SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

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


For the Quarterly Period Ended                     Commission File No. 000-29640
September 30, 1998


                         COMMUNITY FIRST BANCORPORATION

--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


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



                            3685 BLUE RIDGE BOULEVARD
                         WALHALLA, SOUTH CAROLINA 29691

--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (864) 638-2105

--------------------------------------------------------------------------------
                           (Issuer's telephone number)




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

          YES  [X]   NO  [ ]


          State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

Common Stock, no par value, 1,778,396 Shares Outstanding on September 30, 1998.


          Transitional Small Business Disclosure Format (Check one):

          YES  [ ]   NO  [X]






<PAGE>


                         COMMUNITY FIRST BANCORPORATION

                                   FORM 10-QSB


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

Item 1.   Financial Statements

<S>                                                                                                                       <C>
          Consolidated Balance Sheet.....................................................................................    3
          Consolidated Statement of Income...............................................................................    4
          Consolidated Statement of Comprehensive Income.................................................................    5
          Consolidated Statement of Changes in Shareholders' Equity......................................................    6
          Consolidated Statement of Cash Flows...........................................................................    7
          Notes to Unaudited Consolidated Financial Statements...........................................................    8

Item 2.   Management's Discussion and Analysis........................................................................... 9-11

PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K...............................................................................   12

SIGNATURE................................................................................................................   13
</TABLE>




                                       2
<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY FIRST BANCORPORATION

Consolidated Balance Sheet

<TABLE>
<CAPTION>

                                                                                                (Unaudited)
                                                                                               September 30,            December 31,
                                                                                                    1998                    1997
                                                                                               -------------           -------------
                                                                                                    (Dollars in thousands)
Assets                                                                   
<S>                                                                                               <C>                     <C>      
Cash and due from banks ............................................................              $   2,387               $   4,834
Federal funds sold .................................................................                 13,870                   6,510
Available-for-sale securities ......................................................                 30,011                  25,510
Other investments ..................................................................                    345                     335
Loans ..............................................................................                 69,897                  65,838
Less allowance for loan losses .....................................................                 (1,045)                   (890)
                                                                                                  ---------               ---------
Loans - net ........................................................................                 68,852                  64,948
Premises and equipment - net .......................................................                  2,782                   1,675
Accrued interest receivable ........................................................                    909                     793
Other assets .......................................................................                    356                     363
                                                                                                  ---------               ---------

Total assets .......................................................................              $ 119,512               $ 104,968
                                                                                                  =========               =========

Liabilities
Deposits
Noninterest bearing demand .........................................................              $  13,404               $  16,501
Interest bearing transaction accounts ..............................................                 17,027                  10,106
Savings ............................................................................                 15,232                  16,191
Certificates of deposit $100M and over .............................................                 27,071                  23,046
Other time deposits ................................................................                 32,511                  26,446
                                                                                                  ---------               ---------
Total deposits .....................................................................                105,245                  92,290
Accrued interest payable ...........................................................                    841                     772
Other liabilities ..................................................................                    136                      56
                                                                                                  ---------               ---------
Total liabilities ..................................................................                106,222                  93,118
                                                                                                  ---------               ---------

Shareholders' equity
Common stock - No par value; 10,000,000 shares authorized;
shares issued and outstanding: 1,778,396 for 1998
and 1,772,280 for 1997 .............................................................                 10,509                  10,479
Retained earnings ..................................................................                  2,678                   1,387
Accumulated other comprehensive income .............................................                    103                     (16)
                                                                                                  ---------               ---------
Total shareholders' equity .........................................................                 13,290                  11,850
                                                                                                  ---------               ---------

Total liabilities and shareholders' equity .........................................              $ 119,512               $ 104,968
                                                                                                  =========               =========
</TABLE>






See notes to unaudited consolidated financial statements.




