statement  of  Financial  Accounting
Standards ("SFAS") No. 114,  "Accounting by Creditors for Impairment of a Loan."
Community First Bancorp, Inc. evaluates the collectibility of both principal and
interest when assessing the need for a loss accrual. Historical or industry loss
rates are  applied to other  loans not  subject to  reserve  allocations.  These
historical or industry loss rates may be adjusted for significant  factors that,
in management's  judgment,  reflect the impact of any current conditions on loss
recognition.  Factors  which  management  considers in the analysis  include the
effects of the national and local economies,  trends in the nature and volume of
loans (delinquencies,  charge-offs and nonaccrual loans),  changes in mix, asset
quality  trends,  risk management and loan  administration,  changes in internal
lending  policies  and  credit  standards,  and  examination  results  from bank
regulatory agencies and our internal credit examiners.

         An  unallocated  reserve is maintained to recognize the  imprecision in
estimating and measuring loss when evaluating  reserves for individual  loans or
pools of loans.  Reserves on  individual  loans and  historical or industry loss
rates are  reviewed  quarterly  and  adjusted  as  necessary  based on  changing
borrower  and/or  collateral  conditions  and actual  collection  and charge-off
experience.

         Community First Bancorp,  Inc. has not substantively changed any aspect
of its overall  approach in the  determination of the allowance for loan losses.
There have been no material  changes in assumptions or estimation  techniques as
compared to prior periods that impacted the  determination of the current period
allowance.

         Based on the procedures  discussed above,  management is of the opinion
that the  reserve  of  $404,400  was  adequate,  but not  excessive,  to  absorb
estimated credit losses associated with the loan portfolio at December 31, 2006.

         Deferred  Income  Taxes.  We have a deferred  tax asset of  $7,700.  We
evaluate  this asset on a quarterly  basis.  To the extent we believe it is more
likely than not that it will not be utilized, we establish a valuation allowance
to reduce  its  carrying  amount to the  amount  we  expect to be  realized.  At
December  31, 2006,  the  valuation  allowance is $793,300.  The estimate of the
realizable amount of this asset is a critical accounting policy.

Comparison of Financial Condition at December 31, 2006 and December 31, 2005

         The Company's  total assets as of December 31, 2006 were $79.1 million,
an increase of $7.4  million or 10.3% from  December  31,  2005's level of $71.7
million.  The increase was due primarily to growth in the loan  portfolio,  more
specifically  an increase  in  one-to-four  family  first  mortgage  loans which
increased  $6.9  million,  or 14.5%.  Net  loans  receivable  increased  by $8.2
million, or 12.7%, which reflected our continued  marketing efforts.  Commercial
mortgage loans increased $15,000 or 0.2% and decreased to 10.1% of the portfolio
from 11.3% at December 31, 2005. The Company's  investment  securities decreased
by $986,000,  or 55.7%,  to $783,000 at December 31, 2006 due to  maturities  of
securities as the Bank used cash flows from the securities portfolio to pay down
FHLB advances. Premises and equipment decreased $177,000, or 7.7%, primarily due
to a full year's  depreciation  on the new main office.  The Company's  cash and
cash equivalents as of December 31, 2006 were $2.0 million, the same as December
31, 2005's level of $2.0 million.

         Liabilities  increased by $7.6 million,  or 11.0%, to $76.6 million due
primarily  to a $10.2  million,  or  18.7%,  increase  in  deposits  as the Bank
continued  to attract  deposits  locally at  favorable  rates.  The  increase in
deposits came  primarily  from checking  accounts and  certificates  of deposit.
Federal Home Loan Bank advances of $10.4 million decreased from the December 31,
2005 level of $13.0  million.  The Bank has used  proceeds  from the advances to
help meet  loan  demand.  Advances  under the  Company's  line of credit  from a
correspondent  bank  decreased to $750,000 at

                                       24

<PAGE>

December 31, 2006 from $850,000 at December 31, 2005.  In addition,  the Company
had $390,000 in loans from directors at December 31, 2006. These borrowings were
used to fund a capital contribution to the Bank.

         Stockholders'  equity  decreased  to $2.4  million at December 31, 2006
from $2.7  million at December 31, 2005.  The decrease in  stockholders'  equity
principally reflects $674,600 in losses during the period.

Comparison  of Results of Operations  for the Years Ended  December 31, 2006 and
2005

         General.  Net loss for the year ended  December  31, 2006 was  $675,000
($(2.14)  per diluted  share)  compared to a net loss of $439,500  ($(1.58)  per
diluted  share) for the year ended  December 31, 2005.  The increase in loss for
the 2006 period reflects a decrease in net interest  income,  and an increase in
non-interest expenses including the $227,000 write-off on our main correspondent
account and various suspense accounts.

         Net Interest Income.  The primary component of the Bank's net income is
its net interest income,  which is the difference between interest income earned
on  loans  and  investments  and  interest  expense  paid  on the  deposits  and
borrowings  used to fund the interest  earning  assets.  Net interest  income is
determined   by  the   spread   between   the   yields   earned  on  the  Bank's
interest-earning  assets and the rates paid on  interest-bearing  liabilities as
well as the relative amounts of such assets and liabilities. Net interest income
divided by average  interest-earning  assets  represents the Bank's net interest
margin.

         For the year ended  December 31, 2006,  net interest  income  decreased
approximately  $56,000, or 3.2%, compared to the prior year. The decrease in net
interest  income during the 2006 period was  attributable  to a higher volume of
interest-bearing  deposit  accounts.  Interest  income  increased  approximately
$798,000, or 22.4%, for the year ended December 31, 2006, while interest expense
increased  approximately  $860,000,  or 48.2%.  The increase in interest  income
reflects   a  higher   volume  of   interest-earning   assets  and  a  shift  in
interest-earning  assets  into  higher-yielding  loans.  During  the year  ended
December 31, 2006, net loans averaged $63.3 million as compared to $58.5 million
during fiscal year 2005, an increase of $4.8 million or 8.2%.  While the average
yield on the loan  portfolio  declined  during  2006,  interest  income on loans
increased by $826,000 due to higher outstanding loan balances.

         The  increased  income  from  loans  partially  offset an  increase  in
interest  expense of $860,000 or 48.2% for the year ended December 31, 2006. The
increase in  interest  expense  reflects  both a higher  volume of deposits  and
increases  in  short-term  rates as the result of the Federal  Reserve's  eleven
increases  in the  targeted  Federal  Funds rate since June 30,  2004.  Interest
expense has also increased due to the Bank's  greater use of FHLB  borrowings to
fund loan growth,  as well as the  Company's  use of a revolving  line of credit
with The Banker's Bank to provide  additional  capital for the Bank.  Reflecting
the  recent  increases  in  short-term  interest  rates,  which  have  not  been
accompanied  by  increased  long-term  rates,  the Bank's  interest  rate spread
decreased to 2.61% for the year ended  December  31, 2006  compared to 2.69% for
the year ended December 31, 2005. Net interest margin decreased to 2.62% for the
2006 period compared to 2.85% for the 2005 period.

         During the year ended December 31, 2006, the Bank reported net interest
income,  before  provision  for loan losses,  of $1.7 million.  Interest  income
consisted of $4.4 million in interest and fees on loans,  $50,400 in interest on
investment  securities,  and $42,900 in dividends on FHLB stock,  totaling  $4.4
million,  while interest expense, which consisted of $2.0 million in interest on
deposits and $606,300 in interest on FHLB advances and other borrowings, totaled
$2.6 million.

         During the year ended December 31, 2005, the Bank reported net interest
income,  before  provision  for loan losses,  of $1.8 million.  Interest  income
consisted of $3.4 million in interest and fees on loans,  $80,700 in interest on
investment  securities,  and $35,700 in dividends on FHLB stock,  totaling  $3.5
million,  while interest expense, which consisted of $1.3 million in interest on
deposits and $442,500 in interest on FHLB advances and other borrowings, totaled
$1.8 million.

                                       25

<PAGE>

         The  following  table sets forth  certain  information  relating to our
average  balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid at the date and for the  periods  indicated.  Such  yields  and  costs  are
derived by dividing  income or expense by the average daily balance of assets or
liabilities, respectively, for the periods presented.

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                    -----------------------------------------------------------------------------
                                                                     2006                                    2005
                                                    -------------------------------------    ------------------------------------
                                                                                  Average                                Average
                                                      Average                     Yield/      Average                    Yield/
                                                      Balance      Interest        Cost       Balance      Interest       Cost
                                                      -------      --------        ----       -------      --------       ----
                                                                               (Dollars in thousands)
<S>                                                <C>          <C>               <C>       <C>            <C>            <C>
   Interest-earning assets:
    Loans receivable, net(1)..................      $  63,399    $   4,266         6.73%     $58,486        $3,439         5.88%
    Investment securities.....................          1,492           50         3.35        2,926            81         2.77
    Other investments.........................            743           43         5.79          702            36         5.13
                                                    ---------    ---------         ----      -------        ------         ----
       Total interest-earning assets..........         65,634        4,359         6.64       62,114         3,509         5.72
   Non-interest-earning assets................          9,335                                  5,059
                                                    ---------                                -------
       Total assets...........................      $  74,969                                $67,173
                                                    =========                                =======
   Interest-bearing liabilities:
    Deposits..................................      $  54,462        2,036         3.74      $46,858         1,341         2.86
    Borrowings................................         11,041          606         5.49       12,197           446         3.66
                                                    ---------    ---------         ----      -------        ------         ----
       Total interest-bearing liabilities.....         65,503        2,642         4.03       59,055         1,787         3.03
   Non-interest-bearing liabilities...........          6,758                                  5,188
                                                    ---------                                -------
       Total liabilities......................         72,261                                 64,243
   Total stockholders' equity.................          2,708                                  2,930
                                                    ---------                                -------
       Total liabilities and stockholders' equity   $  74,969                                $67,173
                                                    =========                                =======
   Net interest income........................                   $   1,717                                  $1,769
                                                                 =========                                  ======
   Interest rate spread.......................                                     2.61%                                   2.69%
                                                                                 ======                                  ======
   Net interest margin........................                                     2.62%                                   2.85%
                                                                                 ======                                  ======
   Ratio of average interest-earning assets to
      average interest-bearing liabilities....                                   100.20%                                 105.18%
                                                                                 ======                                  ======
</TABLE>
________________
(1)  Non-accrual loans are included in average balances, less allowance for loan
     losses and deferred  fees.

         The table below sets forth  certain  information  regarding  changes in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  multiplied by old rate); and (ii) changes in rate (change in
rate  multiplied  by old  volume).  Changes  in  rate-volume  (changes  in  rate
multiplied by the changes in volume) are allocated  between  changes in rate and
changes in volume proportionately.

