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 June 30, 2008           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, a  non-accelerated  filer, or a smaller  reporting
company.  See the definitions of "large accelerated filer,"  "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

         Large accelerated filer [ ]     Accelerated filer         [ ]

         Non-accelerated filer   [ ]     Smaller reporting company [X]
         (Do not check if a smaller reporting company)

         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, 3,394,873 Shares Outstanding on August 1, 2008



<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                10
Item 3.           Quantitative and Qualitative Disclosures About Market Risk                                           19
Item 4T.          Controls and Procedures                                                                              19

PART II -         OTHER INFORMATION

Item 4.           Submission of Matters to a Vote of Security Holders                                                  20
Item 6.           Exhibits                                                                                             20

SIGNATURE                                                                                                              21
</TABLE>

                                       2

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                                       June 30,         December 31,
                                                                                                         2008              2007
                                                                                                         ----              ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                     <C>               <C>
     Cash and due from banks ...................................................................        $   9,054         $  10,272
     Interest bearing balances due from banks ..................................................            9,451               165
     Federal funds sold ........................................................................            5,874            24,236
                                                                                                        ---------         ---------
         Cash and cash equivalents .............................................................           24,379            34,673
     Securities available-for-sale .............................................................          110,729            99,026
     Securities held-to-maturity (fair value $12,587 for 2008 and $5,625 for 2007) .............           12,690             5,663
     Other investments .........................................................................              927               840
     Loans .....................................................................................          256,818           244,131
         Allowance for loan losses .............................................................           (2,748)           (2,574)
                                                                                                        ---------         ---------
            Loans - net ........................................................................          254,070           241,557
     Premises and equipment - net ..............................................................            8,784             8,621
     Accrued interest receivable ...............................................................            2,595             2,529
     Bank-owned life insurance .................................................................            8,294             7,108
     Other assets ..............................................................................            2,387             2,131
                                                                                                        ---------         ---------

            Total assets .......................................................................        $ 424,855         $ 402,148
                                                                                                        =========         =========

Liabilities
     Deposits
         Noninterest bearing ...................................................................        $  43,106         $  42,289
         Interest bearing ......................................................................          327,751           313,578
                                                                                                        ---------         ---------
            Total deposits .....................................................................          370,857           355,867
     Accrued interest payable ..................................................................            2,937             3,480
     Short-term borrowings .....................................................................            1,500                 -
     Long-term debt ............................................................................            9,500             4,500
     Other liabilities .........................................................................              765               391
                                                                                                        ---------         ---------
            Total liabilities ..................................................................          385,559           364,238
                                                                                                        ---------         ---------

Shareholders' equity
     Common stock - no par value; 10,000,000 shares authorized; issued and
         outstanding - 3,394,873 for 2008 and  3,324,105 for 2007 ..............................           35,374            35,009
     Additional paid-in capital ................................................................              681               681
     Retained earnings .........................................................................            3,945             2,140
     Accumulated other comprehensive income (loss) .............................................             (704)               80
                                                                                                        ---------         ---------
            Total shareholders' equity .........................................................           39,296            37,910
                                                                                                        ---------         ---------

            Total liabilities and shareholders' equity .........................................        $ 424,855         $ 402,148
                                                                                                        =========         =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                       3
<PAGE>

COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                                                  (Unaudited)
                                                                                             Period Ended June 30,
                                                                                             ---------------------
                                                                                Three Months                       Six Months
                                                                                ------------                       ----------
                                                                            2008             2007             2008           2007
                                                                            ----             ----             ----           ----
                                                                                  (Dollars in thousands, except per share)
Interest income
<S>                                                                       <C>              <C>              <C>              <C>
     Loans, including fees .....................................          $ 4,523          $ 4,275          $ 9,255          $ 8,253
     Interest bearing balances due from banks ..................                5                -                7                1
     Securities
       Taxable .................................................            1,172              994            2,189            1,932
       Tax-exempt ..............................................              208              217              414              404
     Other investments .........................................               12               14               25               29
     Federal funds sold ........................................              117              320              503              862
                                                                          -------          -------          -------          -------
         Total interest income .................................            6,037            5,820           12,393           11,481
                                                                          -------          -------          -------          -------

Interest expense
     Time deposits $100M and over ..............................            1,057              945            2,210            1,863
     Other deposits ............................................            2,042            2,211            4,438            4,435
     Short-term borrowings .....................................                -                -                -                3
     Long-term debt ............................................               48               55               87              109
                                                                          -------          -------          -------          -------
         Total interest expense ................................            3,147            3,211            6,735            6,410
                                                                          -------          -------          -------          -------

Net interest income ............................................            2,890            2,609            5,658            5,071
Provision for loan losses ......................................              280              120              410              120
                                                                          -------          -------          -------          -------
Net interest income after provision ............................            2,610            2,489            5,248            4,951
                                                                          -------          -------          -------          -------

Other income
     Service charges on deposit accounts .......................              375              343              735              677
     ATM interchange and other fees ............................              141              116              270              221
     Credit life insurance commissions .........................                3                9                7               16
     Increase in value of bank-owned life insurance ............               93                -              186                -
     Other income ..............................................               13               34               36               74
                                                                          -------          -------          -------          -------
         Total other income ....................................              625              502            1,234              988
                                                                          -------          -------          -------          -------

Other expenses
     Salaries and employee benefits ............................            1,108              903            2,145            1,714
     Net occupancy expense .....................................              130              114              249              202
     Furniture and equipment expense ...........................              106              108              216              210
     Amortization of computer software .........................               81               58              156              117
     ATM interchange and related expenses ......................               95               79              205              149
     Directors' fees ...........................................               34               20               61               47
     Other expense .............................................              451              360              860              737
                                                                          -------          -------          -------          -------
         Total other expenses ..................................            2,005            1,642            3,892            3,176
                                                                          -------          -------          -------          -------

Income before income taxes .....................................            1,230            1,349            2,590            2,763
Income tax expense .............................................              385              410              785              867
                                                                          -------          -------          -------          -------
Net income .....................................................          $   845          $   939          $ 1,805          $ 1,896
                                                                          =======          =======          =======          =======

Per share*
     Net income ................................................          $  0.25          $  0.29          $  0.54          $  0.58
     Net income, assuming dilution .............................             0.24             0.27             0.51             0.54
-------
</TABLE>
* Per share information has been  retroactively  adjusted to reflect a 10% stock
dividend effective December 20, 2007.