                                       3
<PAGE>



COMMUNITY FIRST BANCORPORATION

 Consolidated Statement of Income
<TABLE>
<CAPTION>

                                                                                                 (Unaudited)
                                                                                          Period Ended September 30,
                                                                                Three Months                       Nine Months
                                                                                ------------                       -----------
                                                                           1998              1997             1998             1997
                                                                           ----              ----             ----             ----
                                                                                     (Dollars in thousands, except per share)
Interest income               
<S>                                                                     <C>               <C>               <C>               <C>   
Loans, including fees ......................................            $1,567            $1,399            $4,587            $3,941
Securities - taxable
U. S. Treasury .............................................                                  70                29               213
U. S. Government agencies ..................................               501               363             1,302             1,085
Federal funds sold .........................................               194                64               734               458
Other investments ..........................................                 6                                  14
                                                                        ------            ------            ------            ------
Total interest income ......................................             2,268             1,896             6,666             5,697
                                                                        ------            ------            ------            ------

Interest expense
Time deposits $100M and over ...............................               361               314             1,013               878
Other deposits .............................................               801               572             2,356             1,898
                                                                        ------            ------            ------            ------
Total interest expense .....................................             1,162               886             3,369             2,776
                                                                        ------            ------            ------            ------

Net interest income ........................................             1,106             1,010             3,297             2,921
Provision for loan losses ..................................                65                75               190               221
                                                                        ------            ------            ------            ------
Net interest income after provision ........................             1,041               935             3,107             2,700
                                                                        ------            ------            ------            ------

Other income
Service charges on deposit accounts ........................                98                74               271               217
Credit life insurance commissions ..........................                10                10                31                28
Other income ...............................................                44                35               121               142
                                                                        ------            ------            ------            ------
Total other income .........................................               152               119               423               387
                                                                        ------            ------            ------            ------

Other expenses
Salaries and employee benefits .............................               265               254               798               728
Net occupancy expense ......................................                33                26                79                78
Furniture and equipment expense ............................                43                42               142               118
Other expense ..............................................               178               141               503               464
                                                                        ------            ------            ------            ------
Total other expenses .......................................               519               463             1,522             1,388
                                                                        ------            ------            ------            ------

Income before income taxes .................................               674               591             2,008             1,699
Income tax expense .........................................               242               210               717               602
                                                                        ------            ------            ------            ------

Net income .................................................            $  432            $  381            $1,291            $1,097
                                                                        ======            ======            ======            ======

Per share*
Net income .................................................            $  .24            $  .22            $  .73            $  .62
Net income, assuming dilution ..............................               .23               .21               .70               .60
</TABLE>


----------------
*Per share  information  has been  retroactively  adjusted  to reflect a 2-for-1
stock split effective July 31, 1998, and a 15% stock dividend effective December
30, 1997.

See notes to unaudited consolidated financial statements.





                                       4
<PAGE>



COMMUNITY FIRST BANCORPORATION

Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>

                                                                                                 (Unaudited)
                                                                                          Period Ended September 30,
                                                                                Three Months                       Nine Months
                                                                                ------------                       -----------
                                                                            1998            1997             1998               1997
                                                                            ----            ----             ----               ----
                                                                                            (Dollars in thousands)
                   
<S>                                                                         <C>             <C>             <C>               <C>   
Net income .....................................................            $432            $381            $1,291            $1,097
                                                                            ----            ----            ------            ------
Other comprehensive income (loss):
Change in unrealized holding gains and
losses  on available-for-sale securities .......................             207             106               186                93
Income tax expense (benefit) on
other  comprehensive income ....................................              74              38                67                33
                                                                            ----            ----            ------            ------
Total other comprehensive income ...............................             133              68               119                60
                                                                            ----            ----            ------            ------

Comprehensive income ...........................................            $565            $449            $1,410            $1,157
                                                                            ====            ====            ======            ======
</TABLE>





See notes to unaudited consolidated financial statements.




                                       5
<PAGE>


COMMUNITY FIRST BANCORPORATION

Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>

                                                               Common Stock               (Unaudited)
                                                               ------------                                    Accumulated
                                                           Number                                              Other Com-
                                                             of                       Capital      Retained    prehensive
                                                         Shares *        Amount       Surplus      Earnings      Income        Total
                                                         --------        ------       -------      --------      ------        -----
                                                                                     (Dollars in thousands)
                                       
<S>                                                      <C>            <C>          <C>           <C>         <C>           <C>    
Balance, January 1, 1997 ..........................      1,529,108      $ 3,823      $  4,659      $1,932      $   (79)      $10,335
Net income for period .............................                                                 1,097                      1,097
Exercise of stock options .........................            296            1             1                                      2
Unrealized net holding gains on available-
for-sale securities, net of  taxes ................                                                                 60            60
                                                         ---------      -------      --------      ------      -------       -------

