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, 2009                     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   has   submitted
electronically  and posted on its corporate web site, if any, every  Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T  during  the  preceding  12  months  (or for such  shorter  period  that the
registrant was required to submit and post such files).

         Yes [ ]  No [ ]    (Not yet applicable to Registrant)

         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, 3,609,811 Shares Outstanding on August 6, 2009



<PAGE>


                         COMMUNITY FIRST BANCORPORATION

                                    FORM 10-Q

                                      Index
<TABLE>
<CAPTION>

                                                                                                                     Page
                                                                                                                     ----
PART I -          FINANCIAL INFORMATION

Item 1.           Financial Statements

<S>                                                                                                                    <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 ...........    16
Item 3.           Quantitative and Qualitative Disclosures About Market Risk ......................................    26
Item 4T.          Controls and Procedures .........................................................................    26

PART II -         OTHER INFORMATION

Item 4.           Submission of Matters to a Vote of Security Holders .............................................    26
Item 6.           Exhibits ........................................................................................    27

SIGNATURE                                                                                                              28
</TABLE>




                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                   (Unaudited)
                                                                                                     June 30,           December 31,
                                                                                                       2009                  2008
                                                                                                       -----                 ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                  <C>                  <C>
     Cash and due from banks .............................................................           $   8,348            $   9,204
     Interest bearing balances due from banks ............................................              16,872               12,969
     Federal funds sold ..................................................................                   -               18,793
                                                                                                     ---------            ---------
         Cash and cash equivalents .......................................................              25,220               40,966
     Securities available-for-sale .......................................................             139,815              126,636
     Securities held-to-maturity (fair value $10,588 for 2009
            and $12,238 for 2008) ........................................................              10,278               11,910
     Other investments ...................................................................               1,307                1,220
     Loans ...............................................................................             273,245              270,413
         Allowance for loan losses .......................................................              (5,465)              (5,475)
                                                                                                     ---------            ---------
            Loans - net ..................................................................             267,780              264,938
     Premises and equipment - net ........................................................               8,598                8,655
     Accrued interest receivable .........................................................               2,528                2,776
     Bank-owned life insurance ...........................................................               8,666                8,483
     Other assets ........................................................................               5,562                3,889
                                                                                                     ---------            ---------
            Total assets .................................................................           $ 469,754            $ 469,473
                                                                                                     =========            =========

Liabilities
     Deposits
         Noninterest bearing .............................................................           $  45,963            $  41,962
         Interest bearing ................................................................             368,158              374,153
                                                                                                     ---------            ---------
            Total deposits ...............................................................             414,121              416,115
     Accrued interest payable ............................................................               4,177                3,045
     Long-term debt ......................................................................               9,500                9,500
     Other liabilities ...................................................................               1,429                  885
                                                                                                     ---------            ---------
            Total liabilities ............................................................             429,227              429,545
                                                                                                     ---------            ---------

Shareholders' equity
     Preferred stock - no par value; 10,000,000 shares authorized;
         None issued and outstanding .....................................................                   -                    -
     Common stock - no par value; 10,000,000 shares authorized;
         issued and outstanding - 3,609,811 for 2009 and
         3,564,279 for 2008 ..............................................................              37,570               37,084
     Additional paid-in capital ..........................................................                 748                  748
     Retained earnings ...................................................................               2,672                1,769
     Accumulated other comprehensive income (loss) .......................................                (463)                 327
                                                                                                     ---------            ---------
            Total shareholders' equity ...................................................              40,527               39,928
                                                                                                     ---------            ---------
            Total liabilities and shareholders' equity ...................................           $ 469,754            $ 469,473
                                                                                                     =========            =========
</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
                                                                                ------------                      ----------
                                                                            2009             2008             2009            2008
                                                                            ----             ----             ----            ----
                                                                                  (Dollars in thousands, except per share)

Interest income
<S>                                                                       <C>              <C>              <C>              <C>
     Loans, including fees .....................................          $ 4,197          $ 4,523          $ 8,246          $ 9,255
     Interest bearing balances due from banks ..................                6                5               22                7
     Securities
       Taxable .................................................            1,456            1,172            2,962            2,189
       Tax-exempt ..............................................              202              208              411              414
     Other investments .........................................                -               12                -               25
     Federal funds sold ........................................                -              117                3              503
                                                                          -------          -------          -------          -------
         Total interest income .................................            5,861            6,037           11,644           12,393
                                                                          -------          -------          -------          -------

Interest expense
     Time deposits $100M and over ..............................              990            1,057            2,083            2,210
     Other deposits ............................................            1,757            2,042            3,573            4,438
     Long-term debt ............................................               91               48              182               87
                                                                          -------          -------          -------          -------
         Total interest expense ................................            2,838            3,147            5,838            6,735
                                                                          -------          -------          -------          -------