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, 2007 ..........................    2,958,558    $   30,061   $      593   $    3,285   $     (724)   $   33,215
                                                                                                                         ----------
Comprehensive income:
    Net income ....................................            -             -            -        1,896            -         1,896
                                                                                                                         ----------
    Unrealized holding gains and losses
      on available-for-sale securities
      arising during the period, net of
      income taxes of $374 ........................            -             -            -            -         (668)         (668)
                                                                                                                         ----------
        Total other comprehensive income ..........                                                                           (668)
                                                                                                                         ----------
          Total comprehensive income ..............                                                                           1,228
                                                                                                                         ----------
Exercise of employee stock options ................       14,005            76            -            -            -            76
                                                      ----------    ----------   ----------   ----------   ----------    ----------
Balance, June 30, 2007 ............................    2,972,563    $   30,137   $      593   $    5,181   $   (1,392)   $   34,519
                                                      ==========    ==========   ==========   ==========   ==========    ==========



Balance, January 1, 2008 ..........................    3,324,105    $   35,009   $      681   $    2,140   $       80    $   37,910
                                                                                                                         ----------
Comprehensive income:
    Net income ....................................            -             -            -        1,805            -         1,805
                                                                                                                         ----------
    Unrealized holding gains and losses
      on available-for-sale securities
      arising during the period, net of
      income taxes of $439 ........................            -             -            -            -         (784)         (784)
                                                                                                                         ----------
        Total other comprehensive income ..........                                                                            (784)
                                                                                                                         ----------
          Total comprehensive income ..............                                                                           1,021
                                                                                                                         ----------
Exercise of employee stock options ................       70,768           365            -            -            -           365
                                                      ----------    ----------   ----------   ----------   ----------    ----------
Balance, June 30, 2008 ............................    3,394,873    $   35,374   $      681   $    3,945   $     (704)   $   39,296
                                                      ==========    ==========   ==========   ==========   ==========    ==========
</TABLE>













See accompanying notes to unaudited consolidated financial statements.

                                       5

<PAGE>



COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                             Six Months Ended
                                                                                                                 June 30,
                                                                                                                 --------
                                                                                                         2008                 2007
                                                                                                         ----                 ----
                                                                                                           (Dollars in thousands)
Operating activities
<S>                                                                                                    <C>                 <C>
     Net income ............................................................................           $  1,805            $  1,896
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ......................................................                410                 120
            Depreciation ...................................................................                219                 200
            Amortization of net loan fees and costs ........................................                (85)                (92)
            Securities accretion and premium amortization ..................................                 (1)                 47
            Loss on sale of foreclosed assets ..............................................                  6                   -
            Increase in value of bank-owned life insurance .................................               (186)                  -
            Increase in interest receivable ................................................                (66)               (218)
            (Decrease) increase in interest payable ........................................               (543)                194
            Decrease (increase) in prepaid expenses and other assets .......................                143                 (84)
            Increase in other accrued expenses .............................................                374                  33
                                                                                                       --------            --------
                Net cash provided by operating activities ..................................              2,076               2,096
                                                                                                       --------            --------

Investing activities
     Purchases of available-for-sale securities ............................................            (41,708)            (17,448)
     Purchase of securities held-to-maturity ...............................................             (7,490)                  -
     Maturities, calls and paydowns of securities available-for-sale .......................             28,780              14,183
     Maturities, calls and paydowns of securities held-to-maturity .........................                466                 500
     Proceeds from sales of other investments ..............................................                  -                  95
     Purchases of other investments ........................................................                (87)                  -
     Net increase in loans made to customers ...............................................            (12,838)            (22,996)
     Purchases of premises and equipment ...................................................               (382)               (329)
     Proceeds of sale of foreclosed assets .................................................                 34                   -
     Investment in bank-owned life insurance ...............................................             (1,000)                  -
                                                                                                       --------            --------
                Net cash used by investing activities ......................................            (34,225)            (25,995)
                                                                                                       --------            --------

Financing activities
     Net increase (decrease) in demand deposits, interest
         bearing transaction accounts and savings accounts .................................              4,154              (5,377)
     Net increase in certificates of deposit and other
         time deposits .....................................................................             10,836              25,605
     Net increase (decrease) in short-term borrowings ......................................              1,500              (4,500)
     Proceeds of issuing long-term debt ....................................................              6,000                   -
     Repayments of long-term debt ..........................................................             (1,000)             (1,000)
     Exercise of employee stock options ....................................................                365                  76
                                                                                                       --------            --------
                Net cash provided by financing activities ..................................             21,855              14,804
                                                                                                       --------            --------
Decrease in cash and cash equivalents ......................................................            (10,294)             (9,095)
Cash and cash equivalents, beginning .......................................................             34,673              31,145
                                                                                                       --------            --------
Cash and cash equivalents, ending ..........................................................           $ 24,379            $ 22,050
                                                                                                       ========            ========

Supplemental Disclosure of Cash Flow Information
     Cash paid during the period for
         Interest ..........................................................................           $  7,278            $  6,216
         Income taxes ......................................................................                900                 898
     Noncash investing and financing activities:
         Other comprehensive income (loss) .................................................               (784)               (668)
</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, 2007 filed with the  Securities  and  Exchange
Commission.   Certain  amounts  in  the  2007  financial  statements  have  been
reclassified to conform to the current presentation.