Balance, September 30, 1997 .......................      1,529,404      $ 3,824      $  4,660      $3,029      $   (19)      $11,494
                                                         =========      =======      ========      ======      =======       =======


Balance, January 1, 1998 ..........................      1,772,280      $10,479                    $1,387      $   (16)      $11,850
Net income for period .............................                                                 1,291                      1,291
Exercise of stock options .........................          6,116           30                                                   30
Unrealized net holding gains on available-
for-sale securities, net of taxes .................                                                                119           119
                                                         ---------      -------      --------      ------      -------       -------

Balance, September 30, 1998 .......................      1,778,396      $10,509      $      -      $2,678      $   103       $13,290
                                                         =========      =======      ========      ======      =======       =======
</TABLE>


---------------
*Number of shares has been  retroactively  adjusted  to reflect a 2-for-1  stock
split effected on July 31, 1998.


























See notes to unaudited consolidated financial statements.

                                       6
<PAGE>

COMMUNITY FIRST BANCORPORATION

Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>

                                                                                                             (Unaudited)
                                                                                                          Nine Months Ended
                                                                                                             September 30,
                                                                                                      1998                    1997
                                                                                                      ----                    ----
                                                                                                           (Dollars in thousands)
Operating activities
<S>                                                                                                 <C>                    <C>     
Net income ...........................................................................              $  1,291               $  1,097
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses ............................................................                   190                    221
Depreciation .........................................................................                   111                     93
Amortization of net loan fees and costs ..............................................                    37                     (7)
Securities accretion and premium amortization ........................................                   (87)                   (11)
Gain on sale of other real estate ....................................................                                          (45)
Writedowns of other real estate ......................................................                                           25
Increase in interest receivable ......................................................                  (116)
Increase (decrease) in interest payable ..............................................                    69                   (164)
Increase in prepaid expenses and other receivables ...................................                   (60)                  (177)
Increase in other accrued expenses ...................................................                    80                     38
                                                                                                    --------               --------
Net cash provided by operating activities ............................................                 1,515                  1,070
                                                                                                    --------               --------

Investing activities
Purchases of available-for-sale securities ...........................................               (42,913)                (4,500)
Maturities of available-for-sale securities ..........................................                38,685                  5,533
Purchases of other investments .......................................................                   (10)
Net increase in loans made to customers ..............................................                (4,131)                (8,251)
Proceeds from sales of other real estate .............................................                                           45
Purchases of premises and equipment ..................................................                (1,218)                   (40)
                                                                                                    --------               --------
Net cash used by investing activities ................................................                (9,587)                (7,213)
                                                                                                    --------               --------

Financing activities
Net increase (decrease) in demand deposits, interest bearing
transaction accounts and savings accounts ............................................                 2,865                 (3,997)
Net increase in certificates of deposit and
other time deposits ..................................................................                10,090                  1,287
Exercise of stock options ............................................................                    30                      2
                                                                                                    --------               --------
Net cash provided (used) by financing activities .....................................                12,985                 (2,708)
                                                                                                    --------               --------

Increase (decrease) in cash and cash equivalents .....................................                 4,913                 (8,851)

Cash and cash equivalents, beginning .................................................                11,344                 15,417
                                                                                                    --------               --------

Cash and cash equivalents, ending ....................................................              $ 16,257               $  6,566
                                                                                                    ========               ========
</TABLE>



See notes to unaudited consolidated financial statements.



                                       7
<PAGE>


COMMUNITY FIRST BANCORPORATION

Notes to Unaudited Consolidated Financial Statements


Accounting  Policies - A summary of significant  accounting policies is included
in the  Company's  Annual  Report for the year ended  December  31, 1997 on Form
10-KSB filed with the Securities and Exchange Commission.

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

Statement  of Cash  Flows -  Interest  paid on  deposits  and  other  borrowings
amounted to $3,300,000  for the nine months ended  September  30, 1998,  and was
$2,940,000 for the nine months ended September 30, 1997.  Income tax payments of
$767,000 were made during the first nine months of 1998, and income tax payments
of $662,000 were made in the 1997 period. Non-cash investment security valuation
adjustments   totaling   $186,000  were  made  in  the  1998  period  increasing
available-for-sale  securities,  and  a  related  shareholders'  equity  account
increased by $119,000 and the associated  deferred income taxes changed $67,000.
During the 1997 period,  non-cash valuation  adjustments increased securities by
$93,000,  increased  shareholders'  equity $60,000 and changed  deferred  income
taxes by $33,000.