Net interest income ............................................            3,023            2,890            5,806            5,658
Provision for loan losses ......................................              700              280            1,450              410
                                                                          -------          -------          -------          -------
Net interest income after provision ............................            2,323            2,610            4,356            5,248
                                                                          -------          -------          -------          -------

Other income
     Service charges on deposit accounts .......................              348              375              671              735
     ATM interchange and other fees ............................              156              141              296              270
     Credit life insurance commissions .........................                3                3                9                7
     Gains on sales of securities
         available-for-sale ....................................               90                -               90                -
     Increase in value of bank-owned
         life insurance ........................................               91               93              183              186
     Other income ..............................................               64               13               74               36
                                                                          -------          -------          -------          -------
         Total other income ....................................              752              625            1,323            1,234
                                                                          -------          -------          -------          -------

Other expenses
     Salaries and employee benefits ............................            1,244            1,108            2,425            2,145
     Net occupancy expense .....................................              134              130              269              249
     Furniture and equipment expense ...........................              100              106              193              216
     Amortization of computer software .........................              112               81              207              156
     ATM interchange and related expenses ......................              101               95              214              205
     Directors' fees ...........................................               34               34               57               61
     FDIC insurance assessment .................................              300               55              370               70
     Other expense .............................................              401              396              788              790
                                                                          -------          -------          -------          -------
         Total other expenses ..................................            2,426            2,005            4,523            3,892
                                                                          -------          -------          -------          -------

Income before income taxes .....................................              649            1,230            1,156            2,590
Income tax expense .............................................              160              385              253              785
                                                                          -------          -------          -------          -------
Net income .....................................................          $   489          $   845          $   903          $ 1,805
                                                                          =======          =======          =======          =======

Per share*
     Net income ................................................          $  0.14          $  0.24          $  0.25          $  0.51
     Net income, assuming dilution .............................             0.14             0.23             0.25             0.49
</TABLE>

* Per share  information has been  retroactively  adjusted to reflect a 5% stock
dividend effective December 20, 2008.

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, 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
                                                      ==========    ==========   ==========   ==========   ==========    ==========



Balance, January 1, 2009 ..........................    3,564,279    $   37,084   $      748   $    1,769   $      327    $   39,928
                                                                                                                         ----------
Comprehensive income:
    Net income ....................................            -             -            -          903            -           903
                                                                                                                         ----------
    Unrealized holding gains and losses
      on available-for-sale securities
      arising during the period, net of
      income taxes of $410 ........................            -             -            -            -         (733)         (733)
    Reclassification adjustment,
      net of income tax effects of $33 ............            -             -            -            -          (57)          (57)
                                                                                                                         ----------
        Total other comprehensive income ..........                                                                            (790)
                                                                                                                         ----------
          Total comprehensive income ..............                                                                             113
                                                                                                                         ----------
Exercise of employee stock options ................       45,532           486            -            -            -           486
                                                      ----------    ----------   ----------   ----------   ----------    ----------
Balance, June 30, 2009 ............................    3,609,811    $   37,570   $      748   $    2,672   $     (463)   $   40,527
                                                      ==========    ==========   ==========   ==========   ==========    ==========
</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,
                                                                                                                --------
                                                                                                         2009                 2008
                                                                                                         -----                ----
                                                                                                         (Dollars in thousands)
<S>                                                                                                  <C>                  <C>
Operating activities
     Net income ..........................................................................           $     903            $   1,805
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ....................................................               1,450                  410
            Depreciation .................................................................                 195                  219
            Amortization of net loan fees and costs ......................................                 (59)                 (85)
            Securities accretion and premium amortization ................................                 323                   (1)
            Gains on sales of securities available-for-sale ..............................                 (90)                   -
            Loss on sale of foreclosed assets ............................................                   -                    6
            Increase in value of bank-owned life insurance ...............................                (183)                (186)
            Decrease (increase) in interest receivable ...................................                 248                  (66)
            Increase (decrease) in interest payable ......................................               1,132                 (543)
            Decrease in prepaid expenses and other assets ................................                 246                  143
            Increase in other accrued expenses ...........................................                 547                  374
                                                                                                     ---------            ---------
                Net cash provided by operating activities ................................               4,712                2,076
                                                                                                     ---------            ---------
Investing activities
     Purchases of securities available-for-sale ..........................................            (103,423)             (41,708)
     Purchase of securities held-to-maturity .............................................                   -               (7,490)
     Maturities, calls and paydowns of securities available-for-sale .....................              82,930               28,780
     Maturities, calls and paydowns of securities held-to-maturity .......................               1,629                  466
     Proceeds from sales of securities available-for-sale ................................               5,851                    -
     Proceeds from sales of other investments ............................................                  38                    -
     Purchases of other investments ......................................................                (125)                 (87)
     Net increase in loans made to customers .............................................              (5,770)             (12,838)
     Purchases of premises and equipment .................................................                (138)                (382)
     Proceeds of sale of foreclosed assets ...............................................                 300                   34
     Additional investments in foreclosed assets .........................................                (239)                   -
     Investment in bank-owned life insurance .............................................                   -               (1,000)
                                                                                                     ---------            ---------
                Net cash used by investing activities ....................................             (18,947)             (34,225)
                                                                                                     ---------            ---------
Financing activities
     Net (decrease) increase in demand deposits, interest
         bearing transaction accounts and savings accounts ...............................              (7,155)               4,154
     Net increase in certificates of deposit and other
         time deposits ...................................................................               5,161               10,836
     Net increase (decrease) in short-term borrowings ....................................                   -                1,500
     Proceeds of issuing long-term debt ..................................................                   -                6,000
     Repayments of long-term debt ........................................................                   -               (1,000)
     Cash paid in lieu of issuing fractional shares ......................................                  (3)                   -
     Exercise of employee stock options ..................................................                 486                  365
                                                                                                     ---------            ---------
                Net cash (used) provided by financing activities .........................              (1,511)              21,855
                                                                                                     ---------            ---------
Decrease in cash and cash equivalents ....................................................             (15,746)             (10,294)
Cash and cash equivalents, beginning .....................................................              40,966               34,673
                                                                                                     ---------            ---------
Cash and cash equivalents, ending ........................................................           $  25,220            $  24,379
                                                                                                     =========            =========
</TABLE>