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 June 30, 2008,  there were $1,880,000 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 2007 per share
information  has been  retroactively  adjusted  to give  effect  to a 10%  stock
dividend  effective  December 20, 2007.  Net income per share and net income per
share, assuming dilution, were computed as follows:

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                                         Period Ended June 30,
                                                                                         ---------------------
                                                                          Three Months                          Six Months
                                                                          ------------                          ----------
                                                                     2008               2007               2008              2007
                                                                     ----               ----               ----              ----
                                                                          (Dollars in thousands, except per share amounts)
<S>                                                              <C>                <C>                <C>                <C>
Net income per share, basic
  Numerator - net income ...............................         $      845         $      939         $    1,805         $    1,896
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          3,360,218          3,269,767          3,352,301          3,268,022
                                                                 ==========         ==========         ==========         ==========

      Net income per share, basic ......................         $      .25         $      .29         $      .54         $      .58
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
  Numerator - net income ...............................         $      845         $      939         $    1,805         $    1,896
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          3,360,218          3,269,767          3,352,301          3,268,022
    Effect of dilutive stock options ...................            134,315            224,881            158,873            230,138
                                                                 ----------         ----------         ----------         ----------
               Total shares ............................          3,494,533          3,494,648          3,511,174          3,498,160
                                                                 ==========         ==========         ==========         ==========

      Net income per share, assuming dilution ..........         $      .24         $      .27         $      .51         $      .54
                                                                 ==========         ==========         ==========         ==========
</TABLE>


Fair  Value  Measurements  - The  Company  implemented  Statement  of  Financial
Accounting  Standards No. 157,  "Fair Value  Measurements,"  ("SFAS No. 157") as
required on January 1, 2008.  SFAS No. 157 defines  fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
fashion between market  participants at the measurement  date, and establishes a
framework for measuring fair value. It also establishes a three-level  hierarchy
for fair  value  measurements  based  upon the  transparency  of  inputs  to the
valuation of an asset or liability as of the  measurement  date,  eliminates the
consideration of large position  discounts for financial  instruments  quoted in
active markets,  requires  consideration of the Company's  creditworthiness when
valuing its liabilities,  and expands disclosures about instruments  measured at
fair value. The following is a summary of the measurement  attributes applicable


                                       7
<PAGE>

to  financial  assets  and  liabilities  that are  measured  at fair  value on a
recurring basis:
<TABLE>
<CAPTION>
                                                                              Fair Value Measurement at Reporting Date Using
                                                                              ----------------------------------------------
                                                                        Quoted Prices
                                                                          in Active            Significant
                                                                         Markets for              Other            Significant
                                                                          Identical             Observable         Unobservable
                                                                            Assets                Inputs              Inputs
Description                                 June 30, 2008                 (Level 1)             (Level 2)           (Level 3)
-----------                                 -------------                 ---------             ---------           ---------
                                                                                         (Dollars in thousands)
<S>                                                                      <C>                     <C>                <C>
Securities available-for-sale ..................................         $         -             $110,729           $        -
</TABLE>

Pricing for the  Company's  securities  available-for-sale  is obtained  from an
independent  third-party that uses a process that may incorporate current market
prices,  benchmark  yields,  broker/dealer  quotes,  issuer  spreads,  two-sided
markets,  benchmark securities,  bids, offers, other reference data and industry
and  economic  events  that a market  participant  would be  expected  to use in
valuing the  securities.  Not all of the inputs listed apply to each  individual
security at each measurement  date. The independent third party assigns specific
securities  into an "asset  class" for the purpose of assigning  the  applicable
level of the fair value hierarchy used to value the  securities.  The techniques
used  after  adoption  of SFAS No.  157 are  consistent  with the  methods  used
previously.

In February 2008,  the Financial  Accounting  Standards  Board Staff issued FASB
Staff  Position  No.  FAS 157-2  ("FSP  157-2")  which  delays  for one year the
effective date of the application of Statement of Financial Accounting Standards
No. 157 "Fair Value  Measurements"  ("SFAS No. 157") to nonfinancial  assets and
liabilities,  except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). In accordance
with FSP 157-2,  the Company has only partially  applied SFAS No. 157. There are
currently no major  categories of assets or liabilities  disclosed at fair value
in the financial statements for which the Company has not applied the provisions
of SFAS No. 157.

No cumulative effect adjustments were required upon initial  application of SFAS
No.  157.  Available-for-sale  securities  continue to be measured at fair value
with  unrealized  gains and  losses,  net of  income  taxes,  recorded  in other
comprehensive income.

New Accounting  Pronouncements  - In December 2007, the FASB issued Statement of
Financial Accounting Standards No. 160 "Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51" ("SFAS No. 160"). SFAS No. 160
is effective for years  beginning  after December 31, 2008, and is to be applied
prospectively  with retrospective  presentation and disclosure  requirements for
comparative  financial  statements.  Early adoption is prohibited.  SFAS No. 160
seeks to improve the  relevance,  comparability  and  transparency  of financial
information  that a  reporting  entity  provides in its  consolidated  financial
statements by separately  identifying and reporting several financial  statement
components into amounts that are  attributable  to the reporting  entity or that
are attributable to  noncontrolling  interests.  SFAS No. 160 also specifies the
conditions under which an entity is required to deconsolidate  its interest in a
subsidiary.  The Company currently has no consolidated subsidiaries that are not
wholly owned nor are any transactions  contemplated  that would result in such a
condition.  Therefore,  it is  expected  that the  adoption  of SFAS No.  160 in
January  2009  will  have no  effect  on the  Company's  consolidated  financial
statements.

In March  2008,  the FASB issued SFAS No.  161,  "Disclosures  about  Derivative
Instruments and Hedging  Activities"  ("SFAS 161").  SFAS 161 requires  enhanced
disclosures  about  an  entity's  derivative  and  hedging  activities,  thereby
improving the transparency of financial reporting. It is intended to enhance the
current disclosure  framework in SFAS 133 by requiring that objectives for using
derivative  instruments be disclosed in terms of underlying  risk and accounting
designation.  This  disclosure  better  conveys the purpose of derivative use in
terms of the risks that the entity is intending to manage. SFAS 161 is effective
for the  Company  on  January  1,  2009.  This  pronouncement  does  not  impact
accounting measurements but will result in additional disclosures if the Company
is involved in material derivative and hedging activities at that time.

In February 2008, the FASB issued FASB Staff Position No. 140-3, "Accounting for
Transfers of  Financial  Assets and  Repurchase  Financing  Transactions"  ("FSP
140-3").  This FSP provides guidance on accounting for a transfer of a financial
asset and the transferor's  repurchase financing of the asset. This FSP presumes
that an initial  transfer of a financial  asset and a repurchase  financing  are
considered part of the same arrangement (linked transaction) under SFAS No. 140.
However,  if certain  criteria  are met,  the initial  transfer  and  repurchase
financing are not evaluated as a linked transaction and are evaluated separately
under Statement 140. FSP 140-3 will be effective for financial statements issued
for fiscal years  beginning  after November 15, 2008, and interim periods within
those fiscal years. Earlier application is not permitted.  Accordingly, this FSP

                                       8
<PAGE>

is  effective  for the  Company on January 1,  2009.  The  Company is  currently
evaluating  the  impact,  if any,  the  adoption  of FSP 140-3  will have on its
financial position, results of operations and cash flows.