<TABLE>
<CAPTION>
                                                  Year Ended December 31,                    Year Ended December 31,
                                            -----------------------------------        ---------------------------------
                                                       2006 vs. 2005                              2005 vs. 2004
                                            -----------------------------------        ---------------------------------
                                              Increase (Decrease)                        Increase (Decrease)
                                                    Due to                                    Due to
                                            -----------------------                    -----------------------
                                            Volume         Rate          Total         Volume        Rate         Total
                                            ------         ----          -----         ------        ----         -----
                                                                           (In thousands)
<S>                                        <C>           <C>           <C>            <C>           <C>          <C>
Interest income:
   Loans.................................   $  483        $  344        $  827         $  957        $ (140)      $  817
   Investment securities.................      (53)           22           (31)            (6)           (3)          (9)
   Other investments.....................        5             2             7              7             2            9
                                            ------        ------        ------         ------        ------       ------
      Total interest-earning assets......      435           368           803            958          (141)         817
                                            ------        ------        ------         ------        ------       ------

Interest expense:
   Deposits..............................   $  321        $  374        $  695         $  245        $  146       $  391
   Borrowings............................     (141)          304           163             69           245          314
                                            ------        ------        ------         ------        ------       ------
      Total interest-bearing
        liabilities......................      180           678           858            314           391          705
                                            ------        ------        ------         ------        ------       ------
Change in net interest income............   $  255        $ (310)       $  (55)        $  644        $ (532)      $  112
                                            ======        ======        ======         ======        ======       ======
</TABLE>


                                       26

<PAGE>

         Provision  for Loan Losses.  The provision for loan losses for the year
ended  December  31,  2006 was  $62,500,  compared to $78,500 for the year ended
December 31, 2005.  Net  charge-offs  for the year ended  December 31, 2006 were
$46,000 (0.06% of average  loans),  compared to $10,000 (0.02% of average loans)
during the year ended  December 31, 2005.  The ratio of the  allowance  for loan
losses to total  loans was  0.55% at  December  31,  2006  compared  to 0.60% at
December 31, 2005.  The  allowance for loan losses is  management's  estimate of
probable inherent credit losses in the loan portfolio at the balance sheet date.
The Bank determines the allowance based on ongoing evaluations. Increases to the
allowance  are  made by  charges  to the  provision  for loan  losses,  which is
reflected in the statement of operations.  Loans deemed to be uncollectible  are
charged against the allowance.  Recoveries of loans  previously  charged off are
credited  to the  allowance.  The Bank  increased  the  amount of the  allowance
allocated  to various  forms of  consumer  loans,  and  reduced  the  proportion
allocated to residential  first mortgages  reflecting  changes in the portfolio.
Reserves are provided for consumer and  residential  loans based on average loss
experience,  applied  to the  outstanding  balance  in each  category.  Specific
reserves are determined for loans classified as special mention,  substandard or
doubtful.  Specific reserves are determined on a loan by loan basis. As the loan
portfolio  diversifies to include more commercial and  multi-family  real estate
loans,  future charge-off rates may differ from historical rates,  necessitating
revisions to the estimate.

         Noninterest Income.  Noninterest income for the year ended December 31,
2006 was $435,000, compared to $346,000 for the year ended December 31, 2005, an
increase of approximately  $89,000,  or 25.72%. The increase for the most recent
period  is  due  primarily  to  increases  in  deposit-related   fees  including
non-sufficient  funds fees and overdraft fees which  management  attributes to a
larger deposit base and management's efforts to enhance this type of fee income.

         Noninterest  Expenses.  Noninterest expense for the year ended December
31, 2006 was $2.8 million  compared to $2.5 million for the year ended  December
31,  2005,  an increase of  approximately  $300,000,  or 12.0%.  The increase in
noninterest expense of $300,000 or 12.0% was due primarily to $227,000 write-off
in the 4th quarter from aged unrecognized  items in our main  correspondent bank
account and various suspense accounts.

         Compensation and benefits expense increased by $13,200 or 1.3% to $1.06
million for the year ended  December 31, 2006  compared to $1.04 million for the
year ended  December 31,  2005.  The FASB No. 91  accounting  entry for the year
ended  December 31, 2006 resulted in a deferred  salaries  expense  reduction of
$85,500.  The FASB No. 91 accounting  entry for the year ended December 31, 2005
resulted  in  a  deferred  salaries  expense  reduction  of  $87,100.   Further,
retirement fund expense increased by $28,400 or 43.8% to $93,300 during the year
ended December 31, 2006.

         Advertising  expenses  decreased $1,300 or 1.5% to $90,000 for the year
ended  December  31, 2006  compared to $91,300 for the year ended  December  31,
2005. The reduction was due primarily to decreases in radio advertisement.

         Office supplies,  telephone and postage expenses  decreased  $4,500, or
3.8% to $116,400 for the year ended  December 31, 2006  compared to $120,900 for
the year ended  December 31, 2005. The reduction was due primarily to stationery
and supplies expense,  which decreased $9,200 or 16.3% from $56,700 for the year
ended December 31, 2005 to $47,500 for the year ended December 31, 2006.

         Computer and data processing  expense  increased by $23,700 or 10.1% to
$259,100 for the year ended  December 31, 2006 compared to $235,400 for the year
ended December 31, 2005. The increase reflects additional  technical  assistance
during the period and bank growth.

         Professional fees increased $19,700,  or 18.8% to $125,600 for the year
ended  December 31, 2006  compared to $105,900  for the year ended  December 31,
2005.  Monthly accruals are now being used for audit and accounting  expenses to
more evenly distribute these costs throughout the year, rather than expensing as
incurred.

                                       27

<PAGE>

         Income Tax  Expense.  The  Company  provides  for both the  current and
deferred tax effects of the  transactions  reported in its financial  statements
and   established   deferred  tax  assets  and  liabilities  for  the  temporary
differences  between  the  financial  reporting  and tax bases of its assets and
liabilities.  The Company establishes  valuation allowances for its net deferred
tax assets  unless it is more likely than not that these net deferred tax assets
will be realized.  Based on its current earnings, its future projected earnings,
and other  factors,  the Company  determined in 2005 that it was  appropriate to
establish a valuation allowance of $566,860 for its net deferred tax assets. The
balance of the  valuation  allowance  at  December  31,  2006 is  $783,470.  The
increases in the  valuation  allowance  for the year ended  December 31, 2006 of
$216,610 relates primarily to the net losses incurred in 2006.

Market/Interest Rate Risk Disclosure

         Qualitative  Disclosure.  Our assets and liabilities may be analyzed by
examining  the  extent to which its  assets and  liabilities  are  interest-rate
sensitive and by monitoring the expected effects of interest rate changes on our
net portfolio value.

         An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If assets mature or
reprice more quickly or to a greater extent than liabilities,  the net portfolio
value and net interest  income would tend to increase  during  periods of rising
interest  rates  but  decrease   during  periods  of  falling   interest  rates.
Conversely,  if our assets  mature or reprice more slowly or to a lesser  extent
than liabilities,  the net portfolio value and net interest income would tend to
decrease  during periods of rising interest rates but increase during periods of
falling  interest rates.  Community First Bank's policy has been to mitigate the
interest rate risk inherent in the historical  savings  institution  business of
originating  long-term loans funded by short-term  deposits by pursuing  certain
strategies  designed to decrease the  vulnerability  of our earnings to material
and prolonged changes in interest rates.

         Our primary  method of managing  interest rate risk is to emphasize the
origination  of   adjustable-rate   mortgage   loans.   Community  First  Bank's
adjustable-rate  mortgage loans provide that the interest rate will adjust every
one,  three,  five or seven years.  The terms of these loans generally limit the
amount of any single rate change to a maximum of two percentage  points and also
provide that the rate may not increase above a "ceiling" rate established at the
time the loan is made,  nor below a floor rate which is the initial  rate on the
loan. At December 31, 2006,  approximately  79.8% of our mortgage loan portfolio
had adjustable  rates.  We also purchase  investment  securities with relatively
short  maturities,   normally  three  years  or  less.  At  December  31,  2006,
approximately  94% of our  investment  portfolio had a maturity of five years or
less.  We monitor our deposit  rates on a weekly basis to ensure that it remains
competitive.

         Quantitative  Analysis.  The analysis of an institution's interest rate
gap (the  difference  between  the  repricing  of  interest-earning  assets  and
interest-bearing  liabilities  during a give period of time) is a standard  tool
for the  measurement of exposure to interest rate risk. The following table sets
forth the amounts of interest-earning  assets and  interest-bearing  liabilities
outstanding  at December  31, 2006 which are  projected  to reprice or mature in
each of the future time  periods  shown.  The amounts of assets and  liabilities
shown which  reprice or mature  within a particular  period were  determined  in
accordance with the contractual  terms of the assets or liabilities.  Loans with
adjustable  rates  are  shown  as  being  due at the  end of the  next  upcoming
adjustment  period.  In making the  sensitivity  gap  computations,  none of the
assumptions  sometimes  made regarding  prepayment  rates have been used for any
interest-earning  assets. Decay rates have not been used on money market, NOW or
savings accounts.  In addition,  the table does not reflect scheduled  principal
payments  which  will  be  received  throughout  the  lives  of  the  loans  and
mortgage-backed  securities.  The interest  rate  sensitivity  of our assets and
liabilities  illustrated  in the  following  table would vary  substantially  if
different  assumptions  were  used or if  actual  experience  differs  from  the
indicated by such assumptions.

                                       28

<PAGE>

         The  following  table  presents  our interest  sensitivity  gap between
interest-earning   assets  and  interest-bearing   liabilities  for  the  period
indicated.

<TABLE>
<CAPTION>
                                                                            As of December 31, 2006
                                                 -------------------------------------------------------------------------------
                                                      Within 3                                       Over
                                                       Months      4-12 Months      1-5 Years       5 Years             Total
                                                       ------      -----------      ---------       -------             -----
<S>                                                <C>             <C>              <C>            <C>              <C>
Interest-earning assets:
   Investment securities....................        $      --       $    247         $    490       $     46         $     783
   Loans....................................            1,852          1,657            5,883         63,529            72,921
   FHLB stock...............................              765             --               --             --               765
                                                    ---------       --------         --------       --------         ---------
       Total interest-earning assets........            2,617          1,904            6,373         63,575            74,469

Non-interest-earning assets:
   Cash and due from banks..................               --             --               --             --             1,986
   Premises and equipment...................               --             --               --             --             2,109
   Other assets.............................               --             --               --             --               511
                                                    ---------       --------         --------       --------         ---------
       Total non-interest-earning assets                   --              --              --             --             4,606
                                                    ---------       --------         --------       --------         ---------
       Total assets.........................        $   2,617       $  1,904         $  6,373       $ 63,575         $  79,075
                                                    =========       ========         ========       ========         =========

Interest-bearing liabilities:
   Interest checking........................        $   3,473       $     --         $     --       $     --         $   3,473
   Money Market accounts....................            1,660             --               --             --             1,660
   Savings accounts.........................            3,384             --               --             --             3,384
   Certificates of deposit..................           12,120         31,958            6,644             --            50,722
   FHLB advances............................           10,425             --               --             --            10,425
   Advances under line of credit............            1,140             --               --             --             1,140
                                                    ---------       --------         --------       --------         ---------
       Total interest-bearing liabilities...           32,202         31,958            6,644             --            70,804

Non-interest-bearing liabilities:
   Demand deposits..........................               --             --               --             --             5,439
   Interest payable and other
      liabilities...........................               --             --               --             --               396
                                                    ---------       --------         --------       --------         ---------
       Total non-interest-bearing
           liabilities......................               --             --               --             --             5,835
Stockholders' equity........................               --             --               --             --             2,436
                                                    ---------       --------         --------       --------         ---------
       Total liabilities and stockholders'
           equity...........................        $  32,202       $ 31,958         $  6,644       $     --         $  79,075
                                                    =========       ========         ========       ========         =========

Interest sensitivity gap....................        $ (29,585)      $(30,054)        $   (271)      $ 63,575         $   3,665
Cumulative gap..............................          (29,585)       (59,639)         (59,910)         3,665
Cumulative gap/total assets.................           (37.40)%       (75.42)%         (75.76)%         4.63%
</TABLE>

         The Board of Directors  reviews our asset and liability  policies.  The
Board of Directors meets  regularly to review interest rate risk and trends,  as
well as liquidity and capital ratios and  requirements.  Management  administers
the policies and  determinations  of the Board of Directors  with respect to our
asset and liability goals and strategies. We expect that our asset and liability
policies and strategies  will continue as described so long as  competitive  and
regulatory  conditions in the financial institution industry and market interest
rates continue as they have in recent years.

Liquidity and Capital Resources

         Community First Bancorp, Inc. currently has no operating business other
than that of Community First Bank and does not have material funding needs other
than servicing its  outstanding  debt. In the future,  Community  First

                                       29

<PAGE>
Bancorp, Inc. may require funds for dividends and tax payments for which it will
rely on dividends and other  distributions from Community First Bank.  Community
First  Bank is  subject to various  regulatory  restrictions  on the  payment of
dividends.