Nonperforming  Loans  - As  of  September  30,  1998,  there  were  $129,000  in
nonaccrual  loans  and no loans  90 days or more  past  due as to  principal  or
interest payments still accruing.

Earnings  Per  Share - The  Company  adopted  the  provisions  of  Statement  of
Accounting Standards No. 128, "Earnings per Share" during 1997, as required. All
prior years' figures are restated on a comparable  basis.  On June 18, 1998, the
Company's  Board  of  Directors  declared  a  two-for-one  stock  split  for all
shareholders of record on July 1, 1998. The stock split was effected on July 31,
1998.  Also,  on December  30,  1997, a 15% stock  dividend  was  effected.  The
presentation  of  numbers  of  shares  and  all  per  share  amounts  have  been
retroactively adjusted to reflect the stock split and stock dividend.

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 based on 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. 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
                                                                           ------------                        -----------
                                                                     1998              1997               1998                1997
                                                                     ----              ----               ----                ----
                                                                             (Dollars in thousands, except per share)
Net income per share (basic)
<S>                                                              <C>                <C>                <C>                <C>       
Numerator - net income .................................         $      432         $      381         $    1,291         $    1,097
                                                                 ==========         ==========         ==========         ==========
Denominator
Weighted average common shares
issued and outstanding .................................          1,778,396          1,758,474          1,776,914          1,758,474
                                                                 ==========         ==========         ==========         ==========
Net income per share (basic) ...........................         $      .24         $      .22         $      .73         $      .62
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
Numerator - net income .................................         $      432         $      381         $    1,291         $    1,097
                                                                 ==========         ==========         ==========         ==========
Denominator
Weighted average common shares
issued and outstanding .................................          1,778,396          1,758,474          1,776,914          1,758,474
Effect of dilutive stock options .......................             87,874             70,569             79,516             66,091
                                                                 ----------         ----------         ----------         ----------
Total ..................................................          1,866,270          1,829,043          1,856,430          1,824,565
                                                                 ==========         ==========         ==========         ==========
Net income per share, assuming dilution ................         $      .23         $      .21         $      .70         $      .60
                                                                 ==========         ==========         ==========         ==========
</TABLE>


                                       8
<PAGE>


Item 2. - Management's Discussion and Analysis

Forward Looking Statements

          Statements included in Management's  Discussion and Analysis 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.  The Company  cautions
readers that forward looking  statements,  including without  limitation,  those
relating to the  Company's  planned new  office,  its  response to the Year 2000
problem,  future  business  prospects,  revenues,  working  capital,  liquidity,
capital  needs,  interest  costs,  and income,  are subject to certain 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.


Results of Operations

          Community First  Bancorporation (the "Company") recorded net income of
$432,000 or $.24 per share for the third quarter of 1998, bringing net income to
$1,291,000 or $.73 per share for the nine months ended September 30, 1998. These
results compare  favorably with net income of $381,000 or $.22 per share for the
third quarter of 1997 and $1,097,000 or $.62 per share for the nine months ended
September 30, 1997. Net income per share, assuming dilution,  for the 1998 three
and  nine  months   periods  ended   September  30,  1998  was  $.23  and  $.70,
respectively.  For the comparable 1997 periods,  net income per share,  assuming
dilution, was $.21 and $.60, respectively.  The net income per share figures for
1998 and 1997 have been  retroactively  adjusted to reflect a two-for-one  stock
split effective July 31, 1998, and a 15% stock dividend  effective  December 30,
1997.