In April 2008, the FASB issued FASB Staff Position No. 142-3,  "Determination of
the Useful Life of Intangible Assets" ("FSP 142-3"). This FSP amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized  intangible  asset under SFAS No. 142,
"Goodwill and Other Intangible Assets." The intent of this FSP is to improve the
consistency between the useful life of a recognized  intangible asset under SFAS
No. 142 and the period of expected  cash flows used to measure the fair value of
the asset  under  SFAS No.  141(R),  "Business  Combinations,"  and  other  U.S.
generally accepted  accounting  principles.  This FSP is effective for financial
statements  issued for fiscal years  beginning  after  December  15,  2008,  and
interim  periods  within those fiscal  years and early  adoption is  prohibited.
Accordingly,  this FSP is  effective  for the  Company on  January 1, 2009.  The
Company does not believe the  adoption of FSP 142-3 will have a material  impact
on its financial position, results of operations or cash flows.

In May, 2008, the FASB issued  Statement of Financial  Accounting  Standards No.
162, "The  Hierarchy of Generally  Accepted  Accounting  Principals"  ("SFAS No.
162").  SFAS No. 162  identifies  the sources of accounting  principles  and the
framework for  selecting the  principles  used in the  preparation  of financial
statements of  nongovernmental  entities  that are presented in conformity  with
generally accepted accounting principles ("GAAP") in the United States (the GAAP
hierarchy).  SFAS No. 162 will be effective 60 days following the Securities and
Exchange  Commission's  approval  of the  Public  Company  Accounting  Oversight
Board's  amendments  to AU  Section  411,  "The  Meaning  of  Present  Fairly in
Conformity with Generally  Accepted  Accounting  Principles." The application of
the statement will have no effect on the Company's financial  position,  results
of operations or cash flows.

FASB Staff Position No. APB 14-1,  "Accounting for Convertible  Debt Instruments
That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)"
("FSP No. APB 14-1"),  specifies  that issuers of convertible  debt  instruments
that may be settled in cash upon conversion  should  separately  account for the
liability  and equity  components  in a manner that will  reflect  the  entity's
nonconvertible   debt  borrowing  rate  when  interest  cost  is  recognized  in
subsequent  periods.  FSP  No.  APB  14-1  provides  guidance  for  initial  and
subsequent measurement as well as derecognition  provisions and is effective for
financial  statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those years. Early adoption is not permitted, but the
provisions of FSP APB No. 14-1 will be applied  retrospectively  for all periods
even if the instrument has matured,  has been  converted,  or otherwise has been
extinguished.  The  adoption  of FSP No.  APB 14-1  will  have no  effect on the
Company's financial position, results of operations or cash flows.

In June, 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, "Determining
Whether   Instruments   Granted  in   Share-Based   Payment   Transactions   are
Participating  Securities" ("FSP EITF No. 03-6-1"). This Staff Position provides
that unvested share-based payment awards that contain  nonforfeitable  rights to
dividends  or dividend  equivalents  are  participating  securities  and must be
included in the computation of earnings per share.  FSP EITF 03-6-1 is effective
for financial statements issued for years beginning after December 15, 2008, and
interim periods within those years.  All  prior-periods  earnings per share data
presented must be adjusted retrospectively.  Early application is not permitted.
The  adoption  of the  Staff  Position  will  have no  effect  on the  Company's
financial position, results of operation or cash flows.



                                       9
<PAGE>


          CAUTIONARY NOTICE WITH RESPECT TO FORWARD-LOOKING STATEMENTS

         This report contains "forward-looking statements" within the meaning of
the  securities  laws.  The  Private  Securities  Litigation  Reform Act of 1995
provides a safe harbor for forward-looking  statements.  In order to comply with
the terms of the safe harbor,  the Company notes that a variety of factors could
cause the Company's actual results and experience to differ  materially from the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forwarding-looking statements.

         All statements that are not historical  facts are statements that could
be  "forward-looking   statements."  You  can  identify  these   forward-looking
statements  through the use of words such as "may," "will,"  "should,"  "could,"
"would," "expect,"  "anticipate,"  "assume," "indicate,"  "contemplate," "seek,"
"plan,"  "predict,"  "target,"  "potential,"  "believe,"  "intend,"  "estimate,"
"project,"  "continue,"  or  other  similar  words.  Forward-looking  statements
include,  but are not limited to,  statements  regarding  the  Company's  future
business  prospects,   revenues,  working  capital,  liquidity,  capital  needs,
interest costs, income, business operations and proposed services.

         These  forward-looking  statements  are based on current  expectations,
estimates and projections about the banking industry,  management's beliefs, and
assumptions made by management.  Such information includes,  without limitation,
discussions  as to estimates,  expectations,  beliefs,  plans,  strategies,  and
objectives  concerning  future  financial  and  operating   performance.   These
statements  are not guarantees of future  performance  and are subject to risks,
uncertainties and assumptions that are difficult to predict.  Therefore,  actual
results  may  differ  materially  from those  expressed  or  forecasted  in such
forward-looking  statements.  The risks and uncertainties  include,  but are not
limited to:

          o    future economic and business conditions;
          o    lack of sustained growth in the economies of the Company's market
               areas;
          o    government monetary and fiscal policies;
          o    the  effects  of  changes  in  interest   rates  on  the  levels,
               composition and costs of deposits, loan demand, and the values of
               loan collateral,  securities,  and interest  sensitive assets and
               liabilities;
          o    the  effects  of  competition  from  a  wide  variety  of  local,
               regional, national and other providers of financial,  investment,
               and insurance services, as well as competitors that offer banking
               products and  services by mail,  telephone,  computer  and/or the
               Internet;
          o    credit risks;
          o    higher than anticipated levels of defaults on loans;
          o    misperceptions by depositors about the safety of their deposits;
          o    capital adequacy;
          o    the failure of assumptions  underlying the  establishment  of the
               allowance  for loan  losses and other  estimates,  including  the
               value of collateral securing loans;
          o    availability of liquidity sources;
          o    the risks of opening new offices, including,  without limitation,
               the related costs and time of building customer relationships and
               integrating operations as part of these endeavors and the failure
               to achieve expected gains,  revenue growth and/or expense savings
               from such endeavors;
          o    changes  in laws and  regulations,  including  tax,  banking  and
               securities laws and regulations;
          o    changes in accounting policies, rules and practices;
          o    changes  in  technology  or  products  may be more  difficult  or
               costly, or less effective, than anticipated;
          o    the effects of war or other conflicts, acts of terrorism or other
               catastrophic  events that may affect general economic  conditions
               and economic confidence; and
          o    other factors and information described in this report and in any
               of the  other  reports  that  we file  with  the  Securities  and
               Exchange Commission under the Securities Exchange Act of 1934.

         All  forward-looking   statements  are  expressly  qualified  in  their
entirety by this cautionary notice. The Company has no obligation,  and does not
undertake,  to update,  revise or correct any of the forward-looking  statements
after the date of this  report.  The Company  has  expressed  its  expectations,
beliefs and projections in good faith and believes they have a reasonable basis.
However,  there is no assurance that these expectations,  beliefs or projections
will result or be achieved or accomplished.


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

Changes in Financial Condition


                                       10
<PAGE>

         During the first six months of 2008, loans increased by $12,687,000, or
5.2%,  securities   available-for-sale   increased  by  $11,703,000,  or  11.8%,
securities  held-to-maturity  increased by $7,027,000,  or 124.1%,  and interest
bearing  balances due from banks  increased by  $9,286,000.  Federal  funds sold
decreased by  $18,362,000,  or 75.8%.  Interest  bearing  deposits  increased by
$14,173,000, or 4.5%. Approximately $10,637,000 of that increase was in the form
of  certificates  of  deposits  of  $100,000  or more.  Also  during the period,
short-term  borrowings  increased by $1,500,000  and long-term debt increased by
$5,000,000.

         The Company believes that its liquidity  position  continues to provide
it with  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.  Management also believes that the current balance
sheet positions maintain the Company's exposures to changes in interest rates at
acceptable levels.

Results of Operations

Three Months Ended June 30, 2008 and 2007

         The Company  recorded  consolidated  net income of $845,000 or $.25 per
share for the second quarter of 2008. These results are lower than net income of
$939,000  and  earnings  per share of $.29 for the second  quarter of 2007.  Net
income per share,  assuming  dilution was $.24 for the 2008 quarter and $.27 for
the 2007 period.  Net income per share amounts for 2007 have been  retroactively
adjusted to reflect a ten percent stock dividend effective December 20, 2007.

         Net interest income for the 2008 second quarter was $281,000, or 10.8%,
more than for the 2007  second  quarter.  Interest  income  for the 2008  second
quarter  increased  primarily  because  of higher  average  amounts of loans and
securities  held.  Interest expense for the 2008 quarter was slightly lower than
for the same period of 2007 due to lower interest rates paid for deposits.

         The provision for loan losses for the second  quarter of 2008 increased
by $160,000  over the amount for the same period of 2007 due to higher levels of
nonaccrual and potential problem loans.  Some borrowers  recently have exhibited
increased  difficulty  in  servicing  their  loans due to a general  slowing  in
economic  conditions,  especially  with respect to residential  real estate.  If
those conditions continue or deteriorate  further, it is possible that increased
provisions for loan losses may be needed in the future.

         Noninterest  income  for  the  second  quarter  of  2008  increased  by
$123,000,  or 24.5%,  primarily  due to a $93,000  increase in the value of life
insurance  and higher  amounts of service  charges on deposit  accounts  and ATM
interchange  and other fees.  Noninterest  expense  for the 2008 second  quarter
increased  from the amount  recorded  for the same 2007  period,  primarily as a
result of higher salaries and employee  benefits and higher expenses for deposit
insurance.

<TABLE>
<CAPTION>
                                                                               Summary Income Statement
                                                            ------------------------------------------------------------------------
                                                                               (Dollars in thousands)
For the Three Months Ended June 30,                           2008                2007           Dollar Change     Percentage Change
                                                              ----                ----           -------------     -----------------
<S>                                                         <C>                 <C>                 <C>                  <C>
Interest income ...................................         $6,037              $5,820              $  217                 3.7%
Interest expense ..................................          3,147               3,211                 (64)               -2.0%
                                                            ------              ------              ------
Net interest income ...............................          2,890               2,609                 281                10.8%
Provision for loan losses .........................            280                 120                 160               133.3%
Noninterest income ................................            625                 502                 123                24.5%
Noninterest expenses ..............................          2,005               1,642                 363                22.1%
Income tax expense ................................            385                 410                 (25)               -6.1%
                                                            ------              ------              ------
Net income ........................................         $  845              $  939              $  (94)              -10.0%
                                                            ======              ======              ======
</TABLE>

Six Months Ended June 30, 2008 and 2007

         The Company recorded  consolidated net income of $1,805,000 or $.54 per
share,  for the first half of 2008,  compared with  $1,896,000,  or earnings per
share of $.58,  for the same  period of 2007.  Net income  per  share,  assuming
dilution  was $.51 for the 2008 six months and $.54 for the same period of 2007.
Net  income  per share  amounts  for 2007 have been  retroactively  adjusted  to
reflect a ten percent stock dividend effective December 20, 2007.



                                       11
<PAGE>

         Net  interest  income  for the first six  months of 2008  increased  by
$587,000,  or  11.6%,  over the  amount  recorded  for the same  period of 2007.
Increases  in the amounts of loans  outstanding  more than offset  lower  yields
realized on most  categories of earning  assets and resulted in interest  income
increasing more than interest expenses.  Increases in interest expense primarily
were caused by higher average amounts of interest bearing time deposits.

         Noninterest  income  for the first  six  months  of 2008  increased  by
$246,000 as a result of higher  amounts of service  charges on deposit  accounts
and a $186,000 increase in the value of life insurance.