         Community First Bank's primary sources of funds are deposits, repayment
of  loans  and  mortgage-backed   securities,   maturities  of  investments  and
interest-bearing  deposits and funds provided from  operations.  Community First
Bank is also  able to  obtain  advances  from  the  Federal  Home  Loan  Bank of
Cincinnati.  While scheduled repayments of loans and mortgage-backed  securities
and maturities of investment  securities are relatively  predictable  sources of
funds,  deposit flows and loan prepayments are greatly influenced by the general
level of interest rates,  economic  conditions and competition.  Community First
Bank uses its liquidity  resources  principally to fund existing and future loan
commitments,  to fund maturing time certificates and demand deposit withdrawals,
to invest in other interest-earning  assets, to maintain liquidity,  and to meet
operating expenses.

         Liquidity  may be adversely  affected by unexpected  deposit  outflows,
higher interest rates paid by  competitors,  adverse  publicity  relating to the
savings and loan industry,  and similar matters.  Management  monitors projected
liquidity  needs  and  determines  the  level  desirable,  based  in part on our
commitments to make loans and management's assessment of our ability to generate
funds.

         A major portion of our liquidity consists of cash and cash equivalents,
which include cash and  interest-bearing  deposits in other banks.  The level of
these assets is dependent upon our operating,  investing,  lending and financing
activities  during  any  given  period.  At  December  31,  2006,  cash and cash
equivalents totaled $2.0 million.

         Our primary investing activity is the origination of loans.  During the
years ended December 31, 2006 and 2005, loan originations  totaled $26.1 million
and $27.0  million,  respectively.  These  originations  were  funded in part by
proceeds  from  repayments  of loans,  maturities  and calls of  investment  and
mortgage-backed  securities and increases in deposits and Federal Home Loan Bank
borrowings.

         At December 31, 2006, we had $1.7 million in outstanding commitments to
originate  loans. We anticipate that we will have sufficient  funds available to
meet our current  loan  origination  commitments.  Time  certificates  which are
scheduled  to mature in one year or less totaled  $44.7  million at December 31,
2006.  Based on historical  experience,  management  believes that a significant
portion of such deposits will remain with Community  First Bank,  although there
can be no  assurance  that it will do so. In the  event we are  unable to retain
these deposits,  we may seek  replacement  funding through the Federal Home Loan
Bank of Cincinnati or other sources.

         Community First Bank relies primarily on local deposits for its funding
needs. In order to finance loan growth, we may also borrow from the Federal Home
Loan Bank of  Cincinnati.  At December 31, 2006,  Community  First Bank had $7.6
million  in  unused  borrowing  capacity  at  the  Federal  Home  Loan  Bank  of
Cincinnati.

         Community First Bank is subject to minimum capital  requirements  under
Office of Thrift Supervision  regulations.  To be "well-capitalized" under these
regulations,  Community  First  Bank  must  maintain  a ratio  of Tier 1 or Core
Capital  to  adjusted  total  assets  of  5.0%,  a ratio  of Tier 1  capital  to
risk-based  assets of 6.0% and a ratio of total capital to risk-based  assets of
10.0%. At December 31, 2006, Community First Bank's ratio of Tier 1/Core Capital
to adjusted  total assets was 4.51%,  its ratio of Tier 1 capital to  risk-based
assets was 7.61% and its ratio of total capital to risk-based  assets was 8.47%.
Although Community First Bank was not "well  capitalized;"  these ratios equaled
or exceeded regulatory requirements to be adequately capitalized.

         We have maintained  Community First Bank's capital compliance primarily
through borrowings at the holding company level.  Community First Bancorp,  Inc.
has  previously  borrowed  up to  $1.25  million  on a line of  credit  from our
correspondent bank for this purpose. The line of credit provides for an interest
rate at the prime rate plus 25 basis points  (currently 8.50%) and is secured by
all of our stock in Community  First Bank. In December 2005 the line of credit's
principal  balance was reduced by $400,000  using the proceeds from an unsecured
loan from four  members of our Board of  Directors.  The four  directors  loaned
these funds for the sole purpose of paying down the  outstanding  line of credit
with a  correspondent  bank.  This loan paid the four directors a fixed interest
rate of 7.50%.  Subsequently,  one  director  took  shares  of  common  stock in
exchange for his note.
                                      30
<PAGE>

         In May 2006,  the line of credit was renewed at the same  interest rate
until November 15, 2006. In order to obtain the renewal, we were required to pay
the line down to $750,000.  The maturity date on the line of credit was extended
to  February 15,  2007.  In April 2007,  the Company paid off the line of credit
from its correspondent  bank with the proceeds from a $767,000 loan from another
bank.  The new loan has a one-year  term with  interest  equal to the prime rate
payable at maturity. The new loan is secured by the Company's stock in the Bank.
The three  directors who continue to have loans  outstanding to Community  First
Bancorp,  Inc.  have agreed to extend their notes to April 15, 2007 with accrued
interest being capitalized.

Off-Balance Sheet Arrangements

         We are parties to financial  instruments with off-balance sheet risk in
the normal course of business.  These financial  instruments  primarily  include
loan commitments,  lines of credit,  including  home-equity lines and commercial
lines,  and letters of credit.  We use these  financial  instruments to meet the
financing  needs of its customers.  Outstanding  loan  commitments and lines and
letters  of  credit  at  December  31,  2006 were  $3.2  million  and  $135,000,
respectively,  and at December 31, 2005 were $766,000 and $7,000,  respectively.
These financial  instruments  involve,  to varying degrees,  elements of credit,
interest  rate,  and liquidity  risk.  These do not represent  unusual risks and
management  does not  anticipate  any  accounting  losses,  which  would  have a
material effect on us.

New Accounting Pronouncements

        In May 2005,  the  Financial  Accounting  Standards  Board "FASB" issued
Statement No. 154, Accounting Changes and Error Corrections-a replacement of APB
Opinion No. 20 and FASB Statement  No.3. FASB 154 changes the  requirements  for
the  accounting  for and  reporting of a change in  accounting  principle.  This
Statement  applies to all  voluntary  changes in accounting  principle.  It also
applies  to changes  required  by an  accounting  pronouncement  in the  unusual
instance that the pronouncement does not include specific transition provisions.
When a pronouncement includes specific transition  provisions,  those provisions
should  be  followed.  The  implementation  of SFAS 154 did not have a  material
effect on the Company's financial statements.

        In March  2006,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 156,  "Accounting for Servicing of Financial Assets" ("SFAS 156"),
which  amends  accounting  and  reporting  standards  for  servicing  assets and
liabilities  under  Statement  of  Financial   Accounting   Standards  No.  140,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities".  Specifically, SFAS 156 requires that all separately recognized
servicing assets and servicing  liabilities be initially measured at fair value,
if practicable.  For subsequent measurement purposes, SFAS 156 permits an entity
to choose to measure servicing assets and liabilities either based on fair value
or use the amortization method, which requires  amortization of servicing assets
or servicing  liabilities  in proportion to and over the period of estimated net
servicing  income or net servicing loss and assess servicing assets or servicing
liabilities for impairment or increased  obligation  based on fair value at each
reporting  date.  The Company  does not expect this  guidance to have a material
impact on its financial statements.

        In June  2006,  the  FASB  issued  Interpretation  No.  48  ("FIN  48"),
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No.109,  Accounting  for Income Taxes,"  effective for the Company  beginning on
January 1, 2007.  FIN 48 clarifies the  recognition  threshold a tax position is
required to meet before being  recognized  in the financial  statements.  FIN 48
also provides  guidance on disclosure  and other  matters.  The Company does not
expect this guidance to have a material impact on its financial statements.

         In September  2006, the FASB issued  Statement of Financial  Accounting
Standards  No. 158 ("SFAS  158"),  "Employers'  Accounting  for Defined  Benefit
Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87,
88,106, and 132(R)",  effective for the Company for the year ending December 31,
2006.  This statement  requires the recognition of the overfunded or underfunded
status of a defined benefit  postretirement plan as an

                                       31

<PAGE>

asset or liability on the balance sheet,  and the recognition of changes in that
funded status through other  comprehensive  income. The adoption of SFAS 158 did
not have a material impact on the Company's financial statements.

         Also  in  September  2006,  the  FASB  issued  Statement  of  Financial
Accounting Standards No. 157 ("SFAS 157"), "Fair Value Measurements",  effective
for the Company beginning on January 1, 2008. This Statement defines fair value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value measurements.  This statement establishes a fair value hierarchy that
distinguishes between valuations obtained from sources independent of the entity
and those from the entity's own unobservable inputs that are not corroborated by
observable market data. SFAS 157 expands disclosures about the use of fair value
to measure assets and  liabilities  in interim and annual periods  subsequent to
initial  recognition.  The disclosures  focus on the inputs used to measure fair
value and for recurring fair value measurements  using significant  unobservable
inputs,  the effect of the measurements on earnings or changes in net assets for
the period.  The Company is currently  assessing  the impact of this guidance on
its financial statements.

        In February  2007,  the FASB issued  Statement of  Financial  Accounting
Standards No. 159 ("SFAS 159"),  "The Fair Value Option for Financial Assets and
Financial Liabilities",  effective for the Company beginning on January 1, 2008.
This Statement  provides  entities with an option to report  selected  financial
assets and  liabilities  at fair value,  with the  objective  to reduce both the
complexity  in  accounting  for  financial  instruments  and the  volatility  in
earnings  caused by measuring  related assets and liabilities  differently.  The
Company is  currently  assessing  the impact of this  guidance on its  financial
statements.

Impact of Inflation and Changing Prices

         Our financial statements and the accompanying notes presented elsewhere
in this document,  have been prepared in accordance with  accounting  principles
generally  accepted  in  the  United  States  of  America,   which  require  the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased  cost of our  operations.  As a result,  interest rates have a greater
impact on our  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the prices of goods and services.

Item 7. Financial Statements
----------------------------

         The Company's financial  statements are contained in this Annual Report
on Form 10-KSB immediately following Item 14.

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

         Not applicable.


Item 8A. Controls and Procedures.
---------------------------------

         The  Company's  management  evaluated,  with the  participation  of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report.  Based on that evaluation,  the Chief Executive  Officer
and Chief  Financial  Officer  concluded the Company's  disclosure  controls and
procedures are effective to ensure that information  required to be disclosed by
the  Company  in the  reports  that it files or  submits  under  the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms.  There were no changes in the Company's  internal  control over financial
reporting  that  occurred  during the  Company's  last fiscal  quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.


                                       32

<PAGE>

Item 8B. Other Information
--------------------------

         Not applicable.

                                    PART III

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

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I --  Election of
Directors"  in the  Company's  definitive  Proxy  Statement  for the 2007 Annual
Meeting of Stockholders are incorporated herein by reference.

         The Company has adopted a Code of Ethics that applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions. A copy of the Company's Code
of Ethics will be provided to any person without charge upon written  request to
Amy D. Lyons, Chief Financial Officer, Community First Bancorp, Inc., 2420 North
Main Street, Madisonville, Kentucky 42431.

Item 10. Executive Compensation
-------------------------------

         The  information  contained  under  the  section  captioned  "Executive
Compensation" in the Proxy Statement is incorporated herein by reference.


Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
--------------------------------------------------------------------------------
          Related Stockholder Matters
          ---------------------------

          (a)  Security Ownership of Certain Beneficial Owners

               Information  required  by this  item is  incorporated  herein  by
               reference  to the Section  captioned  "Principal  Holders of  Our
               Common Stock" of the Proxy Statement.

          (b)  Security Ownership of Management

               Information  required  by this  item is  incorporated  herein  by
               reference  to the  section  captioned  "Proposal I -- Election of
               Directors" of the Proxy Statement.

          (c)  Changes in Control

               Management of the Company knows of no arrangements, including any
               pledge by any person of securities of the Company,  the operation
               of which may at a  subsequent  date result in a change in control
               of the registrant.

                                       33

<PAGE>


          (d)  Securities  Authorized  for Issuance  Under  Equity  Compensation
               Plans

               The information required by this item is set forth below.

