UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

For Quarterly Period Ended September 30, 2007      Commission File No. 000-29640


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


         South Carolina                                      58-2322486
---------------------------                          -------------------------
  (State or other jurisdiction of              (IRS Employer Identification No.)
  incorporation or organization)


                             449 HIGHWAY 123 BYPASS
                          SENECA, SOUTH CAROLINA 29678
--------------------------------------------------------------------------------
               (Address of principal executive offices, zip code)


                                 (864) 886-0206
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

         Yes [X]  No [ ]

         Indicate by check mark whether the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.
(Check one):

   Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]


         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act).

         Yes [ ]  No [X]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 2,973,194 Shares Outstanding on November 1, 2007



<PAGE>


                         COMMUNITY FIRST BANCORPORATION

                                    FORM 10-Q

                                      Index

<TABLE>
<CAPTION>
                                                                                                                     Page
PART I -          FINANCIAL INFORMATION

Item 1.           Financial Statements

<S>               <C>                                                                                                  <C>
                  Consolidated Balance Sheets                                                                           3
                  Consolidated Statements of Income                                                                     4
                  Consolidated Statements of Changes in Shareholders' Equity                                            5
                  Consolidated Statements of Cash Flows                                                                 6
                  Notes to Unaudited Consolidated Financial Statements
                                                                                                                        7

Item 2.           Management's Discussion and Analysis of Financial Condition and Results of Operations                 8
Item 3.           Quantitative and Qualitative Disclosures About Market Risk                                           17
Item 4T.          Controls and Procedures                                                                              18

PART II -         OTHER INFORMATION

Item 6.           Exhibits                                                                                             18

SIGNATURE
                                                                                                                       19
</TABLE>




                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                                     September 30,      December 31,
                                                                                                          2007              2006
                                                                                                          ----              ----
                                                                                                           (Dollars in thousands)
Assets
<S>                                                                                                     <C>              <C>
     Cash and due from banks ...................................................................        $   8,455        $   6,952
     Interest bearing balances due from banks ..................................................              230               67
     Federal funds sold ........................................................................           10,948           24,126
                                                                                                        ---------        ---------
         Cash and cash equivalents .............................................................           19,633           31,145
     Securities available-for-sale .............................................................          100,786          102,487
     Securities held-to-maturity (fair value $5,770 for 2007 and $6,530 for 2006) ..............            5,864            6,595
     Other investments .........................................................................              840              980
     Loans .....................................................................................          236,907          202,966
         Allowance for loan losses .............................................................           (2,371)          (2,242)
                                                                                                        ---------        ---------
            Loans - net ........................................................................          234,536          200,724
     Premises and equipment - net ..............................................................            8,228            7,937
     Accrued interest receivable ...............................................................            2,508            2,182
     Other assets ..............................................................................            8,637            1,859
                                                                                                        ---------        ---------

            Total assets .......................................................................        $ 381,032        $ 353,909
                                                                                                        =========        =========

Liabilities
     Deposits
         Noninterest bearing ...................................................................        $  42,553        $  40,576
         Interest bearing ......................................................................          294,613          267,381
                                                                                                        ---------        ---------
            Total deposits .....................................................................          337,166          307,957
     Short-term borrowings .....................................................................                -            4,500
     Long-term debt ............................................................................            4,500            5,500
     Accrued interest payable ..................................................................            2,771            2,703
     Other liabilities .........................................................................              261               34
                                                                                                        ---------        ---------
            Total liabilities ..................................................................          344,698          320,694
                                                                                                        ---------        ---------

Shareholders' equity
     Common stock - no par  value; 10,000,000 shares authorized; issued and
         outstanding - 2,973,194 for 2007 and
         2,958,558 for 2006 ....................................................................           30,144           30,061
     Additional paid-in capital ................................................................              593              593
     Retained earnings .........................................................................            5,952            3,285
     Accumulated other comprehensive income (loss) .............................................             (355)            (724)
                                                                                                        ---------        ---------
            Total shareholders' equity .........................................................           36,334           33,215
                                                                                                        ---------        ---------

            Total liabilities and shareholders' equity .........................................        $ 381,032        $ 353,909
                                                                                                        =========        =========
</TABLE>



See accompanying notes to unaudited consolidated financial statements.



                                       3
<PAGE>

COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                                                 (Unaudited)
                                                                                         Period Ended September 30,
                                                                                         --------------------------
                                                                                 Three Months                     Nine Months
                                                                                 ------------                     -----------
                                                                           2007              2006            2007             2006
                                                                           ----              ----            ----             ----
                                                                             (Dollars in thousands, except per share)

Interest income
<S>                                                                       <C>              <C>              <C>              <C>
     Loans, including fees .....................................          $ 4,632          $ 3,567          $12,885          $10,000
     Interest bearing balances due from banks ..................                3                -                4                4
     Securities
     Taxable ...................................................              975              995            2,907            2,883
     Tax-exempt ................................................              212              178              616              456
     Other investments .........................................               14               14               43               38
     Federal funds sold ........................................              145              188            1,007            1,011
                                                                          -------          -------          -------          -------
         Total interest income .................................            5,981            4,942           17,462           14,392
                                                                          -------          -------          -------          -------

Interest expense
     Time deposits $100M and over ..............................            1,038              808            2,901            2,273
     Other deposits ............................................            2,283            1,809            6,718            5,100
     Short-term borrowings .....................................                -                -                3                2
     Long-term debt ............................................               46               55              155              178
                                                                          -------          -------          -------          -------
         Total interest expense ................................            3,367            2,672            9,777            7,553
                                                                          -------          -------          -------          -------

Net interest income ............................................            2,614            2,270            7,685            6,839
Provision for loan losses ......................................              150               15              270               65
                                                                          -------          -------          -------          -------
Net interest income after provision ............................            2,464            2,255            7,415            6,774
                                                                          -------          -------          -------          -------

Other income
     Service charges on deposit accounts .......................              394              404            1,071            1,150
     ATM interchange and other fees ............................              115               96              336              279
     Credit life insurance commissions .........................                8               15               24               37
     Other income ..............................................               66               44              140              171
                                                                          -------          -------          -------          -------
         Total other income ....................................              583              559            1,571            1,637
                                                                          -------          -------          -------          -------

Other expenses
     Salaries and employee benefits ............................            1,130              804            2,844            2,452
     Net occupancy expense .....................................              116               89              318              237
     Furniture and equipment expense ...........................              111              113              321              317
     Amortization of computer software .........................               62               69              179              202
     ATM interchange and related expenses ......................               66               66              215              208
     Directors' fees ...........................................               20               38               67              162
     Other expense .............................................              396              290            1,133            1,003
                                                                          -------          -------          -------          -------
         Total other expenses ..................................            1,901            1,469            5,077            4,581
                                                                          -------          -------          -------          -------

Income before income taxes .....................................            1,146            1,345            3,909            3,830
Income tax expense .............................................              375              441            1,242            1,273
                                                                          -------          -------          -------          -------
Net income .....................................................          $   771          $   904          $ 2,667          $ 2,557
                                                                          =======          =======          =======          =======

Per share*
     Net income ................................................          $  0.26          $  0.31          $  0.89          $  0.87
     Net income, assuming dilution .............................             0.24             0.28             0.84             0.81
                                                                                                                             -------
</TABLE>
* Per share  information has been  retroactively  adjusted to reflect a 5% stock
dividend effective December 18, 2006.