Net Interest Income

          Net interest income is the principal source of the Company's earnings.
For the third quarter of 1998, net interest  income was  $1,106,000.  This is an
increase  of $96,000 or 9.5% over the  comparable  1997  quarter.  Net  interest
income  for the  first  nine  months  of 1998 was  $3,297,000,  representing  an
increase of $376,000 or 12.9% over the first nine months of 1997.  Both interest
income  and  interest  expense  increased  for the  first  nine  months of 1998,
compared  with the same period one year ago,  primarily as a result of increased
volumes of interest  earning assets and interest  bearing  liabilities.  Average
interest earning assets for the first nine months of 1998 were $115,286,000,  an
increase of  $16,591,000  or 16.8% over the prior year level.  Average  interest
bearing liabilities  increased to $88,073,000 for the first nine months of 1998,
representing  an increase of $12,001,000 or 15.8% over the comparable  period of
the previous year. The average  interest rate spread  (average yield on interest
earning assets less the average rate paid on interest  bearing  liabilities) for
the first nine months of 1998 was 2.62%,  a decrease of 21 basis points from the
prior year's 2.83%.  Furthermore,  the net yield on earning assets (net interest
income divided by average interest earning assets) for the 1998 period decreased
by 13 basis points compared with the prior year to 3.82%.

          The increases in both  interest  earning  assets and interest  bearing
liabilities  resulted  from the  Company's  continuing  marketing  strategies to
increase  its market  share in its current  local  service  area  within  Oconee
County,  South  Carolina.   Management  expects  to  continue  to  utilize  such
strategies  during the remainder of 1998. In addition,  see the discussion under
"Noninterest  Expenses"  below  regarding  the  Company's  plans to expand  into
Anderson County, South Carolina.


Provision and Allowance for Loan Losses

          The provision  for loan losses  charged to expense was $65,000 for the
third quarter of 1998  compared with $75,000 for the third quarter of 1997,  and
was $190,000 for the first nine months of 1998  compared  with  $221,000 for the
first nine months of 1997.  At September  30, 1998 the allowance for loan losses
stood at 1.50% of loans  compared  with 1.35% at the end of 1997.  At the end of
the first nine months of 1998, nonaccrual loans totaled $129,000, and there were
no loans that were 90 days or more past due and still accruing  interest income.
The majority of the nonaccrual loans were secured by real estate.

          Management  believes that the allowance for loan losses is adequate to
absorb all estimated  future risk of loss  inherent in the loan  portfolio as of
September 30, 1998. However,  changes in national or local economic  conditions,
as well as changes in the economic  circumstances of specific  borrowers,  could
cause actual losses to differ markedly from the current estimate.


                                       9
<PAGE>


Noninterest Income

          Noninterest  income  totaled  $152,000  for the third  quarter of 1998
compared with $119,000 for the comparable 1997 quarter.  Noninterest  income was
$423,000 for the first nine months of 1998  compared  with $387,000 for the 1997
period.  Increases  in other  income for the three and nine months ended in 1998
resulted  primarily  from higher  service  charges on deposit  accounts.  Higher
levels of chargeable  account activity caused the increase because there were no
significant changes in 1998 in the rate schedule for such service charges.


Noninterest Expenses

          Noninterest  expenses  totaled $519,000 for the third quarter of 1998,
compared with $463,000 for 1997.  Noninterest  expenses were  $1,522,000 for the
first nine months of 1998 compared with  $1,388,000 for the first nine months of
1997. Salaries and employee benefits were $265,000 for the third quarter of 1998
and $254,000 for the third quarter of 1997.  Part of the increase in salaries is
due to  the  hiring  of  additional  operational  and  administrative  personnel
necessary to meet the demands of the Company's currently expanding customer base
and to accommodate the planned future expansion into Anderson County. During the
third quarter of 1998,  the Company hired a new Vice President for Marketing and
Training.  Net occupancy expense and furniture and equipment  expenses increased
$25,000  during the first nine  months of 1998 as a result of the  depreciation,
maintenance  and training  expenses  associated  with the  installation of a new
computer  system  and  software  completed  late in the third  quarter  of 1997.
Furniture and equipment expenses are expected to continue to increase throughout
1998 as compared with 1997.

          In the third quarter of 1998, the Company's  banking  subsidiary filed
applications with regulatory authorities to place a branch office in the city of
Anderson,  South Carolina, which is located in an adjacent county. The Company's
entry into this new  market  area on a de novo  basis  will  increase  operating
expenses in most categories, and is expected to initially have a negative effect
on net income.  This trend is expected to continue until the new office acquires
a  sufficiently  large  customer  base and attains  the volumes of deposits  and
interest  earning  assets that would enable it to  contribute  to the  Company's
profitability.  Management  currently estimates that capital expenditures needed
to open the new office will total approximately $1,330,000,  which is net of the
anticipated  sale of  approximately  $600,000 in surplus land  acquired with the
initial  purchase of the branch office site.  Subject to regulatory  approval of
all the applications, management expects to open for business a temporary office
late in the fourth quarter of 1998.  Construction of the permanent new office is
expected to be completed  late in the third quarter of 1999. As of September 30,
1998,  $1,137,000  had been expended  toward the project and no sales of surplus
land had yet occurred.  The success of the project may be affected  adversely if
the Company is unable to attract a substantial  number of new  customers,  or if
facilities or personnel costs are higher than projected.