         Noninterest  expenses  for  the  2008  six-month  period  increased  by
$716,000,  or 22.5%,  over the 2007  amounts.  Salaries  and  employee  benefits
increased by $431,000,  or 25.1%,  primarily  reflecting  the effects of certain
deferred compensation  arrangements that originated in the third quarter of 2007
and normal periodic increases in employees' compensation.

<TABLE>
<CAPTION>
                                                                                Summary Income Statement
                                                          --------------------------------------------------------------------------
                                                                                 (Dollars in thousands)
For the Six Months Ended June 30,                           2008                2007            Dollar Change     Percentage Change
                                                            ----                ----            -------------     -----------------
<S>                                                       <C>                 <C>                 <C>                 <C>
Interest income ....................................      $12,393             $11,481             $   912               7.9%
Interest expense ...................................        6,735               6,410                 325               5.1%
                                                          -------             -------             -------
Net interest income ................................        5,658               5,071                 587              11.6%
Provision for loan losses ..........................          410                 120                 290             241.7%
Noninterest income .................................        1,234                 988                 246              24.9%
Noninterest expenses ...............................        3,892               3,176                 716              22.5%
Income tax expense .................................          785                 867                 (82)             -9.5%
                                                          -------             -------             -------
Net income .........................................      $ 1,805             $ 1,896             $   (91)             -4.8%
                                                          =======             =======             =======
</TABLE>


Net Interest Income

Three Months Ended June 30, 2008 and 2007

         The average yield on interest earning assets decreased to 6.12% for the
2008 three-month period, compared with 6.59% for the 2007 period. Yields on most
significant  categories  of earning  assets were lower in the 2008  period.  The
exception was that the yield on taxable investment securities increased to 4.84%
for the 2008 period from 4.34% for the 2007 period. This resulted primarily from
higher  amounts of  mortgage-backed  securities  issued by  government-sponsored
entities held in the 2008 period.  Similarly,  interest  rates paid for deposits
and  borrowings  were  lower in the  2008  period.  The  average  rate  paid for
interest-bearing  liabilities  during  the 2008  three-month  period  was 3.74%,
compared  with  4.39%  in the same  period  of 2007.  Accordingly,  the  average
interest rate spread for the 2008 period was 18 basis points higher than for the
2007 period.




                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Average Balances, Yields and Rates
                                                                                     Three Months Ended June 30,
                                                                                     ---------------------------
                                                                               2008                                2007
                                                                               ----                                ----
                                                                             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 ..................   $   1,802     $       5        1.12%   $     130    $     -      0.00%
Securities
      Taxable .............................................      97,408         1,172        4.84%      91,844        994      4.34%
      Tax exempt (2) ......................................      20,434           208        4.09%      19,499        217      4.46%
                                                              ---------     ---------                ---------    -------
           Total investment securities ....................     117,842         1,380        4.71%     111,343      1,211      4.36%
Other investments .........................................         927            12        5.21%         890         14      6.31%
Federal funds sold ........................................      22,117           117        2.13%      23,533        320      5.45%
Loans (2) (3) (4) .........................................     254,287         4,523        7.15%     218,074      4,275      7.86%
                                                              ---------     ---------                ---------    -------
           Total interest earning assets ..................     396,975         6,037        6.12%     353,970      5,820      6.59%
Cash and due from banks ...................................       7,373                                  8,374
Allowance for loan losses .................................      (2,636)                                (2,228)
Valuation allowance - available-for-sale securities .......         869                                 (1,023)
Premises and equipment ....................................       8,828                                  8,007
Other assets ..............................................      12,296                                  3,640
                                                              ---------                              ---------
           Total assets ...................................   $ 423,705                              $ 370,740
                                                              =========                              =========

Liabilities and shareholders' equity
Interest bearing deposits
      Interest bearing transaction accounts ...............   $  57,967     $     258        1.79%   $  59,327    $   483      3.27%
      Savings .............................................      24,752            68        1.10%      25,715        170      2.65%
      Time deposits $100M and over ........................     108,182         1,057        3.93%      80,644        945      4.70%
      Other time deposits .................................     142,437         1,716        4.85%     122,491      1,558      5.10%
                                                              ---------     ---------                ---------    -------
           Total interest bearing
             deposits .....................................     333,338         3,099        3.74%     288,177      3,156      4.39%
Long-term debt ............................................       4,929            48        3.92%       5,368         55      4.11%
                                                              ---------     ---------                ---------    -------
           Total interest bearing
             liabilities ..................................     338,267         3,147        3.74%     293,545      3,211      4.39%
Noninterest bearing demand deposits .......................      41,307                                 39,295
Other liabilities .........................................       4,138                                  3,181
Shareholders' equity ......................................      39,993                                 34,719
                                                              ---------                              ---------
           Total liabilities and shareholders' equity .....   $ 423,705                              $ 370,740
                                                              =========                              =========
Interest rate spread ......................................                                  2.38%                             2.20%
Net interest income and net yield
      on earning assets ...................................                 $   2,890        2.93%                $ 2,609      2.96%
Interest free funds supporting earning assets .............   $  58,708                              $  60,425
-----------------------------
</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>

Six Months Ended June 30, 2008 and 2007

         For the first  half of 2008,  the  average  yield on  interest  earning
assets was 6.19%,  compared with 6.49% for the 2007 period. Yields were lower on
substantially  all types of  earning  assets  in the 2008  period.  Loan  yields
decreased because a significant portion of the Company's loan portfolio consists
of variable  rate  instruments.  Such loans,  as offered by the Company,  do not
normally subject the borrower to the risk of negative  amortization,  nor do the
loans  involve the use of "teaser"  rates or impose  onerous fees or other terms
that would discourage  borrowers from refinancing to a lower cost product or one
with a fixed rate.  Yields earned on securities  increased due to changes in the
composition  of the  securities  portfolio  brought  about  by  reinvesting  the
proceeds  obtained from  maturities,  calls and paydowns of  securities  and the
investment of other funds, principally deposits, obtained currently.