See accompanying notes to unaudited consolidated financial statements.



                                       4
<PAGE>


COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Changes in Shareholders' Equity

<TABLE>
<CAPTION>
                                                                         (Unaudited)

                                                                   Common Stock                             Accumulated
                                                                   ------------     Additional                   Other
                                                               Number of              Paid-in     Retained  Comprehensive
                                                                Shares      Amount    Capital     Earnings   Income (Loss)   Total
                                                                ------      ------    -------     --------   -------------   -----
                                                                                       (Dollars in thousands)

<S>                                                           <C>         <C>         <C>         <C>         <C>          <C>
Balance, January 1, 2006 ..................................   2,798,409   $  26,956   $       -   $   3,296   $  (1,397)   $  28,855
                                                                                                                           ---------

Comprehensive income:
    Net income ............................................           -           -           -       2,557           -        2,557
                                                                                                                           ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of
      income taxes of $159 ................................           -           -           -           -         283          283
                                                                                                                           ---------
    Total other comprehensive income ......................           -           -           -           -           -          283
                                                                                                                           ---------
    Total comprehensive income ............................           -           -           -           -           -        2,840
                                                                                                                           ---------
Share-based compensation ..................................           -           -         178           -           -          178
Exercise of employee stock options ........................      19,579          83           -           -           -           83
                                                              ---------   ---------   ---------   ---------   ---------    ---------
Balance, September 30, 2006 ...............................   2,817,988   $  27,039   $     178   $   5,853   $  (1,114)   $  31,956
                                                              =========   =========   =========   =========   =========    =========



Balance, January 1, 2007 ..................................   2,958,558   $  30,061   $     593   $   3,285   $    (724)   $  33,215
                                                                                                                           ---------

Comprehensive income:
    Net income ............................................           -           -           -       2,667           -        2,667
                                                                                                                           ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of
      income taxes of $207 ................................           -           -           -           -         369          369
                                                                                                                           ---------
    Total other comprehensive income ......................           -           -           -           -           -          369
                                                                                                                           ---------
    Total comprehensive income ............................           -           -           -           -           -        3,036
                                                                                                                           ---------
Exercise of employee stock options ........................      14,636          83           -           -           -           83
                                                              ---------   ---------   ---------   ---------   ---------    ---------
Balance, September 30, 2007 ...............................   2,973,194   $  30,144   $     593   $   5,952   $    (355)   $  36,334
                                                              =========   =========   =========   =========   =========    =========
</TABLE>
















See accompanying notes to unaudited consolidated financial statements.



                                       5
<PAGE>


COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                                                (Unaudited)
                                                                                                             Nine Months Ended
                                                                                                               September 30,
                                                                                                          2007                 2006
                                                                                                          ----                 ----
                                                                                             (Dollars in thousands)
Operating activities
<S>                                                                                                      <C>               <C>
     Net income ................................................................................         $  2,667          $  2,557
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ..........................................................              270                65
            Depreciation .......................................................................              298               273
            Amortization of net loan (fees) and costs ..........................................             (174)             (143)
            Securities accretion and premium amortization ......................................               65               116
            Net (gain) or loss on sale of foreclosed assets ....................................                -               (31)
            Increase in interest receivable ....................................................             (326)             (431)
            Increase in interest payable .......................................................               68               330
            Increase in prepaid expenses and other assets ......................................               (3)              (52)
            Increase (decrease) in other accrued expenses ......................................              227               (21)
            Increase in cash surrender value of bank-owned life insurance ......................              (33)                -
            Share-based compensation ...........................................................                -               178
                                                                                                         --------          --------
                Net cash provided by operating activities ......................................            3,059             2,841
                                                                                                         --------          --------

Investing activities
     Purchases of available-for-sale securities ................................................          (17,448)          (24,763)
     Maturities, calls and paydowns of securities available-for-sale ...........................           19,655            16,463
     Maturities, calls and paydowns of securities held-to-maturity .............................              736               893
     Purchases of other investments ............................................................                -               (32)
     Proceeds of sales of other investments ....................................................              140                 -
     Net increase in loans made to customers ...................................................          (33,908)          (24,587)
     Purchases of premises and equipment .......................................................             (589)           (1,465)
     Proceeds of sale of foreclosed assets .....................................................               15               168
     Proceeds of sale of real estate held for sale .............................................               36                 -
     Purchases of bank-owned life insurance ....................................................           (7,000)                -
                                                                                                         --------          --------
                Net cash used by investing activities ..........................................          (38,363)          (33,323)
                                                                                                         --------          --------

Financing activities
     Net (decrease) increase  in demand deposits, interest
         bearing transaction accounts and savings accounts .....................................           (8,925)           10,323
     Net increase in certificates of deposit and other
         time deposits .........................................................................           38,134             5,953
     Net decrease in short-term borrowings .....................................................           (4,500)           (3,500)
     Repayment of long-term debt ...............................................................           (1,000)           (1,000)
     Exercise of employee stock options ........................................................               83                83
                                                                                                         --------          --------
                Net cash provided by financing activities ......................................           23,792            11,859
                                                                                                         --------          --------
Decrease in cash and cash equivalents ..........................................................          (11,512)          (18,623)
Cash and cash equivalents, beginning ...........................................................           31,145            32,450
                                                                                                         --------          --------
Cash and cash equivalents, ending ..............................................................         $ 19,633          $ 13,827
                                                                                                         ========          ========

Supplemental Disclosure of Cash Flow Information Cash paid during the year for:
         Interest, net of $18 capitalized during construction in 2006 ..........................         $  9,709          $  7,223
         Income taxes ..........................................................................            1,278             1,347
     Noncash investing and financing activities:
         Transfer of loans to other real estate ................................................                -                41
         Other comprehensive income ............................................................              369               283
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                       6
<PAGE>

COMMUNITY FIRST BANCORPORATION

Notes to Unaudited Consolidated Financial Statements

Accounting  Policies - A summary of significant  accounting policies is included
in Community First  Bancorporation's  (the "Company") Annual Report on Form 10-K
for the year ended  December  31, 2006 filed with the  Securities  and  Exchange
Commission.   Certain  amounts  in  the  2006  financial  statements  have  been
reclassified to conform to the current presentation.  Such reclassifications had
no effect on net income or retained earnings for any period.

Management  Opinion - In the opinion of management,  the accompanying  unaudited
consolidated  financial statements of Community First Bancorporation reflect all
adjustments  necessary  for a fair  presentation  of the  results of the periods
presented. Such adjustments were of a normal, recurring nature.