 Liquidity

          Liquidity  is the  ability  to meet  current  and  future  obligations
through  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.

          As of  September  30, 1998,  the ratio of loans to total  deposits was
66.4%.  Management believes that the Company's liquidity sources are adequate to
meet its operating needs.


Capital Resources

          The  capital  base  for the  Company  increased  by  $1,440,000  since
December  31, 1997 as the result of the  $1,291,000  of net income for the first
nine months of 1998,  plus $119,000 for the change in  unrealized  holding gains
and losses on available-for-sale  securities,  plus the addition of $30,000 from
the exercise of employees' stock options.

                                       10
<PAGE>



          The Company and its banking  subsidiary  (the "Bank") are each 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, 1998  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:


<TABLE>
<CAPTION>

                                                                                                                         Minimum
                                                                            The Company              The Bank          Requirements
                                                                            -----------              --------          ------------

<S>                                                                             <C>                   <C>                   <C> 
Tier 1 (core capital) .............................................             18.8%                 18.4%                 4.0%
Total capital (tier 1 plus tier 2
or supplementary capital) .........................................             20.0%                 19.7%                 8.0%
Leverage ..........................................................             10.9%                 10.7%                 3.0%
</TABLE>



Year 2000 Readiness

          The  Company  is  presently  on  schedule  in  implementing   its  Y2K
Preparedness Plan. The plan has five phases: (1) Awareness, (2) Assessment,  (3)
Renovation, (4) Validation, and (5) Implementation. The awareness and assessment
phases  have been  substantially  completed  as of  September  30,  1998,  which
included  the  identification  of  critical  systems and  equipment  potentially
vulnerable  to the year 2000  problem.  This  also  included  identification  of
significant loan customers whose businesses could possibly be adversely affected
by the problem and  communicating  with them about their  progress in addressing
the Year 2000  changeover.  The  renovation  phase,  consisting  of upgrading or
replacing  systems and equipment,  had also been largely completed by the end of
the  third  quarter  except  for  necessary  upgrades  to an  outdoor  time  and
temperature  sign and one vault door timer which are  expected to be upgraded by
the end of 1998. The validation portion of the plan calls for the actual testing
of  systems  and  equipment  as of 13  critical  dates  with such  testing to be
completed by June 30, 1999.  This testing is presently on schedule with no major
problems   encountered.   Finally,  the  implementation  phase,  which  requires
addressing  any  problems  encountered  in  the  validation  phase,  along  with
continued  review and  assessment of the  Company's  systems and  equipment,  is
presently underway and will continue until the year 2000 has arrived.

          Management is of the opinion that the Company's  systems and equipment
will be ready for the Year 2000 in a timely manner without any material  adverse
effect  on the  Company's  business.  Management  is not  aware of any  material
expenditures to be required to complete its preparedness plan.






                                       11
<PAGE>



                           PART II - OTHER INFORMATION

Item 6. - Exhibits and Reports on Form 8-K

(a)  Exhibits

     Exhibit No.
     from Item 601 of
     Regulation S-B                           Description
-------------------------                    -----------------------
           27                                Financial Data Schedule

(b)  Reports on Form 8-K

     None.



                                       12
<PAGE>



SIGNATURE

      In accordance  with the  requirements  of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

COMMUNITY FIRST BANCORPORATION


By:   /s/Frederick D. Shepherd, Jr                   Date:  November 10, 1998
      ----------------------------------------              -----------------
      Frederick D. Shepherd, Jr., President
      and Chief Executive Officer (also
      principal accounting officer)




                                       13
<PAGE>



                                  EXHIBIT INDEX

Exhibit No.
from Item 601 of
Regulation S-B                        Description
------------------                    ------------------------
    27                                Financial Data Schedule