<TABLE>
<CAPTION>
                                           EQUITY COMPENSATION PLAN INFORMATION
                                                   (a)                  (b)                          (c)
                                                                                             Number of securities
                                          Number of securities      Weighted-average       remaining available for
                                            to be issued upon      exercise price of     future issuance under equity
                                               exercise of            outstanding       compensation plans (excluding
                                          outstanding options,     options, warrants       securities reflected in
                                           warrants and rights         and rights                column (a))
                                           -------------------         ----------                -----------

<S>                                         <C>                    <C>                          <C>

    Equity compensation plans
    approved by security holders:
        2004 Stock Option Plan.............          --               $     --                     27,772
        2005 Restricted Stock Plan.........       5,197                     --                      3,134
    Equity compensation plans
      not approved by security
      holders..............................          --                     --                         --
                                                  -----               --------                     ------

         TOTAL                                    5,197               $     --                     30,906
                                                  =====               ========                     ======
</TABLE>

Item 12. Certain   Relationships  and  Related   Transactions,   and   Director
--------------------------------------------------------------------------------
          Independence
          ------------

         The  information  required  by this  item  is  incorporated  herein  by
reference   to  the   sections   captioned  "Corporate   Goverance  --  Director
Independence" and "Related Party Transactions" in the Proxy Statement.

                                       34

<PAGE>

Item 13. Exhibits
-----------------

         The  following  exhibits are either filed as part of this Annual Report
on Form 10-KSB or incorporated herein by reference:

<TABLE>
<CAPTION>
          No.  Description
          ---  -----------

<S>      <C>
          3.1  Articles of Incorporation*
          3.2  Bylaws*
          4    Form of Common Stock Certificate*
          10.1 Employment Agreement between Community First Bank and William M. Tandy + **
          10.2 2004 Stock Option Plan + ***
          10.3 Community First Bank 2005 Restricted Stock Plan + ****
          10.4 Loan and Stock Pledge Agreement, dated April 13, 2007
          21   Subsidiaries of the Registrant
          23   Consent of King + Company, PSC
          31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
          31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
          32   Section 1350 Certification

______________________
+        Management contract or compensatory plan or arrangement required to be filed as an exhibit.
*        Incorporated by reference from the Registrant's Registration Statement on Form SB-2
         (File No. 333-104226) originally filed with the Securities and Exchange Commission on April 1, 2003.
**       Incorporated by reference from  Registrant's Pre-Effective Amendment No. 1 to Registration  Statement on Form SB-2
         (File No. 333-104226) filed with the Securities and Exchange Commission on May 5, 2003.
***      Incorporated  by  reference  from  Registrant's Registration Statement on Form S-8 (File No. 333-116450)
         filed with the Securities and Exchange Commission on June 14, 2004.
****     Incorporated  by  reference  from  Registrant's  Registration  Statement on Form S-8 (File No. 333-125769)
         filed with the Securities and Exchange Commission on June 13, 2005.

</TABLE>


Item 14. Principal Accountant Fees and Services
-----------------------------------------------

         The  information  set  forth  under  the  caption   "Relationship  with
Independent   Auditors"  in  the  Proxy  Statement  is  incorporated  herein  by
reference.

                                       35

<PAGE>

                          COMMUNITY FIRST BANCORP, INC.

                                    INDEX TO
                       CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005




    Report of Independent Registered Public Accounting Firm..................F-1

    Consolidated Financial Statements

        Balance Sheets.......................................................F-2

        Statements of Operations.............................................F-3

        Statements of Stockholders' Equity...................................F-4

        Statements of Cash Flows.............................................F-5

        Notes to Financial Statements........................................F-6


<PAGE>

                        REPORT OF INDEPENDENT REGISTERED
                        --------------------------------
                             PUBLIC ACCOUNTING FIRM
                             ----------------------


Audit Committee, Board of Directors and Stockholders
Community First Bancorp, Inc.
Madisonville, Kentucky


We have audited the  accompanying  consolidated  balance sheets of the Community
First  Bancorp,  Inc.  as of  December  31,  2006  and  2005,  and  the  related
consolidated statements of operations,  changes in stockholders' equity and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of the Community First
Bancorp, Inc. as of December 31, 2006 and 2005 and the results of its operations
and its  cash  flows  for  each of the  years  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America.


                                   /s/ King + Company, PSC


Louisville, Kentucky
April 5, 2007


                                      F-1
<PAGE>

                          Community First Bancorp, Inc.
                           Consolidated Balance Sheets
                           December 31, 2006 and 2005

<TABLE>
<CAPTION>
Assets

                                                                                2006            2005
                                                                           ------------    ------------
<S>                                                                      <C>             <C>
        Cash and due from banks                                            $  1,181,530    $    785,814
        Interest-bearing demand deposits                                        804,757       1,223,134
                                                                           ------------    ------------

               Cash and cash equivalents                                      1,986,287       2,008,948

        Held-to-maturity securities                                              55,092          65,522
        Available-for-sale securities                                           728,050       1,703,147

        Loans receivable, net of the allowance for loan loss of $404,369
          and $387,822, for December 31, 2006 and 2005, respectively         72,835,520      64,578,288
        Premises and equipment, net                                           2,109,048       2,286,004
        Federal Home Loan Bank (FHLB) stock                                     764,500         721,900
        Interest receivable                                                     383,227         288,501
        Deferred income taxes                                                     7,676          16,587
        Other assets                                                            205,349          59,817
                                                                           ------------    ------------

               Total assets                                                $ 79,074,749    $ 71,728,714
                                                                           ============    ============


Liabilities and Stockholders' Equity

    Liabilities
        Deposits                                                           $ 64,678,666    $ 54,476,673
        FHLB advances                                                        10,425,000      13,000,000
        Advances under line of credit                                           750,000         850,000
        Loans from directors                                                    390,126         400,000
        Interest payable                                                        301,647         158,391
        Other liabilities                                                        93,558         123,649
                                                                           ------------    ------------

               Total liabilities                                             76,638,997      69,008,713
                                                                           ------------    ------------

    Stockholders' Equity
        Preferred stock, $.01 par value, authorized 1,000,000 shares                -0-             -0-
        Common stock, $.01 par value; authorized 5,000,000 shares;
          issued and outstanding 328,088 and 277,725 shares at
          December 31, 2006 and 2005, respectively                                3,280           2,777
        Additional paid-in capital                                            2,829,943       2,457,428
        Retained earnings (deficit) - substantially restricted                 (382,569)        291,993
        Accumulated other comprehensive loss                                    (14,902)        (32,197)
                                                                           ------------    ------------

               Total stockholders' equity                                     2,435,752       2,720,001
                                                                           ------------    ------------

               Total liabilities and stockholders' equity                  $ 79,074,749    $ 71,728,714
                                                                           ============    ============
</TABLE>

See Notes to Consolidated Financial Statements            F-2

<PAGE>

                          Community First Bancorp, Inc.
                      Consolidated Statements of Operations
                     Years Ended December 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                          2006           2005
                                                      -----------    -----------
<S>                                                 <C>            <C>
Interest and Dividend Income
    Loans                                             $ 4,265,776    $ 3,439,471
    Investment securities and deposits                     50,359         80,730
    Dividends on FHLB stock                                42,882         35,718
                                                      -----------    -----------

           Total interest and dividend income           4,359,017      3,555,919
                                                      -----------    -----------

Interest Expense
    Deposits                                            2,036,500      1,340,870
    FHLB advances                                         508,640        387,922
    Other borrowings                                       97,640         54,581
                                                      -----------    -----------

           Total interest expense                       2,642,780      1,783,373
                                                      -----------    -----------

Net Interest Income                                     1,716,237      1,772,546

Provision for Loan Losses                                  62,500         78,500
                                                      -----------    -----------

Net Interest Income After Provision for Loan Losses     1,653,737      1,694,046
                                                      -----------    -----------

Noninterest Income
    Service charges and fees                              398,927        326,462
    Loss on sale of fixed assets                           (7,530)        (1,965)
    Loss on sale of other real estate                      (6,495)        (2,000)
    Foreclosed real estate expense, net                    (1,532)        (4,356)
    Insurance commissions and premiums                      5,676          5,189
    Other income                                           46,081         20,850
                                                      -----------    -----------

           Total noninterest income                       435,127        344,180
                                                      -----------    -----------

Noninterest Expense
    Compensation and benefits                           1,056,558      1,043,406
    Directors fees                                         14,400         43,200
    Occupancy expense                                     317,057        335,013
    Insurance premiums                                     41,571         31,352
    Data processing                                       259,054        235,385
    Advertising                                            89,971         91,332
    Office supplies, telephone and postage                116,350        120,885
    Payroll and other taxes                               141,464        148,459
    Professional fees                                     125,599        105,864
    Losses on accounts                                    227,288            -0-
    Other operating expenses                              374,114        322,814
                                                      -----------    -----------

           Total noninterest expense                    2,763,426      2,477,710
                                                      -----------    -----------

Loss Before Income Tax                                   (674,562)      (439,484)

Provision (Credit) for Income Taxes                           -0-            -0-
                                                      -----------    -----------

Net Loss                                              $  (674,562)   $  (439,484)
                                                      ===========    ===========
Basic Loss Per Share                                  $     (2.14)   $     (1.58)
Diluted Loss Per Share                                $     (2.14)   $     (1.58)

</TABLE>
See Notes to Consolidated Financial Statements            F-3
<PAGE>

                          Community First Bancorp, Inc.
                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 2006 and 2005

<TABLE>
<CAPTION>


                                                                                                 Accumulated
                                                                                                    Other
                                                                                                    Compre-     Compre-
                                                          Common Stock      Additional              hensive     hensive
                                                       -----------------     Paid-in    Retained    Income      Income
                                                         Shares  Amount      Capital    Earnings    (Loss)      (Loss)        Total
                                                       -----------------------------------------------------------------------------


<S>                                                    <C>      <C>       <C>         <C>        <C>        <C>         <C>
    Balance, January 1, 2005                            277,725  $2,777    $2,457,428  $ 731,477  $(28,187)              $3,163,495

      Comprehensive loss
        Net loss                                                                        (439,484)             $(439,484)   (439,484)
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes                                               (4,010)      (4,010)     (4,010)
                                                                                                              ---------
           Total comprehensive loss                                                                           $(443,494)
                                                                                                              =========
                                                       --------   ------    ----------  ---------  --------               ----------

    Balance, December 31, 2005                          277,725   2,777     2,457,428    291,993   (32,197)               2,720,001

      Comprehensive income (loss)
        Net loss                                                                        (674,562)             $(674,562)   (674,562)
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes                                               17,295       17,297      17,295
                                                                                                              ---------
           Total comprehensive loss                                                                           $(657,265)
                                                                                                              =========
      Issuance of stock                                  50,363     503       372,515                                       373,018
                                                       --------  -------   ----------  ---------  --------               ----------

    Balance, December 31, 2006                          328,088  $3,280    $2,829,943  $(382,569) $(14,902)              $2,435,752
                                                       ========  ======    ==========  ========== ========               ==========
</TABLE>


See Notes to Consolidated Financial Statements             F-4
<PAGE>

                          Community First Bancorp, Inc.
                      Consolidated Statements of Cash Flows
                     Years Ended December 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                     2006            2005
                                                                 ------------    ------------
<S>                                                            <C>             <C>
Operating Activities
    Net loss                                                     $   (674,562)   $   (439,484)
    Items not requiring (providing) cash
       Provision for loan losses                                       62,500          78,500
       Depreciation, amortization and accretion                       206,795         216,032
       Deferred compensation for restricted stock plan                      4           7,470
       Loss on sale of other real estate owned                          6,495           2,000
       FHLB stock dividends                                           (42,600)        (34,900)
    Changes in
       Interest receivable                                            (94,726)        (61,435)
       Other assets                                                  (111,184)        (34,350)
       Interest payable and other liabilities                         113,161         383,901
                                                                 ------------    ------------

           Net cash provided by (used in) operating activities       (534,117)        117,734
                                                                 ------------    ------------

Investing Activities
    Net change in loans                                            (8,273,779)    (12,725,233)
    Proceeds from maturities of available-for-sale securities       1,000,000         500,000
    Proceeds from maturities of held-to-maturity securities            10,429          23,443
    Purchase of premises and equipment                                (28,534)           (650)
    Proceeds from sale of foreclosed assets                            14,025          23,000
                                                                 ------------    ------------