Nonperforming  Loans  - As  of  September  30,  2007,  there  were  $426,000  in
nonaccrual  loans  and no loans  90 days or more  past  due and  still  accruing
interest.

Earnings Per Share - Basic earnings per common share is computed by dividing net
income  applicable  to common  shares by the weighted  average  number of common
shares  outstanding.   Diluted  earnings  per  share  is  computed  by  dividing
applicable  net  income  by  the  weighted   average  number  of  common  shares
outstanding and any dilutive potential common shares and dilutive stock options.
It is assumed that all dilutive  stock options are exercised at the beginning of
each period and that the proceeds are used to purchase  shares of the  Company's
common stock at the average  market price during the period.  All 2006 per share
information  has  been  retroactively  adjusted  to give  effect  to a 5%  stock
dividend  effective  December 18, 2006.  Net income per share and net income per
share, assuming dilution, were computed as follows:

<TABLE>
<CAPTION>
                                                                                               (Unaudited)
                                                                                        Period Ended September 30,
                                                                                        --------------------------
                                                                              Three Months                      Nine Months
                                                                              ------------                      -----------
                                                                          2007             2006             2007             2006
                                                                          ----             ----             ----             ----
                                                                            (Dollars in thousands, except per share amounts)
Net income per share, basic
<S>                                                                    <C>              <C>              <C>              <C>
  Numerator - net income .......................................       $      771       $      904       $    2,667       $    2,557
                                                                       ==========       ==========       ==========       ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...................................        2,972,583        2,952,488        2,971,486        2,943,101
                                                                       ==========       ==========       ==========       ==========

         Net income per share, basic ...........................       $      .26       $      .31       $      .89       $      .87
                                                                       ==========       ==========       ==========       ==========

Net income per share, assuming dilution
  Numerator - net income .......................................       $      771       $      904       $    2,667       $    2,557
                                                                       ==========       ==========       ==========       ==========
  Denominator
    Weighted average common shares
       issued and outstanding ..................................        2,972,583        2,952,488        2,971,486        2,943,101
    Effect of dilutive stock options ...........................          208,615          199,391          195,486          195,342
                                                                       ----------       ----------       ----------       ----------
               Total shares ....................................        3,181,198        3,151,879        3,166,972        3,138,443
                                                                       ==========       ==========       ==========       ==========

        Net income per share, assuming dilution ................       $      .24       $      .28       $      .84       $      .81
                                                                       ==========       ==========       ==========       ==========
</TABLE>

Share-Based  Compensation  - As of  September  30,  2007,  the  Company  has two
share-based  compensation  plans.  Effective  January 1, 2006, the Company began
accounting  for  compensation  expenses  related  to stock  options  granted  to


                                       7
<PAGE>

employees  and  non-officer  directors  under the  recognition  and  measurement
principles  of  Statement  of Financial  Accounting  Standards  No. 123 (revised
2004),  "Share-Based  Payment"("SFAS  123(R))  using  the  modified  prospective
application method. Total share-based compensation expenses included in salaries
and employee benefits and directors fees were $38,000 and $17,000, respectively,
for the three month period, and $98,000 and $80,000,  respectively, for the nine
month period ended  September 30, 2006.  During the fourth  quarter of 2006, the
Company  accelerated the vesting of all options then  outstanding and there have
been no grants of options during 2007. Consequently, no share-based compensation
expense is recognized in the 2007 period.

Salary  Continuation  Agreement - On July 31, 2007,  the Company  entered into a
Salary  Continuation  Agreement  with its  Chief  Executive  Officer,  which was
effective as of January 1, 2007. The Agreement is being  accounted for under the
provisions  of  Accounting   Principles  Board  Opinion  No.  12  and  Financial
Accounting Standards Board Statements No. 106 and 111, as applicable. During the
three and nine periods of 2007,  salaries  and benefits  expense of $290,000 was
recognized for this agreement.

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

Forward Looking Statements

         Statements  included in this report which are not  historical in nature
are intended to be, and are hereby  identified as "forward  looking  statements"
for  purposes  of the safe  harbor  provided  by Section  21E of the  Securities
Exchange Act of 1934, as amended.  Forward-looking statements include statements
concerning plans, objectives,  goals,  strategies,  future events or performance
and underlying  assumptions and other statements which are other than statements
of historical facts. Such forward-looking statements may be identified,  without
limitation,  by the use of the  words  "anticipates,"  "believes,"  "estimates,"
"expects," "intends," "plans," "predicts,"  "projects," and similar expressions.
The Company's expectations,  beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable  basis,  including  without
limitation,  management's  examination  of  historical  operating  trends,  data
contained in the Company's  records and other data available from third parties,
but  there  can be no  assurance  that  management's  beliefs,  expectations  or
projections  will result or be achieved or  accomplished.  The Company  cautions
readers that  forward-looking  statements,  including without limitation,  those
relating to the Company's recent and continuing  expansion,  its future business
prospects,  revenues, working capital, liquidity, capital needs, interest costs,
income,  and adequacy of the  allowance for loan losses,  are not  guarantees of
future  performance and are subject to risks and uncertainties  that could cause
actual results to differ materially from those indicated in the  forward-looking
statements,  due to several important factors herein  identified,  among others,
and  other  risks and  factors  identified  from  time to time in the  Company's
reports  filed  with the  Securities  and  Exchange  Commission.  The  risks and
uncertainties include, but are not limited to

          o    our growth and our ability to maintain growth;
          o    governmental monetary and fiscal policies, as well as legislative
               and regulatory changes;
          o    the effect of interest rate changes on our level and  composition
               of  deposits,  loan  demand and the value of our  collateral  and
               securities;
          o    the  effects of  competition  from other  financial  institutions
               operating   in  our   market   area  and   elsewhere,   including
               institutions  operating locally,  nationally and internationally,
               together  with   competitors  that  offer  banking  products  and
               services by mail, telephone and computer and/or the Internet;
          o    failure  of  assumptions  underlying  the  establishment  of  our
               allowance  for loan  losses,  including  the value of  collateral
               securing loans; and
          o    loss of consumer  confidence and economic  disruptions  resulting
               from terrorist activities.

         The Company  undertakes no obligation to publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

Changes in Financial Condition

         During  the three  months  ended  September  30,  2007,  loans  grew by
$10,936,000, or 4.8%, and securities available-for-sale decreased by $3,873,000,
or 3.7%. Total deposits increased by $8,981,000,  or 2.7%, during the 2007 third
quarter,  due to higher amounts of public  deposits.  The Company also purchased
bank-owned  life insurance of $7,000,000  during the third quarter of 2007. This
asset is intended to fund certain  retirement  benefits of the  Company's  Chief
Executive  Officer  under the terms of an  agreement  dated July 31,  2007.  The
Company accrued $290,000 for those benefits during the third quarter of 2007.