         Average rates paid on  interest-bearing  liabilities  were lower in the
2008 period as well, at 3.92% compared with 4.36% in the 2007 six-month  period.
Decreases  in interest  rates paid  resulted  from the  Company's  responses  to
actions  taken early in 2008 by the Federal  Reserve to lower  certain  interest
rates within its purview



                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                                                 Average Balances, Yields and Rates
                                                                                    Six Months Ended June 30,
                                                                                    -------------------------
                                                                              2008                               2007
                                                                              ----                               ----
                                                                            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 .................   $   1,108     $       7      1.27%   $      98    $       1      2.06%
Securities
      Taxable ............................................      92,739         2,189      4.75%      90,135        1,932      4.32%
      Tax exempt (2) .....................................      20,524           414      4.06%      19,595          404      4.16%
                                                             ---------     ---------              ---------    ---------
           Total investment securities ...................     113,263         2,603      4.62%     109,730        2,336      4.29%
Other investments ........................................         886            25      5.67%         935           29      6.25%
Federal funds sold .......................................      35,084           503      2.88%      32,830          862      5.29%
Loans (2) (3) (4) ........................................     252,271         9,255      7.38%     213,064        8,253      7.81%
                                                             ---------     ---------              ---------    ---------
           Total interest earning assets .................     402,612        12,393      6.19%     356,657       11,481      6.49%
Cash and due from banks ..................................       7,811                                8,031
Allowance for loan losses ................................      (2,609)                              (2,228)
Valuation allowance - available-for-sale securities ......         823                               (1,119)
Premises and equipment ...................................       8,835                                7,957
Other assets .............................................      12,247                                3,713
                                                             ---------                            ---------
           Total assets ..................................   $ 429,719                            $ 373,011
                                                             =========                            =========

Liabilities and shareholders' equity
Interest bearing deposits
      Interest bearing transaction accounts ..............   $  58,856     $     593      2.03%   $  57,291    $     916      3.22%
      Savings ............................................      33,489           277      1.66%      32,966          523      3.20%
      Time deposits $100M and over .......................     105,614         2,210      4.21%      80,442        1,863      4.67%
      Other time deposits ................................     142,867         3,568      5.02%     119,992        2,996      5.04%
                                                             ---------     ---------              ---------    ---------
           Total interest bearing deposits ...............     340,826         6,648      3.92%     290,691        6,298      4.37%
Short-term borrowings ....................................           -             -      0.00%          25            3     24.20%
Long-term debt ...........................................       4,714            87      3.71%       5,434          109      4.05%
                                                             ---------     ---------              ---------    ---------
           Total interest bearing
             liabilities .................................     345,540         6,735      3.92%     296,150        6,410      4.36%
Noninterest bearing demand deposits ......................      40,542                               39,492
Other liabilities ........................................       4,233                                3,180
Shareholders' equity .....................................      39,404                               34,189
                                                             ---------                            ---------
           Total liabilities and shareholders' equity ....   $ 429,719                            $ 373,011
                                                             =========                            =========
Interest rate spread .....................................                                2.27%                               2.13%
Net interest income and net yield on earning assets ......                 $   5,658      2.83%                $   5,071      2.87%
Interest free funds supporting earning assets ............   $  57,072                            $  60,507
----------------------------------------
</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.



                                       15
<PAGE>


Provision and Allowance for Loan Losses

         The  provision  for loan losses was $280,000 for the second  quarter of
2008,  compared with $120,000 for the  comparable  period of 2007. For the first
half of 2008, the provision for loan losses was $410,000, compared with $120,000
recorded for the first half of 2007.  At June 30, 2008,  the  allowance for loan
losses was 1.07% of loans, a slight increase over 1.05% at December 31, 2007.

         For the first six months of 2008,  net  charge-offs  totaled  $236,000,
compared  with  $83,000 in net charge offs  during the same period of 2007.  The
higher levels of  charge-offs in 2008 reflect a general  deterioration  of local
economic  conditions.  No  particular  industries  or  groups of  borrowers  are
disproportionately  represented  among the loans charged off. If local  economic
conditions  do not  improve,  it is likely  that the  Company  will  continue to
experience  elevated  levels of both net  charge-offs  and  provisions  for loan
losses. The activity in the allowance for loan losses is summarized in the table
below:

<TABLE>
<CAPTION>
                                                                            Six Months            Year Ended            Six Months
                                                                              Ended                 Ended                  Ended
                                                                           June 30, 2008      December 31, 2007       June 30, 2007
                                                                           -------------      -----------------       -------------
                                                                                            (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $   2,574             $   2,242             $   2,242
Provision for loan losses ........................................                 410                   594                   120
Net charge-offs ..................................................                (236)                 (262)                  (83)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   2,748             $   2,574             $   2,279
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding
  at period end ..................................................                1.07%                 1.05%                 1.01%
Loans at end of period ...........................................           $ 256,818             $ 244,131             $ 225,971
                                                                             =========             =========             =========
</TABLE>



                                       16
<PAGE>


Non-Performing and Potential Problem Loans

<TABLE>
<CAPTION>
                                                         90 Days or
                                                        More Past Due      Total         Percentage                       Percentage
                                           Nonaccrual     and Still    Nonperforming      of Total        Potential        of Total
                                              Loans        Accruing        Loans            Loans       Problem Loans        Loans
                                              -----        --------        -----            -----       -------------        -----
                                                                            (Dollars in thousands)
<S>                                          <C>           <C>            <C>                <C>            <C>              <C>
January 1, 2007 ....................         $    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%
Net change .........................             199            -             199                              (140)
                                             -------       ------         -------                           -------
December 31, 2007 ..................             625            -             625            0.26%            3,088          1.26%
Net change .........................            (181)           -            (181)                              962
                                             -------       ------         -------                           -------
March 31, 2008 .....................             444            -             444            0.18%            4,050          1.61%
Net change .........................           1,436            -           1,436                             1,338
                                             -------       ------         -------                           -------
June 30, 2008 ......................         $ 1,880       $    -         $ 1,880            0.73%          $ 5,388          2.10%
                                             =======       ======         =======                           =======
</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.  As of  June  30,  2008,  approximately  92% of the  Company's
potential  problem loans were included in the Company's least severe category of
potential  problem  loans.  Approximately  86% of potential  problem  loans were
secured  by real  estate.  Management  expects  that  further  deterioration  of
economic  conditions  within  the  Company's  market  areas  is  likely  in  the
short-term,  especially with respect to real estate activities and real property
values. Consequently,  management believes that the amounts of potential problem
and nonaccrual loans are likely to increase for at least the next six months. If
current  conditions in the Company's  local real estate  markets  continue or if
those conditions  deteriorate  further, it is possible that increased provisions
for loan losses may be needed in the future.