           Net cash used in investing activities                   (7,277,859)    (12,179,440)
                                                                 ------------    ------------

Financing Activities
    Net increase in deposits                                       10,201,993       7,777,458
    Repayment of FHLB advances                                    (26,725,000)    (15,000,000)
    Proceeds from FHLB advances                                    24,150,000      15,000,000
    Proceeds from line of credit and notes payable                         -0-        900,000
    Repayment of line of credit and notes payable                    (100,000)       (400,000)
    Proceeds from stock issuance                                      363,144              -0-
    Costs of issuance of stock                                       (100,822)             -0-
                                                                 ------------    ------------

           Net cash provided by financing activities                7,789,315       8,277,458
                                                                 ------------    ------------

Decrease in Cash and Cash Equivalents                                 (22,661)     (3,784,248)

Cash and Cash Equivalents, Beginning of Year                        2,008,948       5,793,196
                                                                 ------------    ------------

Cash and Cash Equivalents, End of Year                           $  1,986,287    $  2,008,948
                                                                 ============    ============

Supplemental Cash Flows Information

    Interest paid                                                $  2,499,524    $  1,672,758
    Loans transferred to foreclosed real estate                  $     52,717    $     29,879
    Loans to facilitate sale of foreclosed real estate           $     30,000    $     30,000
    Stock issued in lieu of loan repayment                       $      9,874              -0-
</TABLE>

See Notes to Consolidated Financial Statements          F-5

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005

Note 1: Nature of Operations and Summary of Significant Accounting Policies

    Nature of Operations

        Community  First Bancorp,  Inc.  (Company) is a thrift  holding  company
        whose  principal  activity is the ownership and management of its wholly
        owned  subsidiary,  Community  First Bank (Bank).  The Bank is primarily
        engaged in providing a full range of banking and  financial  services to
        individual and corporate customers, primarily in Madisonville,  Kentucky
        and the surrounding  area. The Bank is subject to competition from other
        financial institutions. The Bank is subject to the regulation of certain
        federal and state agencies and undergoes periodic  examinations by those
        regulatory authorities.

    Principles of Consolidation

        The  consolidated  financial  statements  include  the  accounts  of the
        Company  and  the  Bank.  All  significant   intercompany  accounts  and
        transactions have been eliminated in consolidation.

    Use of Estimates

        The   preparation  of  the  financial   statements  in  conformity  with
        accounting  principles  generally  accepted  in  the  United  States  of
        America,  requires  management to make  estimates and  assumptions  that
        affect the reported  amounts of assets and liabilities and disclosure of
        contingent   assets  and  liabilities  at  the  date  of  the  financial
        statements and the reported  amounts of revenues and expenses during the
        reporting period. Actual results could differ from those estimates.

        Material  estimates  that are  particularly  susceptible  to significant
        change relate to the determination of the allowance for losses on loans,
        valuation allowance related to deferred taxes, and the valuation of real
        estate  acquired in connection  with  foreclosures or in satisfaction of
        loans. In connection with the determination of the allowances for losses
        on loans and  foreclosed  real estate,  management  obtains  independent
        appraisals for significant properties.

    Cash and Cash Equivalents

        The Company considers all liquid investments with original maturities of
        three months or less to be cash equivalents.

    Investment Securities

        Available-for-sale  securities, which include any security for which the
        Bank has no immediate  plan to sell but which may be sold in the future,
        are carried at fair value. Unrealized gains and losses are recorded, net
        of related income tax effects, in other comprehensive income.

                                       F-6

<PAGE>
                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        Held-to-maturity  securities,  which  include any security for which the
        Bank has the  positive  intent and ability to hold until  maturity,  are
        carried at  historical  cost adjusted for  amortization  of premiums and
        accretion of discounts.

        Amortization  of premiums and  accretion  of  discounts  are recorded as
        interest income from securities.  Realized gains and losses are recorded
        as net security gains (losses).  Gains and losses on sales of securities
        are determined on the specific-identification method.

    Loans

        Loans  that  management  has the  intent  and  ability  to hold  for the
        foreseeable  future or until  maturity or payoffs are  reported at their
        outstanding  principal  balances  adjusted for any  charge-offs  and the
        allowance for loan losses.  Interest  income is reported on the interest
        method. Generally, loans are placed on nonaccrual status at 90 days past
        due and interest is  considered a loss,  unless the loan is well secured
        and in the process of collection.

    Allowance for Loan Losses

        The allowance for loan losses is  established as losses are estimated to
        have  occurred  through a provision  for loan losses  charged to income.
        Loan losses are charged against the allowance when  management  believes
        the  uncollectibility  of  a  loan  balance  is  confirmed.   Subsequent
        recoveries, if any, are credited to the allowance.

        The  allowance  for loan  losses  is  evaluated  on a  regular  basis by
        management  and  is  based  upon  management's  periodic  review  of the
        collectibility  of the  loans  in light of  historical  experience,  the
        nature and volume of the loan  portfolio,  adverse  situations  that may
        affect  the  borrower's  ability  to  repay,   estimated  value  of  any
        underlying   collateral  and  prevailing   economic   conditions.   This
        evaluation is inherently  subjective,  as it requires estimates that are
        susceptible  to  significant   revision  as  more  information   becomes
        available.

        A loan is considered  impaired when,  based on current  information  and
        events,  it is  probable  that the Bank will be unable  to  collect  the
        scheduled  payments of principal or interest  when due  according to the
        contractual  terms  of  the  loan  agreement.   Factors   considered  by
        management in determining impairment include payment status,  collateral
        value and the probability of collecting scheduled principal and interest
        payments when due. Loans that  experience  insignificant  payment delays
        and  payment  shortfalls  generally  are  not  classified  as  impaired.
        Management  determines  the  significance  of payment delays and payment
        shortfalls on a case-by-case basis, taking into consideration all of the
        circumstances  surrounding  the loan  and the  borrower,  including  the
        length of the delay,  the reasons for the delay,  the  borrower's  prior
        payment  record  and the  amount of the  shortfall  in  relation  to the
        principal and interest  owed.  Impairment is measured on a  loan-by-loan
        basis for commercial and construction  loans by either the present value
        of  expected  future  cash  flows  discounted  at the  loan's  effective
        interest rate, the loan's  obtainable  market price or the fair value of
        the collateral if the loan is collateral dependent.

                                       F-7

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        Large  groups of  smaller  balance  homogenous  loans  are  collectively
        evaluated  for  impairment.  Accordingly,  the Bank does not  separately
        identify  individual  consumer  and  residential  loans  for  impairment
        measurements.

    Premises and Equipment

        Depreciable  assets are stated at cost, less  accumulated  depreciation.
        Depreciation  is charged to expense  primarily  using the  straight-line
        method over the estimated useful lives of the related assets as follows:

           Buildings                             39 - 50 years
           Building improvements                  7 - 40 years
           Furniture and equipment                3 - 15 years

    Federal Home Loan Bank Stock

        Federal  Home  Loan  Bank  (FHLB)  stock is a  required  investment  for
        institutions  that  are  members  of  the  FHLB  system.   The  required
        investment in the common stock is based on a predetermined formula.

    Foreclosed Real Estate

        Assets acquired  through,  or in lieu of, loan  foreclosure are held for
        sale  and  are  initially   recorded  at  fair  value  at  the  date  of
        foreclosure,  establishing a new cost basis.  Subsequent to foreclosure,
        management  periodically  performs valuations and the assets are carried
        at the lower of carrying amount or fair value less cost to sell. Revenue
        and expenses from operations and changes in the valuation  allowance are
        included in net income or expense from foreclosed assets.

    Income Taxes

        Deferred tax assets and  liabilities  are recognized for the tax effects
        of differences  between the financial  statement and tax basis of assets
        and liabilities. A valuation allowance is established to reduce deferred
        tax assets if it is more likely than not that a deferred  tax asset will
        not be realized.  The Company files consolidated income tax returns with
        its subsidiary.

    Stock Options

       The Company accounts for all stock based  compensation in accordance with
       FASB  123(R),   which   requires  that  equity   instruments   issued  as
       compensation be measured at fair value (See Note 7).

    Advertising Costs

       Advertising costs are expensed as incurred.

                                       F-8

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


    Earnings per Share

        Earnings per share have been  computed  based upon the  weighted-average
        common  shares  outstanding  during  2006 and 2005.  Since  there are no
        dilutive securities, basic and diluted earnings per share are the same.

    Reclassifications

        Certain   reclassifications   have  been  made  to  the  2005  financial
        statements  to conform  to the 2006  financial  statement  presentation.
        These reclassifications had no effect on net income.

    Effect of Implementing Recently Issued Accounting Standards

        In May 2005,  the  Financial  Accounting  Standards  Board "FASB" issued
        Statement   No.  154,   Accounting   Changes  and  Error   Corrections-a
        replacement  of APB Opinion  No. 20 and FASB  Statement  No.3.  FASB 154
        changes the  requirements  for the  accounting  for and  reporting  of a
        change in accounting principle.  This Statement applies to all voluntary
        changes in accounting principle.  It also applies to changes required by
        an   accounting   pronouncement   in  the  unusual   instance  that  the
        pronouncement does not include specific  transition  provisions.  When a
        pronouncement includes specific transition provisions,  those provisions
        should  be  followed.  The  implementation  of SFAS  154 did not  have a
        material effect on the Company's financial statements.

        In March  2006,  the  FASB  issued  Statement  of  Financial  Accounting
        Standards No. 156, "Accounting for Servicing of Financial Assets" ("SFAS
        156"),  which amends  accounting  and reporting  standards for servicing
        assets and liabilities under Statement of Financial Accounting Standards
        No. 140, "Accounting for Transfers and Servicing of Financial Assets and
        Extinguishments  of Liabilities".  Specifically,  SFAS 156 requires that
        all separately  recognized servicing assets and servicing liabilities be
        initially  measured  at  fair  value,  if  practicable.  For  subsequent
        measurement  purposes,  SFAS 156  permits an entity to choose to measure
        servicing  assets and liabilities  either based on fair value or use the
        amortization method, which requires  amortization of servicing assets or
        servicing  liabilities in proportion to and over the period of estimated
        net servicing  income or net servicing loss and assess  servicing assets
        or servicing liabilities for impairment or increased obligation based on
        fair value at each  reporting  date.  The  Company  does not expect this
        guidance to have a material impact on its financial statements.

        In June  2006,  the  FASB  issued  Interpretation  No.  48  ("FIN  48"),
        "Accounting for Uncertainty in Income Taxes, an  interpretation  of FASB
        Statement  No.109,  Accounting  for  Income  Taxes,"  effective  for the
        Company  beginning on January 1, 2007. FIN 48 clarifies the  recognition
        threshold a tax position is required to meet before being  recognized in
        the financial  statements.  FIN 48 also provides  guidance on disclosure
        and other  matters.  The Company does not expect this guidance to have a
        material impact on its financial statements.

                                       F-9

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        In September  2006,  the FASB issued  Statement of Financial  Accounting
        Standards  No. 158 ("SFAS  158"),  "Employers'  Accounting  for  Defined
        Benefit  Pension and Other  Postretirement  Plans - an amendment of FASB
        Statements  No. 87, 88, 106, and 132(R)",  effective for the Company for
        the  year  ending  December  31,  2006.  This  statement   requires  the
        recognition of the overfunded or underfunded status of a defined benefit
        postretirement  plan as an asset or liability on the balance sheet,  and
        the   recognition  of  changes  in  that  funded  status  through  other
        comprehensive  income.  The adoption of SFAS 158 did not have a material
        impact on the Company's financial statements.