         Loans grew by  $33,941,000,  or 16.7% and, as noted  above,  bank-owned
life  insurance of $7,000,000  was purchased  during the 2007 nine month period.
These items were funded  primarily by an increase of  $27,232,000,  or 10.2%, in
interest  bearing  deposits and a reduction of $13,178,000 in federal funds sold
during the period.  The Company reduced its short-term  borrowings by $4,500,000
during the 2007 nine month period.

                                       8
<PAGE>

         The Company  believes that it continues to have sufficient  flexibility
to fund loan requests or make  investments  in securities at attractive  yields,
and to meet normal  demands  for deposit  withdrawals  by its  customers,  while
maintaining  its  exposure to any  further  increases  in  interest  rates at an
acceptable level.

Results of Operations

Three Months Ended September 30, 2007 and 2006

         The Company  recorded  consolidated  net income of $771,000 or $.26 per
share for the third  quarter of 2007  compared  with net income of $904,000  and
earnings per share of $.31 for the third quarter of 2006.  Net income per share,
assuming  dilution  was $.24 for the 2007  quarter and $.28 for the 2006 period.
Net  income  per share  amounts  for 2006 have been  retroactively  adjusted  to
reflect a five percent stock dividend effective December 18, 2006.

         Loan growth was primarily  responsible  for higher  interest income for
the 2007 third  quarter.  Higher rates paid on, and  increased  volumes of, time
deposits combined to increase interest expense.  In the 2007 third quarter,  the
Company  continued to incur higher  occupancy  expenses  associated with its new
Seneca, SC office and began incurring  expenses related to training of personnel
and  publicity  for its new banking  office in  Anderson,  SC,  which opened for
business early in the fourth  quarter of 2007. The Company also incurred  higher
expenses for public relations and professional  services during the 2007 period.
In  addition,  the Company  incurred  expenses  of $290,000  related to a salary
continuation agreement entered into with its Chief Executive Officer on July 31,
2007. The contract terms were made effective as of January 1, 2007, however, and
the current three month period reflects a disproportionate share of the expense.
Such  expenses for the fourth  quarter of 2007 are expected to be  approximately
$97,000.  Income tax expense  was reduced due to the lower  amount of net income
before taxes.

<TABLE>
<CAPTION>
                                                                                Summary Income Statement
                                                                                ------------------------
                                                                                (Dollars in thousands)
For the Three Months Ended September 30,                     2007               2006             Dollar Change     Percentage Change
                                                             ----               ----             -------------     -----------------
<S>                                                        <C>                 <C>                 <C>                   <C>
Interest income ....................................       $ 5,981             $ 4,942             $ 1,039               21.0%
Interest expense ...................................         3,367               2,672                 695               26.0%
                                                           -------             -------             -------
Net interest income ................................         2,614               2,270                 344               15.2%
Provision for loan losses ..........................           150                  15                 135              900.0%
Noninterest income .................................           583                 559                  24                4.3%
Noninterest expenses ...............................         1,901               1,469                 432               29.4%
Income tax expense .................................           375                 441                 (66)             -15.0%
                                                           -------             -------             -------
Net income .........................................       $   771             $   904             $  (133)             -14.7%
                                                           =======             =======             =======
</TABLE>

Nine Months Ended September 30, 2007 and 2006

         The Company recorded  consolidated net income of $2,667,000 or $.89 per
share for the first nine months of 2006  compared  with net income of $2,557,000
and  earnings  per share of $.87 for the same  period of 2006.  Net  income  per
share, assuming dilution was $.84 for the 2007 nine months and $.81 for the same
period of 2006.  Net income per share  amounts for 2006 have been  retroactively
adjusted to reflect the five percent stock dividend effective December 18, 2006.

         Increases in interest income, interest expenses and net interest income
for the 2007 nine month period reflect the effects of loan growth,  higher rates
earned on securities  and loans,  and higher rates paid for, and higher  volumes
of, interest bearing deposits, especially time deposits.

         Salaries and employee  benefits and  directors'  fees for the 2006 nine
month period  included  approximately  $178,000  representing  the effect of the
adoption of SFAS 123(R).  No such amounts were incurred  during the 2007 period.
The Company incurred higher legal and other professional fees in the 2007 period
primarily  due to expenses  associated  with the recent  contractual  agreements
between the Company and its Chief Executive Officer.  The Company previously has
not provided for the chief executive  officer's  retirement except to the extent
that matching  contributions  were made in conjunction with his participation in
the  Company's  401(k)  plan.  During  the third  quarter of 2007,  the  Company
purchased  life  insurance  that will be used to fund its  liability  under this
arrangement.  It is expected that increases in the cash  surrender  value of the
life  insurance  will  substantially  offset  the  effects  on  earnings  of the
Company's anticipated liability.


                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                                Summary Income Statement
                                                                                ------------------------
                                                                                 (Dollars in thousands)
For the Nine Months Ended September 30,                      2007                2006           Dollar Change     Percentage Change
                                                             ----                ----           -------------     -----------------
<S>                                                        <C>                 <C>                 <C>                   <C>
Interest income ....................................       $17,462             $14,392             $ 3,070               21.3%
Interest expense ...................................         9,777               7,553               2,224               29.4%
                                                           -------             -------             -------
Net interest income ................................         7,685               6,839                 846               12.4%
Provision for loan losses ..........................           270                  65                 205              315.4%
Noninterest income .................................         1,571               1,637                 (66)             -4.0%
Noninterest expenses ...............................         5,077               4,581                 496               10.8%
Income tax expense .................................         1,242               1,273                 (31)             -2.4%
                                                           -------             -------             -------
Net income .........................................       $ 2,667             $ 2,557             $   110                4.3%
                                                           =======             =======             =======
</TABLE>

Net Interest Income

         Net interest income,  the principal  source of the Company's  earnings,
was higher in both the 2007 three month and nine month  periods.  Changes in the
composition of earning assets and interest  bearing  liabilities,  combined with
more  responsive  practices  with regard to changing the initial  interest rates
offered for deposits and charged for fixed-rate loans, led to these increases.

         In August and  September  2007,  the Federal  Reserve Board reduced its
discount rate by a total of 100 basis  points.  These  adjustments  were made in
response to the  well-publicized  concerns about imminent interest rate "resets"
associated  with  subprime  mortgage  loans,  which could cause some  borrowers'
payments  to  increase  so  significantly  as to be  unaffordable  and result in
significantly  increased  foreclosure  rates.  The  Company  generally  does not
originate  subprime mortgage loans. Most of the mortgage loans originated by the
Company  are  retained  and  serviced  by the  Bank and are  underwritten  using
traditional mortgage guidelines.