Noninterest Income

         Noninterest  income  totaled  $625,000 for the second  quarter of 2008,
compared  with  $502,000  for the 2007  quarter.  Increases in the value of life
insurance  were $93,000 in the 2008  quarter,  with no such activity in the same
2007  period.  Service  charges on deposit  accounts in the 2008 second  quarter
increased  by $32,000  over the prior year  quarter.  There were no sales of any
securities in either the 2008 or 2007 second quarter.

         For the six months  ended June 30,  2008,  noninterest  income  totaled
$1,234,000, compared with $988,000 for the same period of 2007. Increases in the
value of life  insurance  were $186,000 in the 2008 period with no such activity
in the first six months of 2007. Service charges on deposit accounts in the 2008
six months  period were  $735,000  representing  an increase of $58,000 over the
prior year period.  No gains or losses on sales of securities were recognized in
either the 2008 or 2007 six months period.

Noninterest Expenses

         Noninterest  expenses totaled $2,005,000 for the second quarter of 2008
compared with $1,642,000 for the same quarter of 2007,  representing an increase
of $363,000.  Compared with the 2007 period,  salaries and employee benefits for
the 2008  three-month  period  increased  by $205,000  primarily  as a result of
deferred  compensation  benefits  and the  opening of the new Highway 81 office.
Occupancy expenses increased for the 2008 three-month period and included higher
utility expenses and increases in depreciation and other expenses related to the
new office.  Deposit insurance  assessments increased by $46,000 over the amount
for the second quarter of 2007.

         For the six months ended June 30, 2008,  salaries and employee benefits
increased by $431,000 over the amount for the 2007 period  primarily as a result



                                       17
<PAGE>

of recognition of deferred  compensation  expenses.  Net occupancy and furniture
and equipment expenses  increased by an aggregate of $53,000.  Deposit insurance
assessments  for the 2008 six months  period were $52,000 more than for the same
period of 2007.

         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 Anderson  County  market is served from three  offices in
Anderson and  Williamston,  including an office on Highway 81 in Anderson County
that opened for business during the fourth quarter of 2007.

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 also has significant amounts
of  credit  availability  under  its FHLB  lines of  credit  and  federal  funds
purchased facilities.

         As of June 30,  2008,  the ratio of loans to total  deposits was 69.2%,
compared  with 68.6% as of  December  31,  2007.  Deposits  as of June 30,  2008
totaled  $370,857,000,  an increase of $14,990,000 or 4.2% over the amount as of
December 31, 2007.  Management believes that the Company's liquidity sources are
adequate to meet its operating needs.

Capital Resources

         The Company's  capital base increased by $1,386,000  since December 31,
2007 as the result of net income of $1,805,000 for the first six months of 2008,
less a $784,000  change in  unrealized  gains and  losses on  available-for-sale
securities,  net of deferred  income tax effects and $365,000  received from the
exercise of employee  stock  options.  Unrealized  losses on  available-for-sale
securities  are  not  considered  to be  other  than  temporary.  The  Company's
available-for-sale   securities   primarily   consist  of  debt   issuances   of
government-sponsored  enterprises.  While not directly  guaranteed  by the U. S.
Government,  these  issues are  generally  considered  to be of high quality and
default risk is believed to be remote.  Therefore,  the changes in market values
are  believed  to be the result  only of changes in market  interest  rates.  In
addition, the Company currently has both the intent and the ability to hold such
securities until the market value recovers, including until maturity.

         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 June 30,  2008 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 .................   13.9%      14.8%      9.5%
Community First Bank ...........................   13.2%      14.2%      9.0%
Minimum "well-capitalized" requirement .........    6.0%      10.0%      6.0%
Minimum requirement ............................    4.0%       8.0%      5.0%

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



                                       18
<PAGE>

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:

                                 June 30, 2008
                                 -------------
                                  (Dollars in
                                   thousands)
Loan commitments ............   $    47,893
Standby letters of credit ...         1,114

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 the three  months or six months  ended June 30,
2008.

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 June 30 2008, the
model indicates that net interest income would increase  $125,000 and net income
would  increase  $77,000 in the next twelve months if interest rates rose by 100
basis points.  Conversely,  net interest  income would decrease  $81,000 and net
income  would  decrease  $53,000 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 June 30, 2008,  there was no  significant  change from the  interest  rate
sensitivity  analysis for the various changes in interest rates calculated as of
December 31, 2007.  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 2007 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 issuer's  disclosure controls and procedures (as defined in



                                       19
<PAGE>

17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),   the  issuer'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 4. - Submission of Matters to a Vote of Security Holders.

         On  Tuesday,  April 29,  2008,  the  shareholders  of  Community  First
Bancorporation held their regular annual meeting. At the meeting, one matter was
submitted to a vote with results as follows:

1. Election of three directors to hold office for three-year terms:

                                                       SHARES VOTED
                                         ---------------------------------------
                                                         AUTHORITY      BROKER
      DIRECTORS                             FOR           WITHHELD     NON-VOTES
      ---------                             ---           --------     ---------

James E. McCoy ....................      2,070,818            0        221,828
James E. Turner ...................      2,070,818            0        221,828
Charles L. Winchester .............      2,070,818            0        221,828

         The following directors continue to serve until the expiration of their
terms at the  annual  meetings  to be held in the years  indicated  and were not
voted on at the 2008 annual  meeting:  Larry S.  Bowman,  MD - 2009,  William M.
Brown - 2009, John R. Hamrick - 2009, Frederick D. Shepherd,  Jr. - 2009, Robert
H. Edwards - 2010; Blake L. Griffith - 2010 and Gary W. Thrift - 2010.


Item 6. - Exhibits

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

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





                                       20
<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

August 12, 2008                             /s/ Frederick D. Shepherd, Jr.
-----------------                           ------------------------------------
         Date                                Frederick D. Shepherd, Jr., Chief
                                             Executive Officer and Chief
                                             Financial Officer


<PAGE>


                                  EXHIBIT INDEX


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

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







                                       21