        Also  in  September  2006,  the  FASB  issued   Statement  of  Financial
        Accounting  Standards No. 157 ("SFAS 157"),  "Fair Value  Measurements",
        effective for the Company  beginning on January 1, 2008.  This Statement
        defines fair value,  establishes a framework  for measuring  fair value,
        and expands  disclosures about fair value  measurements.  This statement
        establishes a fair value hierarchy that distinguishes between valuations
        obtained  from  sources  independent  of the  entity  and those from the
        entity's own unobservable inputs that are not corroborated by observable
        market data. SFAS 157 expands disclosures about the use of fair value to
        measure assets and liabilities in interim and annual periods  subsequent
        to initial  recognition.  The  disclosures  focus on the inputs  used to
        measure  fair  value and for  recurring  fair value  measurements  using
        significant  unobservable  inputs,  the  effect of the  measurements  on
        earnings  or  changes  in net  assets  for the  period.  The  Company is
        currently  assessing  the  impact  of  this  guidance  on its  financial
        statements.

        In February  2007,  the FASB issued  Statement of  Financial  Accounting
        Standards  No. 159 ("SFAS  159"),  "The Fair Value Option for  Financial
        Assets and Financial  Liabilities",  effective for the Company beginning
        on January 1, 2008. This Statement  provides  entities with an option to
        report selected financial assets and liabilities at fair value, with the
        objective to reduce both the  complexity  in  accounting  for  financial
        instruments and the volatility in earnings  caused by measuring  related
        assets and liabilities  differently.  The Company is currently assessing
        the impact of this guidance on its financial statements.

                                      F-10

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


Note 2: Investment Securities

        The amortized  cost and  approximate  fair values of  securities  are as
        follows:

<TABLE>
<CAPTION>
                                                                    Gross            Gross
                                                  Amortized       Unrealized       Unrealized         Approximate
                                                    Cost            Gains            Losses           Fair Value
                                            -------------------------------------------------------------------------
<S>                                         <C>               <C>               <C>               <C>
           Available-for-sale Securities
               December 31, 2006
                  U. S. Government
                     agencies                 $       750,626   $          -0-    $        22,576   $     728,050
                                               ==============    =============     ==============    ============
               December 31, 2005
                  U. S. Government
                     agencies                 $     1,751,931   $          -0-    $        48,784   $   1,703,147
                                               ==============    =============     ==============    ============
           Held-to-maturity Securities
               December 31, 2006
                  Mortgage-backed
                     securities               $        55,092   $       3,235     $            -0-  $      58,327
                                               ==============    ============      ===============   ============
               December 31, 2005
                  Mortgage-backed
                     securities               $        65,522   $       3,901     $           166   $      69,257
                                               ==============    ============      ==============    ============
</TABLE>

        The  amortized  cost  and  fair  value  of  debt  securities,  including
        mortgage-backed securities at December 31, 2006, by contractual maturity
        are shown  below.  Expected  maturities  will  differ  from  contractual
        maturities  because  borrowers  may  have the  right  to call or  prepay
        obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                         Available-for-sale                 Held-to-maturity
                                                 ---------------------------------------------------------------------
                                                        Amortized           Fair          Amortized          Fair
                                                          Cost             Value            Cost            Value
                                                 ---------------------------------------------------------------------
<S>                                                    <C>             <C>                       <C>           <C>
                   Within one year                       $250,626        $246,875                -0-            -0-
                   One to five years                      500,000         481,175                -0-            -0-
                   Five to 10 years                            -0-             -0-               -0-            -0-
                   Mortgage-backed securities                  -0-             -0-          $55,092        $58,327
                                                 ---------------------------------------------------------------------

                                                         $750,626        $728,050           $55,092        $58,327
                                                 =====================================================================
</TABLE>

        Investment  securities with a carrying value of  approximately  $598,000
        and $191,000 at December 31, 2006 and 2005,  respectively,  were pledged
        as collateral for certain customer deposits.

                                      F-11

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        Certain  investments  in debt  securities  are reported in the financial
        statements  at an amount  less than their  historical  cost.  Total fair
        value of these  investments  at December 31, 2006 and 2005, was $728,050
        and  $1,703,147,  which  is  approximately  93%  and  96% of the  Bank's
        available-for-sale  and  held-to-maturity  investment  portfolio.  These
        declines  primarily  resulted from recent  increases in market  interest
        rates and failure of certain  investments to maintain  consistent credit
        quality ratings.

        Based on evaluation of available  evidence,  including recent changes in
        market  interest  rates,   credit  rating  information  and  information
        obtained from regulatory  filings,  management  believes the declines in
        fair value for these securities are temporary.

        Should  the  impairment  of any of these  securities  become  other than
        temporary,  the cost basis of the  investment  will be  reduced  and the
        resulting   loss   recognized   in  net   income  in  the   period   the
        other-than-temporary impairment is identified.

        The following table shows our investments'  gross unrealized  losses and
        fair value,  aggregated by  investment  category and length of time that
        individual securities have been in a continuous unrealized loss position
        at December 31, 2006 and 2005:

<TABLE>
<CAPTION>
                                         Less than 12 Months          12 Months or More               Total
                                  ------------------------------------------------------------------------------------
           Description of               Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
             Securities                 Value        Losses         Value        Losses         Value        Losses
        --------------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>          <C>           <C>            <C>          <C>
         December 31, 2006

         Mortgage-backed
           securities                       -0-           -0-         -0-           -0-            -0-          -0-
         U. S. Government agencies          -0-           -0-    $728,050    $   22,576       $728,050      $22,576
                                     ----------   -----------    --------     ---------        -------       ------

             Total temporarily
                impaired
                securities          $       -0-  $        -0-    $728,050    $   22,576       $728,050      $22,576
                                     ==========   ===========     =======     =========        =======       ======
</TABLE>


<TABLE>
<CAPTION>
                                         Less than 12 Months          12 Months or More               Total
                                  ------------------------------------------------------------------------------------
           Description of               Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
             Securities                 Value        Losses         Value        Losses         Value        Losses
        --------------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>          <C>           <C>            <C>          <C>
         December 31, 2005
         Mortgage-backed                                                             -0-
           securities               $  19,664    $      166              -0-              $     19,664   $      166
         U. S. Government agencies         -0-           -0-    $1,703,147   $   48,784      1,703,147       48,784
                                     ---------    ----------     ---------    ---------      ---------    ---------

             Total temporarily
                impaired
                securities          $  19,664    $      166     $1,703,147   $   48,784     $1,722,811   $   48,950
                                     ========     =========      =========    =========      =========    =========
</TABLE>

                                      F-12

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


Note 3: Loans Receivable and Allowance for Loan Losses

        Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                        <C>                  <C>
           Real estate mortgage loans
               One-to-four family residential - first                         $     54,652,216     $     47,739,224
               One-to-four family residential - second                               2,733,796            1,755,309
               Multi-family                                                          1,066,559              791,323
               Commercial                                                            7,371,484            7,355,604
               Construction                                                          1,811,131            2,304,825
           Other loans
               Consumer installment                                                     89,807              194,396
               Commercial                                                            1,083,806              819,447
               Automobile                                                            3,376,926            2,897,924
               Passbook                                                                351,042              397,879
               Overdrafts                                                               88,910               51,792
               Other                                                                   614,212              658,387
                                                                            -------------------- --------------------
                                                                                    73,239,889           64,966,110
           Less
               Allowance for loan losses                                               404,369              387,822
                                                                            -------------------- --------------------

                  Net loans                                                   $     72,835,520     $     64,578,288
                                                                            ==================== ====================
</TABLE>

        Activity in the allowance for loan losses was as follows:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                          <C>                  <C>
           Balance, beginning of year                                         $        387,822     $        319,937
               Provision charged to expense                                             62,500               78,500
               Losses charged off                                                      (47,264)             (16,192)
               Recoveries                                                                1,311                5,577
                                                                            -------------------- --------------------

           Balance, end of year                                               $        404,369     $        387,822
                                                                            ==================== ====================
</TABLE>

        At December 31, 2006 and 2005, the total recorded investment in loans on
        nonaccrual   amounted   to   approximately    $334,000   and   $262,000,
        respectively,  and the total  recorded  investment  in loans past due 90
        days or more and  still  accruing  interest  amounted  to  approximately
        $9,000 and $44,000,  respectively.  At December 31, 2006 and 2005, there
        were no loans, which were specifically classed as impaired loans.

                                      F-13

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        In the ordinary course of business, the Bank has and expects to continue
        to have  transactions,  including  borrowings,  with  its  officers  and
        directors.  In the  opinion of  management,  such  transactions  were on
        substantially the same terms,  including  interest rates and collateral,
        as those  prevailing at the time of comparable  transactions  with other
        persons and did not involve more than a normal risk of collectibility or
        present  any  other  unfavorable  features  to the  Bank.  Loans to such
        borrowers, at December 31, are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Balance, beginning of year                                         $        624,809     $        429,651
               Loan proceeds                                                           103,000              239,382
               Payments                                                                (58,854)             (44,224)

           Balance, end of year                                               $        668,955     $        624,809
                                                                            ==================== ====================

           Letters of Credit                                                  $         25,000     $          7,000
                                                                            ==================== ====================

</TABLE>

Note 4: Premises and Equipment

        Major  classifications  of premises and equipment stated at cost, are as
        follows:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Land                                                               $        261,649     $        261,649
           Buildings and improvements                                                1,769,087            1,769,087
           Furniture, fixtures and equipment                                           997,022              968,488
                                                                            -------------------- --------------------
                                                                                     3,027,758            2,999,224
           Less accumulated depreciation                                               918,710              713,220
                                                                            -------------------- --------------------

           Net premises and equipment                                         $      2,109,048     $      2,286,004
                                                                            ==================== ====================
</TABLE>

        Depreciation  expense  for the year  ended  December  31,  2006 and 2005
        totaled $205,490 and $209,970, respectively.

                                      F-14

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


Note 5: Deposits

        Deposits at December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                     2006                               2005
                                       -----------------------------------------------------------------------
                                            Amount          Percentage         Amount          Percentage
                                       -----------------------------------------------------------------------
<S>                                  <C>                     <C>        <C>                      <C>
           Non-interest bearing
              demand                     $     5,439,393         9%         $     6,143,507          11%
           NOW accounts                        3,472,787         5                2,642,483           5
           Money market accounts               1,660,413         3                2,099,769           4
           Passbook savings                    3,384,414         5                3,789,177           7
           Time deposits                      50,721,659        78               39,801,737          73
                                          --------------        --           --------------   ---------

                                         $    64,678,666       100%         $    54,476,673         100%
                                          ==============       ===           ==============   =========
</TABLE>

        Time  deposit  accounts  in  denominations  of  $100,000  or  more  were
        $12,670,435 and $9,048,175, at December 31, 2006 and 2005, respectively.

        At December 31, 2006,  the scheduled  maturities of time deposit were as
        follows:

<TABLE>
<CAPTION>
<S>        <C>                                                                   <C>
           2007                                                                    $44,733,630
           2008                                                                      4,391,555
           2009                                                                        302,502
           2010                                                                      1,244,600
           2011                                                                         49,372
                                                                            --------------------

                                                                                   $50,721,659
                                                                            ====================
</TABLE>

        Interest  expense  on  deposits  for the years  ended  December  31, are
        summarized as follows:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Time deposits                                                      $      1,955,460     $      1,305,311
           Money market accounts                                                        28,300               13,626
           NOW accounts                                                                  9,420                6,932
           Passbook savings                                                             43,320               15,001
                                                                            -------------------- --------------------
                                                                                     2,036,500            1,340,870
           Less interest retained for early withdrawal                                      -0-                  -0-
                                                                            -------------------- --------------------

                                                                              $      2,036,500     $      1,340,870
                                                                            ==================== ====================
</TABLE>

        In the  ordinary  course of  business,  the Bank has  continued  to have
        transactions,  including deposits,  with its officers and directors.  In
        the opinion of management,  such  transactions were on substantially the
        same  terms,  including  interest  rates  prevailing  at  the  time,  of
        comparable  transactions with other persons.  Deposits from officers and
        directors totaled $457,163 and $363,622,  on December 31, 2006 and 2005,
        respectively.

                                      F-15

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        The aggregate amount of overdrawn deposit accounts reclassified as loans
        as  of  December  31,  2006  and  2005  totaled   $66,287  and  $35,100,
        respectively.