         In response to the Federal  Reserve's  rate cuts,  the Bank lowered the
rates it offers for deposits  late in the third  quarter of 2007.  Approximately
$72,000,000  of savings and money market  accounts were  potentially  subject to
such  immediate  rate changes as of September 30, 2007.  Yields on variable rate
loans which are indexed to the prime rate were similarly reduced during the 2007
third  quarter.  Variable rate loans totaled  $71,980,000 at the end of the 2007
third quarter.

Three Months Ended September 30, 2007 and 2006

         For the third quarter of 2007, net interest income totaled  $2,614,000,
an  increase  of  $344,000  over the  amount  for the same  period of 2006.  The
Company's  interest  rate  spread for the third  quarter  of 2007 was 2.15%,  an
increase  of 8 basis  points over the 2.07%  interest  rate spread for the third
quarter of 2006.  Net yield on earning  assets  for the 2007 third  quarter  was
2.91%, an increase of 12 basis points over the 2006 third quarter net yield. The
average  amount of the  Company's  higher  yielding  loan category for the third
quarter  of 2007 was 23.3%  more than for the third  quarter  of 2006.  Interest
rates associated with those loans in the 2007 period were 40 basis points higher
than in the 2006 period. As a result, interest income on loans was $1,065 higher
in the  2007  three  month  period.  Rates  associated  with  other  significant
categories of earning  assets were higher in the 2007 three month period as well
and the yield on earning  assets for the 2007 period was 57 basis points  higher
than for the 2006 period.

         Rates paid for interest bearing  liabilities  also generally  increased
above the prior year level.  Rates paid for time deposits rose most dramatically
and rates paid for other  types of interest  bearing  deposit  accounts  and for
borrowings  rose  only  modestly  or  fell.  Average  amounts  of time  deposits
outstanding  for the 2007 period  increased by $29,540,000,  or 15.8%,  over the
amount for the 2006 period.



                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                             Average Balances, Yields and Rates
                                                                              Three Months Ended September 30,
                                                                              --------------------------------
                                                                      2007                                       2006
                                                                      ----                                       ----
                                                                    Interest                                   Interest
                                                        Average     Income/        Yields/        Average      Income/      Yields/
                                                       Balances     Expense       Rates (1)       Balances     Expense     Rates (1)
                                                       --------     -------       ---------       --------     -------     ---------
                                                                                    (Dollars in thousands)
Assets
<S>                                                  <C>            <C>           <C>           <C>           <C>             <C>
Interest-bearing balances due from banks ........    $      227     $     3       5.24%         $      46     $     -         0.00%
Securities
      Taxable ...................................        93,000         975       4.16%           101,222         995         3.90%
      Tax exempt (2) ............................        19,574         212       4.30%            18,346         178        3.85%
                                                     ----------     -------                     ---------     -------
           Total investment securities ..........       112,574       1,187       4.18%           119,568       1,173         3.89%
Other investments ...............................           845          14       6.57%               980          14         5.67%
Federal funds sold ..............................        11,770         145       4.89%            14,246         188         5.24%
Loans (2) (3) (4) ...............................       231,452       4,632       7.94%           187,669       3,567         7.54%
                                                     ----------     -------                     ---------     -------
           Total interest earning assets ........       356,868       5,981       6.65%           322,509       4,942         6.08%
Cash and due from banks .........................         8,698                                     6,331
Allowance for loan losses .......................        (2,302)                                   (2,268)
Valuation allowance - Available-for-
      sale securities ...........................        (1,602)                                   (2,701)
Premises and equipment ..........................         8,227                                     7,815
Other assets ....................................         6,560                                     4,051
                                                     ----------                                 ---------
           Total assets .........................    $  376,449                                 $ 335,737
                                                     ==========                                 =========

Liabilities and shareholders' equity
Interest bearing deposits
      Interest bearing transaction accounts .....    $   57,297     $   457       3.16%         $  51,698     $   406         3.12%
      Savings ...................................        19,068          92       1.91%            20,826         118         2.25%
      Time deposits $100M and over ..............        85,990       1,038       4.79%            72,426         808         4.43%
      Other time deposits .......................       130,076       1,734       5.29%           114,100       1,285          4.47%
                                                     ----------     -------                     ---------     -------
           Total interest bearing
             deposits ...........................       292,431       3,321       4.51%           259,050       2,617         4.01%
Long-term debt ..................................         4,500          46       4.06%             5,500          55         3.97%
                                                     ----------     -------                     ---------     -------
           Total interest bearing
             liabilities ........................       296,931       3,367       4.50%           264,550       2,672         4.01%
Noninterest bearing demand deposits .............        41,084                                    38,053
Other liabilities ...............................         3,061                                     2,398
Shareholders' equity ............................        35,373                                    30,736
                                                     ----------                                 ---------
           Total liabilities and shareholders'
           equity ...............................    $  376,449                                 $ 335,737
                                                     ==========                                 =========
Interest rate spread ............................                                 2.15%                                       2.07%
Net interest income and net yield
      on earning assets .........................                   $ 2,614       2.91%                       $ 2,270         2.79%
Interest free funds supporting earning
      assets ....................................    $   59,937                                 $  57,959
</TABLE>
-----------------------------------------
(1)  Yields and rates are annualized
(2)  Yields on tax exempt instruments have not been adjusted to a tax-equivalent
     basis.
(3)  Nonaccrual  loans are included in the average  loan  balances and income on
     such loans is recognized on a cash basis. (4) Includes  immaterial  amounts
     of loan fees.


                                       11
<PAGE>

Nine Months Ended September 30, 2007 and 2006

         For the  first  nine  months  of  2007,  net  interest  income  totaled
$7,685,000,  an increase  of  $846,000,  or 12.4%,  over the amount for the same
period of 2006.  The  Company's  interest  rate  spread  for the 2007 nine month
period was 2.13%, only slightly lower than the 2.14% spread for the 2006 period.
The yield on interest  earning  assets  increased  to 6.54% for the 2007 period,
compared  with  5.90% for the 2006  period,  due to higher  rates  earned on all
significant  categories of earning assets, but especially as related to loans. A
significant  portion of the Company's loans are variable rate  instruments  that
are  repriced in response to changes in the "prime  rate."  Also,  for all loans
with  original  anticipated  maturities  of more than five  years,  the  Company
generally  includes a provision  that allows it to adjust the  interest  rate on
each loan at least every five years.

         Rates paid for interest bearing  liabilities during the 2007 nine month
period were 65 basis points higher than for the 2006 period. Rates paid for time
deposits  during the 2007  period were 79 basis  points  higher than in the 2006
period. The average amounts of time deposits  outstanding during the 2007 period
were $17,949,000, or 9.6%, more than in the 2006 period. Rates paid for interest
bearing transaction accounts for the 2007 nine month period were 46 basis points
more than for the same period of 2006 and the average amount of such accounts in
the 2007  period  was  $13,228,000,  or 30.0%,  more  than for the 2006  period.
Increases  in rates paid for other  interest-bearing  funding  sources were less
significant.

         The Company continues to pursue a strategy to increase its market share
in its local  market areas in Anderson  and Oconee  Counties of South  Carolina.
Oconee County is served from four offices, which are located in Seneca, Walhalla
and Westminster.  The Company  currently is using its temporary  facility at the
Westminster  location  and there  presently  are no firm  plans,  timetables  or
budgets for  constructing  a permanent  facility for this  office.  The Anderson
County  market is  served  from  three  offices  in  Anderson  and  Williamston,
including an office on Highway 81 in Anderson  County opened early in the fourth
quarter of 2007.




                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                            Average Balances, Yields and Rates
                                                                             Nine Months Ended September 30,
                                                                      2007                                       2006
                                                                      ----                                       ----
                                                                    Interest                                   Interest
                                                        Average     Income/       Yields/        Average       Income/     Yields/
                                                       Balances     Expense      Rates (1)       Balances      Expense    Rates (1)
                                                       --------     -------      ---------       --------      -------    ---------
                      (Dollars in thousands)
Assets
<S>                                                  <C>            <C>            <C>         <C>                <C>        <C>
Interest-bearing balances due from banks             $      141     $     4        3.79%       $     103          $ 4        5.19%
Securities
      Taxable                                            91,100       2,907        4.27%         100,842        2,883        3.82%
      Tax exempt (2)                                     19,588         616        4.20%          15,646           456       3.90%
                                                     ----------     -------                    ---------         ----
           Total investment securities                  110,688       3,523        4.26%         116,488        3,339        3.83%
Other investments                                           904          43        6.36%             969           38        5.24%
Federal funds sold                                       25,733       1,007        5.23%          28,776        1,011        4.70%
Loans (2) (3) (4)                                       219,261      12,885        7.86%         179,560       10,000        7.45%
                                                     ----------     -------                    ---------      -------
           Total interest earning assets                356,727      17,462        6.54%         325,896       14,392        5.90%
Cash and due from banks                                   8,256                                    6,586
Allowance for loan losses                                (2,253)                                  (2,266)
Valuation allowance - Available-for-
      sale securities                                    (1,282)                                  (2,607)
Premises and equipment                                    8,048                                    7,451
Other assets                                              4,673                                    3,973
                                                     ----------                                ---------
           Total assets                              $  374,169                                $ 339,033
                                                     ==========                                =========

Liabilities and shareholders' equity
Interest bearing deposits
      Interest bearing transaction accounts          $   57,293     $ 1,373        3.20%       $  44,065        $ 903        2.74%
      Savings                                            28,282         616        2.91%          30,946          617        2.67%
      Time deposits $100M and over                       82,312       2,901        4.71%          73,978        2,273        4.11%
      Other time deposits                               123,391       4,729        5.12%         113,776        3,580        4.21%
                                                     ----------     -------                    ---------       ------
           Total interest bearing
             deposits                                   291,278       9,619        4.42%         262,765        7,373        3.75%
Short-term borrowings                                        17           3       23.59%              26            2       10.28%
Long-term debt                                            5,119         155        4.05%           6,108          178        3.90%
                                                     ----------     -------                    ---------         ----
           Total interest bearing
             liabilities                                296,414       9,777        4.41%         268,899        7,553        3.76%
Noninterest bearing demand deposits                      40,028                                   37,727
Other liabilities                                         3,139                                    2,482
Shareholders' equity                                     34,588                                   29,925
                                                     ----------                                ---------
           Total liabilities and shareholders'
           equity                                    $  374,169                                $ 339,033
                                                     ==========                                =========
Interest rate spread                                                               2.13%                                     2.14%
Net interest income and net yield
      on earning assets                                             $ 7,685        2.88%                      $ 6,839        2.81%
Interest free funds supporting earning
      assets                                         $   60,313                                $  56,997
</TABLE>
-----------------------------------------
(1)  Yields and rates are annualized
(2)  Yields on tax exempt instruments have not been adjusted to a tax-equivalent
     basis.
(3)  Nonaccrual  loans are included in the average  loan  balances and income on
     such loans is recognized on a cash basis. (4) Includes  immaterial  amounts
     of loan fees.


                                       13
<PAGE>

Provision and Allowance for Loan Losses

         The  provision  for loan losses was $150,000  for the third  quarter of
2007  compared  with $15,000 for the third  quarter of 2006.  For the first nine
months of 2007,  the  provision  for loan  losses was  $270,000,  compared  with
$65,000 for the first nine months of 2006. At September 30, 2007,  the allowance
for loan losses was 1.00% of loans,  compared  with 1.10% at December  31, 2006.
The increase in the  provision  and  allowance  was made as a result of moderate
increases  in the amounts of  nonaccrual  and  potential  problem  loans and net
charge-offs and higher volumes of loans.

         For the first nine months of 2007, net  charge-offs  totaled  $141,000,
compared  with $72,000 in net charge offs during the same period of 2006.  As of
September 30, 2007, nonaccrual loans totaled $426,000 and there were no loans 90
days or more past due and still  accruing  interest.  As of September  30, 2006,
there were  $481,000 in  nonaccrual  loans and no loans 90 days or more past due
and still  accruing  interest.  The activity in the allowance for loan losses is
summarized in the table below:

<TABLE>
<CAPTION>
                                                                         Nine Months                                 Nine Months
                                                                            Ended             Year Ended               Ended
                                                                         September 30,        December 31,           September 31,
                                                                         -------------        ------------           -------------
                                                                                         (Dollars in thousands)
<S>                                                                      <C>                   <C>                   <C>
Allowance at beginning of period .................................       $   2,242             $   2,266             $   2,266
Provision for loan losses ........................................             270                    65                    65
Net charge-offs ..................................................            (141)                  (89)                  (72)
                                                                         ---------             ---------             ---------
Allowance at end of period .......................................       $   2,371             $   2,242             $   2,259
                                                                         =========             =========             =========
Allowance as a percentage of loans outstanding
  at period end ..................................................            1.00%                 1.10%                 1.16%
Loans at end of period ...........................................       $ 236,907             $ 202,966             $ 193,935
                                                                         =========             =========             =========
</TABLE>