Note 6: Federal Home Loan Bank Advances and Other Short-term Borrowings

        The Bank owns stock of the Federal Home Loan Bank (FHLB) of  Cincinnati,
        Ohio.  This stock allows the Bank to obtain  advances from the FHLB. The
        FHLB advances are secured by the Bank's  first-mortgage  1-4 family loan
        portfolio and the Bank's FHLB stock totaling  approximately  $55,416,000
        and $47,980,000 in 2006 and 2005, respectively.

        At  December   31,   2006  and  2005,   $10,425,000   and   $13,000,000,
        respectively, represented the balance due on the advances from the FHLB.
        All advances are short term with  interest  rates  ranging from 4.94% to
        5.41%.

    Non-Revolving Line of Credit

        At  December 31,  2005,  the Company had  $850,000  advanced  against  a
        $1,250,000  revolving line of credit, which  expired  on March 31, 2006.
        On March 31, 2006,  the Company  made a  principal  payment  of $100,000
        and  refinanced  the remaining  $750,000  balance under  a  new $750,000
        line  of  credit  maturing  on  November  15,  2006.  Subsequently,  the
        maturity  date was extended to February  15, 2007.  The line  of  credit
        was fully extended at December 31, 2006 and was  collateralized  by  all
        of the  Company's  stock in the  Bank.  Interest  was based on the prime
        rate plus .25%,  which was 8.50%  on December  31,  2006.  Interest  was
        payable monthly and principal was due at maturity.

        Subsequent to year end the company  received a commitment from  a  third
        party commercial lender to refinance the line of credit.  The  new  note
        will be dated in April 2007 with  principal due  at maturity,  one  year
        from the date of the  note.  The note  will be  secured  by  all  of the
        Company's  stock in the Bank and will have an interest  rate  and  terms
        similar to those of the debt being refinanced.

        As of December 31, 2006, the Company maintained cash reserves of $23,536
        for payment of interest on this line of credit.

    Related Party Notes Payable

        The Company has three  unsecured  notes payable to directors of the Bank
        totaling   $390,126   and  $400,000  at  December  31,  2006  and  2005,
        respectively.  The notes bear a fixed  rate of  interest  of 7.50%.  The
        notes mature on April 15, 2007.

                                      F-16


<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


Note 7: Employee Benefits


    Defined Benefit Plan

        The Bank is a participant in a pension fund known as the Pentegra Group.
        This plan is a multi-employer  plan;  separate actuarial  valuations are
        not made with respect to each participating  employer. The plan required
        contributions in the amount of approximately $93,300 and $64,800 for the
        years ended December 31, 2006 and 2005, respectively.  The plan provides
        pension benefits for substantially all of the Bank's employees.

    Defined Contribution Plan

        The Bank began a retirement  savings 401(k) plan covering  substantially
        all employees on January 1, 2004.  Employees may contribute up to 20% of
        their  compensation  with the Bank matching a certain  percentage of the
        employee's  compensation using a formula to be determined each year. The
        Bank made no matching contribution to the plan in 2006 or 2005.

    Restricted Stock Plan

        The Company has a Restricted Stock Plan, covering 8,331 shares of common
        stock,  the  purpose  of which is to reward and to retain  personnel  of
        experience and ability in key positions of responsibility  with the Bank
        and any subsidiaries with an increased equity interest in the Company as
        compensation  for  their  prior  and  anticipated  future   professional
        contributions  and service.  Shares  awarded  under the plan entitle the
        shareholder  to all rights of common  stock  ownership  except  that the
        shares may not be sold,  transferred,  pledged,  exchanged, or otherwise
        disposed of until the shares are earned and non-forfeitable.  The shares
        awarded   under  the   Restricted   Stock   Plan  shall  be  earned  and
        non-forfeitable  at the rate of one-fifth  per year over five years from
        the grant date.  During May 2005 the Company granted 5,197 shares with a
        restriction  period of five years at a market price of $11.50.  Deferred
        compensation  expense  recorded for the year ended December 31, 2006 and
        2005  relating to these  shares of  restricted  stock was  approximately
        $12,000 and $7,500, respectively.

    Stock Option Plan

        On  May  20,  2004,  the   stockholders  of  the  Company  approved  the
        establishment  of the Community  First  Bancorp,  Inc. 2004 Stock Option
        Plan.  Under the Option Plan, the Company may grant either  incentive or
        nonincentive  stock  options  to  directors  and  key  employees  for an
        aggregate  of  27,772  shares of the  Company's  common  stock,  with an
        exercise  price equal to the fair market  value of the stock at the date
        of the award. Upon exercise of the options,  the Company may issue stock
        out of authorized  shares or purchase the stock in the open market.  The
        option to purchase  shares expires 10 years after the date of the grant.
        The options vest, and thereby become exercisable,  at the rate of 20% on
        the  one-year  anniversary  of the date of the  grant  and 20%  annually
        thereafter.  The options become vested  immediately in the case of death
        or disability or upon a change in the control of the Company.

                                      F-17

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        On December 8, 2005 the optionees  agreed to the cancellation of all the
        outstanding stock options, which totaled 16,442 as of that date.

<TABLE>
<CAPTION>
                                                                                             2005
                                                                            ----------------------------------------
                                                                                  Shares         Weighted-Average
                                                                                                  Exercise Price
                                                                            ----------------------------------------
<S>                                                                                 <C>           <C>
           Outstanding, beginning of year                                             16,442        $    16.00
               Granted                                                                    -0-               -0-
               Exercised                                                                  -0-               -0-
               Forfeited                                                                  -0-               -0-
               Cancelled                                                             (16,442)            16.00
                                                                               -------------        ----------

           Outstanding, end of year                                                       -0-      $      0.00
                                                                               ==============       ==========

           Options exercisable, end of year                                               -0-
                                                                               ==============

</TABLE>

        The following table summarizes information about stock options under the
plan outstanding at December 31, 2006 and 2005:

<TABLE>
<CAPTION>
                                                            Options Outstanding                 Options Exercisable
                                                ------------------------------------------------------------------------------
                                                    Weighted-Average       Weighted-                       Weighted-
                        Exercise      Number           Remaining        Average Exercise   Number      Average Exercuse
                         Price     Outstanding      Contractual Life       Price         Exercisable        Price
------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>          <C>                <C>               <C>                  <C>          <C>
  December 31, 2006     $  0.00     -0-                 0 years           $   0.00            -0-           $0.00

  December 31, 2005     $  0.00     -0-                 0 years           $   0.00            -0-           $0.00
</TABLE>



Note 8: Income Taxes

        The provision (credit) for income taxes includes these components:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Taxes currently payable                                            $             -0-    $             -0-
           Deferred income taxes                                                            -0-                  -0-
                                                                            -------------------- --------------------

                  Income tax expense (credit)                                 $             -0-    $             -0-
                                                                            ==================== ====================

</TABLE>

                                      F-18

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        A reconciliation of income tax  expense/(benefit)  at the statutory rate
        to the Bank's actual income tax expense is shown below:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Computed at the statutory rate (34%)                               $       (229,351)    $       (149,425)
           Increase (decrease) resulting from
               Changes in the deferred tax asset valuation allowance                   226,480              148,013
               Other                                                                     2,871                1,412
                                                                              ------------------   ------------------

                  Actual tax expense (credit)                                 $             -0-    $             -0-
                                                                               ================     ================
</TABLE>


        The tax effects of temporary differences related to deferred taxes shown
        on the balance sheets were:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Deferred tax assets
               Allowance for loan losses                                      $        137,485     $        131,859
               Net operating loss carryovers                                           917,190              683,842
               Unrealized loss on available-for-sale securities                          7,676               16,587
               Capital loss carryover                                                    5,100                5,100
               Charitable contributions carryover                                       11,216                9,950
               Deferred compensation                                                     2,541                2,540
               Deferred loan fees                                                        2,296                   -0-
               Other                                                                       722                  850
                                                                            -------------------- --------------------

                                                                                     1,084,226              850,728
                                                                            -------------------- --------------------
           Deferred tax liabilities
               Depreciation                                                             86,758               85,313
               FHLB stock                                                              196,452              181,968
                                                                            -------------------- --------------------

                                                                                       283,210              267,281
                                                                            -------------------- --------------------
                  Net deferred tax asset before
                     valuation allowance                                               801,016              583,447
                                                                            -------------------- --------------------
           Valuation allowance
               Beginning balance                                                      (566,860)            (418,847)
               Increase during the period                                             (226,480)            (148,013)
                                                                            -------------------- --------------------

               Ending balance                                                         (793,340)            (566,860)
                                                                            -------------------- --------------------

                  Net deferred tax asset                                      $          7,676     $         16,587
                                                                            ==================== ====================
</TABLE>

                                      F-19

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        As of December 31, 2006, the Company had approximately $2,697,617 of net
        operating loss carryovers available to offset future federal income. The
        net operating losses will begin to expire in the year 2010.

        Retained earnings at December 31, 2006 and 2005,  include  approximately
        $647,729,  for which no deferred  federal  income tax liability has been
        recognized.  This amount  represents an allocation of income to bad debt
        deductions  for tax purposes  only.  Reduction of amounts  allocated for
        purposes  other than tax bad debt  losses or  adjustments  arising  from
        carryback of net operating losses,  would create income for tax purposes
        only,  which would be subject to the  then-current  corporate income tax
        rate.  The deferred  income tax liability on the  preceding  amount that
        would have been  recorded  if it was  expected to reverse  into  taxable
        income in the foreseeable future was approximately  $220,228 at December
        31, 2006 and 2005.



Note 9: Other Comprehensive Income (Loss)

        Other  comprehensive  income (loss) components and related taxes were as
        follows:

<TABLE>
<CAPTION>
                                                                                   2006                 2005
                                                                            -------------------- --------------------
<S>                                                                         <C>                  <C>
           Unrealized gain (losses) on available-for-sale securities          $         26,208     $         (6,076)
                                                                            -------------------- --------------------
                  Other comprehensive income (loss), before
                     tax effect                                                         26,208               (6,076)
           Tax expense (benefit)                                                         8,913               (2,066)
                                                                            -------------------- --------------------

                  Other comprehensive income (loss)                           $         17,295     $         (4,010)
                                                                            ==================== ====================

</TABLE>

Note 10: Regulatory Matters

        The  Bank  is  subject  to  various  regulatory   capital   requirements
        administered  by  certain  federal  banking  agencies.  Failure  to meet
        minimum capital requirements can initiate certain mandatory and possibly
        additional  discretionary  actions by regulators  that,  if  undertaken,
        could have a direct material effect on the Bank's financial  statements.
        Under  capital  adequacy  guidelines  and the  regulatory  framework for
        prompt corrective action, the Bank must meet specific capital guidelines
        that involve quantitative measures of the Bank's assets, liabilities and
        certain   off-balance-sheet   items  as  calculated   under   regulatory
        accounting practices.  The Bank's capital amounts and classification are
        also  subject  to  qualitative   judgments  by  the   regulators   about
        components, risk weightings and other factors.

        Quantitative  measures  established  by  regulation  to  ensure  capital
        adequacy  require the Bank to maintain  minimum  amounts and ratios (set
        forth in the following table).  Management believes, as

                                      F-20

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        of December 31, 2006 and 2005, that the Bank meets all capital  adequacy
        requirements to which it is subject.

        As of  December  31,  2006,  the most recent  notification  from the OTS
        categorized  the Bank as  adequately  capitalized  under the  regulatory
        framework for prompt corrective  action. To be categorized as adequately
        capitalized,  the Bank must maintain  minimum total  risk-based,  Tier I
        risk-based and Tier I leverage  ratios as set forth in the table.  There
        are no  conditions  or events since that  notification  that  management
        believes have changed the Bank's category.