                                       14

<PAGE>

Non-Performing and Potential Problem Loans

<TABLE>
<CAPTION>
                                                        90 Days or
                                                       More Past Due     Total Non-        Percentage                     Percentage
                                        Nonaccruing     and Still        performing         of Total     Potential         of Total
                                          Loans          Accruing         Loans              Loans     Problem Loans         Loans
                                          -----          --------         -----              -----     -------------         -----
                                                                           (Dollars in thousands)
<S>                                      <C>             <C>             <C>                 <C>         <C>                <C>
January 1, 2006 ................         $  900          $    5          $  905              0.53%       $2,148             1.27%
Net change .....................           (321)             (5)           (326)                            615
                                         ------          ------          ------                          ------
March 31, 2006 .................            579               -             579              0.34%        2,763             1.61%
Net change .....................            (82)              -             (82)                          1,047
                                         ------          ------          ------                          ------
June 30, 2006 ..................            497               -             497              0.27%        3,810             2.05%
Net change .....................            (16)              -             (16)                          (151)
                                         ------          ------          ------                          ------
September 30, 2006 .............            481               -             481              0.25%        3,659             1.89%
Net change .....................           (431)              -            (431)                           (483)
                                         ------          ------          ------                          ------
December 31, 2006 ..............             50               -              50              0.02%        3,176             1.56%
Net change .....................            143               -             143                            (151)
                                         ------          ------          ------                          ------
March 31, 2007 .................            193               -             193              0.09%        3,025             1.43%
Net change .....................            219               -             219                              97
                                         ------          ------          ------                          ------
June 30, 2007 ..................            412               -             412              0.18%        3,122             1.38%
Net change .....................             14               -              14                             106
                                         ------          ------          ------                          ------
September 30, 2007 .............         $  426          $    -          $  426              0.18%       $3,228             1.36%
                                         ======          ======          ======                          ======
</TABLE>

         Potential problem loans include loans, other than non-performing loans,
that management has identified as having possible credit problems  sufficient to
cast  doubt upon the  abilities  of the  borrowers  to comply  with the  current
repayment  terms.  Management  believes  that  potential  problem  loans reflect
circumstances unique to each individual borrower. The Company does not currently
originate  or invest in, nor has it  historically  originated  or  invested  in,
significant amounts of subprime mortgage loans.

Noninterest Income

         Noninterest  income  totaled  $583,000  for the third  quarter of 2007,
compared with $559,000 for the 2006 quarter. Service charges on deposit accounts
in the 2007 quarter were  $394,000  representing  a decrease of $10,000 from the
prior year period.  Increases in the cash  surrender  value of  bank-owned  life
insurance  obtained in the third quarter of 2007 totaled $33,000.  There were no
sales of any securities in either the 2007 or 2006 period.

         For the nine  months  ended  September  30,  2007,  noninterest  income
totaled  $1,571,000,  compared  with  $1,637,000  for the same  period  of 2006.
Service  charges  on  deposit  accounts  in  the  2007  period  were  $1,071,000
representing  a decrease of $79,000  from the prior year  period.  There were no
sales of any  securities  in either the 2007 or 2006  period.  A gain of $31,000
from the sale of foreclosed assets was recognized in the 2006 period;  there has
been no such gain in 2007.  During the 2007 period,  $33,000 of increases in the
cash surrender value of life insurance were recognized.

Noninterest Expenses

         Noninterest  expenses totaled  $1,901,000 for the third quarter of 2007
compared with  $1,469,000 for the same period of 2006,  representing an increase
of $432,000 or 29.4%.  Salaries and employee benefits increased by $326,000,  or
40.5%, to $1,130,000.  During the 2006 period,  share-based compensation expense
of $38,000 was  recognized  due to the adoption of SFAS 123(R).  No  share-based
compensation  expense was  recognized  in the 2007 period.  During the three and
nine month  periods of 2007,  $290,000  was  accrued  for a salary  continuation
agreement with the Company's chief executive officer.  The agreement was reached
on July 31, 2007 and was effective as of January 1, 2007.

         Occupancy and furniture and equipment expenses for the third quarter of
2007  increased by $25,000  compared  with 2006  primarily  due to the Company's
occupancy of new corporate  offices and the opening of the new banking office in
Seneca, SC, as well as higher maintenance expenses associated with the Company's
equipment.  Directors'  fees for the 2006 three month period include  $17,000 of
share-based  compensation  expenses  that  resulted  from the  adoption  of SFAS
123(R). No share-based expenses were recognized in the 2007 period. In addition,
higher expenses were incurred in 2007 for  stationery,  supplies and promotional

                                       15
<PAGE>

expenses  resulting from the opening of the new corporate offices and additional
banking offices. Legal and consulting expenses were higher in the 2007 period as
a result of expenses incurred in negotiating agreements with the Company's Chief
Executive Officer.

         For the nine months ended  September  30,  2007,  salaries and employee
benefits  increased  by  $392,000,  or  16.0%,  over the  amount  for  2006.  No
share-based  compensation  expense  was  recognized  in the 2007  period,  while
$98,000 of such  expenses were  recognized  in the 2006 period.  The increase in
salaries and benefits for 2007 is  attributable  to an increase in the number of
employees  for the new Seneca and  Anderson  offices,  higher costs of providing
health insurance benefits,  the aforementioned expense for the Chief Executive's
Salary Continuation  Agreement,  and normal salary increases.  Net occupancy and
furniture and equipment expenses increased by an aggregate of $85,000, or 15.3%.
Early in the second  quarter of 2006,  the Company moved its  corporate  offices
into a newly  constructed  office building in Seneca,  SC that also houses a new
full-service  banking  office.  The new Anderson  office was opened early in the
fourth quarter of 2007 and, consequently,  had no effect on this increase. Other
expenses  increased  due to  legal  and  consulting  fees  as  discussed  in the
preceding  paragraph.  During  the  first  nine  months  of  2006,  the  Company
recognized  share-based expenses for directors fees of $80,000. No such expenses
were incurred in the 2007 period.

Liquidity

         Liquidity is the ability to meet current and future obligations through
the  liquidation or maturity of existing assets or the acquisition of additional
liabilities.  The  Company  manages  both  assets  and  liabilities  to  achieve
appropriate  levels  of  liquidity.  Cash  and  short-term  investments  are the
Company's  primary  sources of asset  liquidity.  These funds  provide a cushion
against  short-term  fluctuations  in cash flow from both  deposits  and  loans.
Securities  available-for-sale  are the Company's  principal source of secondary
asset  liquidity.  However,  the  availability  of this source is  influenced by
market conditions.  Individual and commercial deposits are the Company's primary
source of funds for credit  activities.  The Company has significant  amounts of
credit  availability  under its FHLB lines of credit and federal funds purchased
facilities.

         As of  September  30,  2007,  the ratio of loans to total  deposits was
70.3%, compared with 65.9% as of December 31, 2006. Deposits as of September 30,
2007 were $337,166,000, an increase of $29,209,000 or 9.5% over the amount as of
December 31, 2006.  Management believes that the Company's liquidity sources are
adequate to meet its operating needs.

Capital Resources

         The Company's  capital base increased by $3,119,000  since December 31,
2006 as the result of net  income of  $2,667,000  for the first  nine  months of
2007,  $83,000  from the  exercise of employee  stock  options,  plus a $369,000
change in unrealized gains and losses on available-for-sale  securities,  net of
deferred income tax effects.

         The  Company  and its banking  subsidiary  (the  "Bank") are subject to
regulatory  risk-based capital adequacy standards.  Under these standards,  bank
holding  companies and banks are required to maintain  certain minimum ratios of
capital to risk-weighted  assets and average total assets.  Under the provisions
of the Federal Deposit Insurance  Corporation  Improvement Act of 1991 (FDICIA),
federal bank regulatory authorities are required to implement prescribed "prompt
corrective actions" upon the deterioration of the capital position of a bank. If
the  capital  position  of an affected  institution  were to fall below  certain
levels, increasingly stringent regulatory corrective actions are mandated.

         The September  30, 2007 risk based  capital  ratios for the Company and
the  Bank  are  presented  in the  following  table,  compared  with  the  "well
capitalized" and minimum ratios under the regulatory definitions and guidelines:

                                                               Total
                                                   Tier 1     Capital   Leverage
                                                   ------     -------   --------
Community First Bancorporation .................    14.6%      15.6%      9.7%
Community First Bank ...........................    14.1%      15.1%      9.4%
Minimum "well-capitalized" requirement .........     6.0%      10.0%      6.0%
Minimum requirement ............................     4.0%       8.0%      5.0%


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<PAGE>


Off-Balance-Sheet Arrangements

         In the  normal  course  of  business,  the Bank is  party to  financial
instruments with  off-balance-sheet  risk including commitments to extend credit
and standby letters of credit.  Such instruments have elements of credit risk in
excess of the amount  recognized  in the balance  sheet.  The exposure to credit
loss in the  event of  nonperformance  by the  other  parties  to the  financial
instruments  for  commitments to extend credit and standby  letters of credit is
represented by the contractual notional amount of those instruments.  Generally,
the same credit policies used for on-balance-sheet  instruments,  such as loans,
are used in extending loan commitments and standby letters of credit.

         Following  are  the   off-balance-sheet   financial  instruments  whose
contract amounts represent credit risk:

                                                            September 30, 2007
                                                            ------------------
                                                          (Dollars in thousands)
Loan commitments ..........................................       $54,529
Standby letters of credit .................................           774

         Loan  commitments  involve  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 some
involve payment of a fee. Many of the commitments are expected to expire without
being fully  drawn;  therefore,  the total amount of loan  commitments  does not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if any,
upon  extension  of credit is based on  management's  credit  evaluation  of the
borrower. Collateral held varies but may include commercial and residential real
properties, accounts receivable, inventory and equipment.

         Standby letters of credit are conditional  commitments to guarantee the
performance of a customer to a third party.  The credit risk involved in issuing
standby  letters  of  credit  is the  same  as  that  involved  in  making  loan
commitments to customers. Many letters of credit will expire without being drawn
upon  and do not  necessarily  represent  future  cash  requirements.  The  Bank
receives fees for loan commitments and standby letters of credit.  The amount of
such fees was not  material  for either the nine  months or three  months  ended
September 30, 2007.

         As described under  "Liquidity,"  management  believes that its various
sources of liquidity  provide the  resources  necessary for the Bank to fund the
loan  commitments  and to perform under standby  letters of credit,  if the need
arises. Neither the Company nor the Bank are involved in other off-balance sheet
contractual  relationships or transactions  that could result in liquidity needs
or other commitments or significantly impact earnings.

Item 3.  - Quantitative and Qualitative Disclosures About Market Risk

         The Company's  exposure to market risk is primarily related to the risk
of loss from  adverse  changes  in market  prices and  rates.  This risk  arises
principally from interest rate risk inherent in the Company's  lending,  deposit
gathering and borrowing activities. Management actively monitors and manages its
interest rate risk exposure.  Although the Company manages other risks,  such as
credit quality and liquidity  risk in the normal course of business,  management
considers  interest  rate risk to be its most  significant  market risk and this
risk  could  potentially  have the  largest  material  effect  on the  Company's
financial condition and results of operations.  Other types of market risk, such
as commodity price risk and foreign currency  exchange risk, do not arise in the
normal course of the Company's community banking operations.

         The Company uses a simulation  model to assist in achieving  consistent
growth in net interest income while managing interest rate risk. As of September
30 2007, the model indicates that net interest income would increase $14,000 and
net income would  increase  $9,000 in the next twelve  months if interest  rates
rose by 100 basis points. Conversely, net interest income would decrease $35,000
and net income  would  decrease  $22,000 in the next  twelve  months if interest
rates declined by 100 basis points. In the current interest rate environment, it
appears  unlikely that there will be any large changes in interest  rates in the
immediate future. The prospective effects of hypothetical  interest rate changes
are based on a number of  assumptions,  including the relative  levels of market
interest rates and prepayment  assumptions  affecting  loans,  and should not be
relied on as indicative of actual future results.  The prospective  effects also
do not  contemplate  potential  actions that the Company,  its customers and the
issuers of its investment  securities  could undertake in response to changes in
interest rates.

         As of September  30,  2007,  there was no  significant  change from the
interest rate  sensitivity  analysis for the various  changes in interest  rates


                                       17
<PAGE>

calculated  as of December 31, 2006.  The foregoing  disclosures  related to the
Company's market risk should be read in conjunction with Management's Discussion
and Analysis of Financial  Condition and Results of  Operations  included in the
2006  Annual  Report  on Form  10-K  filed  with  the  Securities  and  Exchange
Commission.


Item 4T. - Controls and Procedures

Based  on  the  evaluation  required  by  17  C.F.R.  Section  240.13a-15(b)  or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),  the  Company's  chief
executive  officer and chief  financial  officer  concluded  such  controls  and
procedures, as of the end of the period covered by this report, were effective.

There  has been no change  in the  Company's  internal  control  over  financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially  affect,  the Company's internal control over
financial reporting.


                           PART II - OTHER INFORMATION

Item 6. - Exhibits

10.1      Employment   Agreement  among  Community  First   Bancorporation,
          Community First Bank and Frederick D. Shepherd, Jr. (incorporated
          by reference to Form 8-K filed August 6, 2007).

10.2      Salary  Continuation  Agreement  between Community First Bank and
          Frederick D. Shepherd, Jr. (incorporated by reference to Form 8-K
          filed on August 6, 2007).

31.       Rule 13a-14(a)/15d-14(a) Certifications

32.       Certifications Pursuant to 18 U.S.C. Section 1350





                                       18
<PAGE>


SIGNATURE

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


                              COMMUNITY FIRST BANCORPORATION

November 14, 2007             /s/ Frederick D. Shepherd, Jr.
-----------------             -------------------------------------------------
         Date                     Frederick D. Shepherd, Jr., Chief
                                  Executive Officer and Chief Financial Officer



                                       19
<PAGE>


                                  EXHIBIT INDEX


10.1      Employment   Agreement  among  Community  First   Bancorporation,
          Community First Bank and Frederick D. Shepherd, Jr. (incorporated
          by reference to Form 8-K filed August 6, 2007).

10.2      Salary  Continuation  Agreement  between Community First Bank and
          Frederick D. Shepherd, Jr. (incorporated by reference to Form 8-K
          filed on August 6, 2007).

31.       Rule 13a-14(a)/15d-14(a) Certifications

32.       Certifications Pursuant to 18 U.S.C. Section 1350








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