        The Bank's actual  capital  amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
                                                                                        To be Well Capitalized Under
                                                               For Capital Adequacy       Prompt Corrective Action
                                         Actual                 Purposes Required           Provisions Required
                              ---------------------------------------------------------------------------------------
                                   Amount       Percentage      Amount      Percentage      Amount       Percentage
                              ---------------------------------------------------------------------------------------
<S>                           <C>               <C>      <C>               <C>       <C>                 <C>
     December 31, 2006
           Total risk-based
              capital           $   3,973         8.47%    $     3,752         8.0%    $     4,690         10.0%
           Tier I risk-based
              capital           $   3,569         7.61%    $     1,876         4.0%    $     2,814          6.0%
           Tier I core
              capital           $   3,569         4.51%    $     3,164         4.0%    $     3,954          5.0%
           Tangible equity
              capital           $   3,569         4.51%    $     1,187         1.5%    $     1,187          1.5%

     December 31, 2005
           Total risk-based
              capital           $   4,311        10.22%    $     3,373         8.0%    $     4,217         10.0%
           Tier I risk-based
              capital           $   3,923         9.30%    $     1,687         4.0%    $     2,530          6.0%
           Tier I core
              capital           $   3,923         5.47%    $     2,871         4.0%    $     3,589          5.0%
           Tangible equity
              capital           $   3,923         5.47%    $     1,077         1.5%    $     1,077          1.5%
</TABLE>

        Liquidation  Account.  Upon  conversion to a capital stock savings bank,
        eligible  account  holders  who  continued  to  maintain  their  deposit
        accounts  in the Bank were  granted  priority in the event of the future
        liquidation  of  the  Bank  through  the   establishment  of  a  special
        "Liquidation  Account" in an amount equal to the  consolidated net worth
        of the Bank as of the date  specified  in the  Plan of  Conversion.  The
        initial liquidation account balance of $1,748,866 is reduced annually in
        proportion to decreases in the accounts of the eligible account holders.
        The liquidation  account does not restrict the use or application of net
        worth,  except with respect to the cash payment of  dividends.  The Bank
        may not  declare  or pay a cash  dividend  on or  repurchase  any of its
        common  stock if the effect  would  cause its  regulatory  capital to be
        reduced below the amount required for the liquidation account.

                                      F-21

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


        Dividend Restrictions.  The payment of cash dividends by the Bank on its
        common  stock  is  limited  by  regulations  of  the  Office  of  Thrift
        Supervision  (OTS).  Interest on deposits will be paid prior to payments
        of  dividends  on  common  stock.  Additional  limitation  on  dividends
        declared or paid or repurchases of the Bank stock are tied to the Bank's
        level of compliance  with its  regulatory  capital  requirements.  Under
        current OTS regulations the Bank must either 1) file  notification  with
        the OTS because it is a subsidiary of a savings and loan holding company
        or  2)  apply  for   distributions   if  the  total  amount  of  capital
        distributions  for the  applicable  calendar year exceeds net income for
        that year to date plus retained net income for the preceding two years.

        Federal  Reserve  Act.  In  September  2005  the  Company  inadvertently
        violated Section 23A of the Federal Reserve Act. The violation  occurred
        when  the  Company  pledged  assets  of the Bank as  collateral  for the
        Company's  note  payable to a third  party  lender.  Prior to filing the
        Company's  third  quarter  Form  10Q with the  Securities  and  Exchange
        Commission, the Company discovered and corrected the violation.

        Rights Offering. During the first quarter of 2007, the Company commenced
        a rights  offering  of  750,000  shares at $7.25  per share to  existing
        stockholders  as  of  the  close  of  business  on  December  29,  2006.
        Unsubscribed  shares were offered on a best efforts  basis to members of
        the local  community.  The Company  reserved  the right to increase  the
        number of shares  sold by 112,500 to cover  oversubscriptions  and other
        purchases.  Pursuant to the rights offering, the Company sold a total of
        8,032 shares for gross  proceeds of $58,232.  Estimated  expenses of the
        offering  were  $100,822.  The excess of expenses  over proceeds will be
        charged against earnings during the first quarter.

                                      F-22

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


Note 11: Disclosures About Fair Values of Financial Instruments

        The  following  table  presents  estimated  fair values of the Company's
        financial  instruments.  The fair values of certain of these instruments
        were  calculated  by  discounting  expected cash flows,  which  involves
        significant judgments by management and uncertainties. Fair value is the
        estimated  amount  at which  financial  assets or  liabilities  could be
        exchanged in a current transaction  between willing parties,  other than
        in a forced or liquidation sale. Because no market exists for certain of
        these financial  instruments  and because  management does not intend to
        sell these financial instruments,  the Company does not know whether the
        fair  values  shown  below  represent  values  at which  the  respective
        financial instruments could be sold individually or in the aggregate.

<TABLE>
<CAPTION>
                                                              2006                              2005
                                               ----------------------------------------------------------------------
                                                     Carrying           Fair           Carrying            Fair
                                                       Value            Value            Value             Value
                                               ----------------------------------------------------------------------
<S>                                              <C>            <C>              <C>              <C>
     Financial assets
        Cash and cash equivalents                  $  1,986,287   $   1,986,287    $     2,008,948  $     2,008,948
        Held-to-maturity securities                $     55,092   $      58,327    $        65,522  $        69,257
        Available-for-sale securities              $    728,050   $     728,050    $     1,703,147  $     1,703,147
        FHLB stock                                 $    764,500   $     764,500    $       721,900  $       721,900
        Loans, net of allowance for loan
           losses                                  $ 72,835,520   $  72,451,544    $    64,578,288  $    59,984,000
        Interest receivable                        $    383,227   $     383,227    $       288,501  $       288,501

     Financial liabilities
        Deposits                                   $ 64,678,666   $  64,672,801    $    54,476,673  $    54,503,179
        FHLB advances                              $ 10,425,000   $  10,422,601    $    13,000,000  $    12,979,000
        Advances under line of credit and
           notes payable                           $  1,140,126   $   1,140,126    $     1,250,000  $     1,250,000
        Interest payable                           $    301,647   $     301,647    $       158,391  $       158,391

     Unrecognized financial instruments (net
        of contract amount)
          Commitments to originate loans           $         -0-  $          -0-   $            -0- $            -0-
</TABLE>

        The  following  methods and  assumptions  were used to estimate the fair
        value of each class of financial instruments.

     Cash and Cash Equivalents,  Interest-bearing  Deposit and Federal Home Loan
     Bank Stock

        The carrying amount approximates fair value.


     Securities

        Fair values equal quoted market prices,  if available.  If quoted market
        prices are not available, fair value is estimated based on quoted market
        prices of similar securities.

                                      F-23

<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


    Loans

        The fair value of loans is  estimated  by  discounting  the future  cash
        flows using the current  rates at which  similar  loans would be made to
        borrowers  with  similar  credit  ratings  and  for the  same  remaining
        maturities.  Loans with  similar  characteristics  were  aggregated  for
        purposes of the  calculations.  The carrying amount of accrued  interest
        approximates its fair value.

    Deposits

        Deposits include demand  deposits,  savings  accounts,  NOW accounts and
        certain money market  deposits.  The carrying amount  approximates  fair
        value. The fair value of fixed-maturity time deposits is estimated using
        a discounted  cash flow  calculation  that  applies the rates  currently
        offered for deposits of similar remaining maturities.

    Short-term Borrowings and Interest Payable

        The carrying amount approximates fair value.


    Commitments to Originate Loans

         The fair value of commitments to originate loans is estimated using the
         fees currently  charged to enter into similar  agreements,  taking into
         account  the  remaining   terms  of  the  agreements  and  the  present
         creditworthiness   of   the   counterparties.   For   fixed-rate   loan
         commitments,  fair value also considers the difference  between current
         levels of interest rates and the committed rates.

Note 12: Significant Estimates and Concentrations

        Accounting principles generally accepted in the United States of America
        require  disclosure  of  certain   significant   estimates  and  current
        vulnerabilities due to certain concentrations.  Estimates related to the
        allowance  for loan losses are  reflected in the note  regarding  loans.
        Current vulnerabilities due to certain concentrations of credit risk are
        discussed in the note on commitments  and credit risk.  During 2006, the
        Company  charged  $227,000  to  expense  as its  estimate  of  losses on
        accounts   containing   unreconciled  items  and  other  amounts  deemed
        unrecoverable.

Note 13: Commitments and Credit Risk

        The  Bank  grants  agribusiness,  commercial  and  residential  loans to
        customers primarily in Hopkins County, Kentucky.

                                      F-24


<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2006 and 2005


    Commitments to Originate Loans

        Commitments  to originate  loans are agreements to lend to a customer as
        long as  there  is no  violation  of any  condition  established  in the
        contract.  Commitments  generally have fixed  expiration  dates or other
        termination clauses and may require payment of a fee. Since a portion of
        the   commitments  may  expire  without  being  drawn  upon,  the  total
        commitment   amounts   do  not   necessarily   represent   future   cash
        requirements.   Each  customer's  creditworthiness  is  evaluated  on  a
        case-by-case  basis.  The  amount  of  collateral  obtained,  if  deemed
        necessary,   is  based  on   management's   credit   evaluation  of  the
        counterparty.   Collateral   held  varies  but  may   include   accounts
        receivable,  inventory,  property, plant and equipment,  commercial real
        estate and residential real estate.

        At December  31,  2006 and 2005,  the Bank had  granted  commitments  to
        extend  credit  and  unused  lines of  credit to  borrowers  aggregating
        approximately $1,669,000 and $1,888,700,  respectively.  The commitments
        to extend credit  expire over varying  periods of time with the majority
        expiring within a one-year period.

    Standby Letters of Credit

        Standby letters of credit are irrevocable conditional commitments issued
        by the Bank to guarantee the performance of a customer to a third party.
        Financial  standby  letters  of credit are  primarily  issued to support
        public and private borrowing  arrangements,  including commercial paper,
        bond financing and similar transactions.  Performance standby letters of
        credit are issued to guarantee  performance of certain  customers  under
        nonfinancial  contractual  obligations.  The  credit  risk  involved  in
        issuing  standby  letters  of  credit  is  essentially  the same as that
        involved in extending loans to customers.  Should the Banks be obligated
        to perform under the standby  letters of credit,  they may seek recourse
        from the customer for reimbursement of amounts paid.

        The Bank had outstanding  standby letters of credit totaling $135,000 at
        December 31, 2006.  There was $7,000 in outstanding  standby  letters of
        credit at December 31, 2005.

    Other Credit Risks

        At December  31, 2006 and 2005,  approximately  $417,000  and  $101,000,
        respectively,  were held in deposits at financial institutions in excess
        of federally insured amounts.

                                      F-25

<PAGE>

                                   SIGNATURES

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

                                      COMMUNITY FIRST BANCORP, INC.

Date:   March 30, 2007                By:  /s/William M. Tandy
                                           -------------------------------------
                                           William M. Tandy
                                           President and Chief Executive Officer
                                           (Duly Authorized Officer)

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

By:   /s/William M. Tandy
      -----------------------------------------------
      William M. Tandy                                     Date: March 30, 2007
      President, Chief Executive Officer and Director
      (Principal Executive Officer)


By:   /s/Amy D. Lyon
      -----------------------------------------------
      Amy D. Lyons                                         Date: March 30, 2007
      Vice President and Chief Financial Officer
      (Principal Financial and Accounting Officer)


By:   /s/Ralph T. Teague
      -----------------------------------------------
      Ralph T. Teague                                      Date: March 30, 2007
      Director


By:   /s/Paul W. Arison
      -----------------------------------------------
      Paul W. Arison                                       Date: March 30, 2007
      Director


By:   /s/Charlotte E. Baldwin
      -----------------------------------------------
      Charlotte E. Baldwin                                 Date: March 30, 2007
      Director


By:   /s/Charles G. Ramsey
      -----------------------------------------------
      Charles G. Ramsey                                    Date: March 30, 2007
      Director


By:   /s/J. Craig Riddle
      -----------------------------------------------
      J. Craig Riddle                                       Date: March 30, 2007
      Director


By:   /s/Charles B. Vaughn
      -----------------------------------------------
      Charles B. Vaughn                                    Date: March 30, 2007
      Director


By:   /s/Steven E. Carson
      -----------------------------------------------
      Steven E. Carson                                     Date: March 30, 2007
      Director


                                       37