See accompanying notes to unaudited consolidated financial statements.


                                       6
<PAGE>

COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Cash Flows - continued
                                                                 (Unaudited)
                                                             Six Months Ended
                                                                  June 30,
                                                              2009        2008
                                                              ----        ----
                                                          (Dollars in thousands)
Supplemental Disclosure of Cash Flow Information
     Cash paid during the period for
         Interest ......................................   $ 4,706     $ 7,278
         Income taxes ..................................         8         900
     Net transfers from loans to foreclosed assets .....     1,537           -
     Noncash investing and financing activities:
         Other comprehensive income (loss) .............      (790)       (784)

See accompanying notes to unaudited consolidated financial statements.

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, 2008 filed with the  Securities  and  Exchange
Commission.   Certain  amounts  in  the  2008  financial  statements  have  been
reclassified to conform to the current  presentation.  All amounts are stated in
thousands, except per share.

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.

Investment Securities - The following table presents information about amortized
cost,  unrealized  gains,   unrealized  losses  and  estimated  fair  values  of
securities:



                                       7
<PAGE>

                                                      June 30, 2009
                                                      -------------
                                                    Gross       Gross
                                                 Unrealized Unrealized Estimated
                                       Amortized   Holding   Holding     Fair
                                          Cost      Gains    Losses      Value
                                          ----      -----    ------      -----
                                               (Dollars in thousands)
Available-for-sale
Mortgage-backed securities
     issued by US Government
     agencies ......................   $  1,626   $     34   $      -   $  1,660
Government sponsored
     enterprises (GSEs) ............     80,217        462      1,284     79,395
Mortgage-backed securities
     issued by GSEs ................     38,858        697         88     39,467
State, county and
     municipal .....................     19,837         86        630     19,293
                                       --------   --------   --------   --------
          Total ....................   $140,538   $  1,279   $  2,002   $139,815
                                       ========   ========   ========   ========

Held-to-maturity
Mortgage-backed securities
     issued by US Government
     agencies ......................   $      -   $      -   $      -    $     -
Government sponsored
     enterprises ...................          -          -          -          -
Mortgage-backed securities
     issued by GSEs ................     10,278        310          -     10,588
State, county and
     municipal .....................          -          -          -          -
                                       --------   --------   --------   --------
          Total ....................   $ 10,278   $    310   $      -   $ 10,588
                                       ========   ========   ========   ========


The  amortized  cost and  estimated  fair  value of  securities  by  contractual
maturity are shown below:

<TABLE>
<CAPTION>
                                                                                          June 30, 2009
                                                                                          -------------
                                                                        Available-for-sale                 Held-to-maturity
                                                                        ------------------                 ----------------
                                                                   Amortized          Estimated         Amortized         Estimated
                                                                      Cost            Fair Value           Cost           Fair Value
                                                                      ----            ----------           ----           ----------
                                                                                         (Dollars in thousands)
<S>                                                                <C>                <C>                <C>                <C>
Due within one year ....................................           $  2,508           $  2,562           $      -           $      -
Due after one through five years .......................             12,103             12,246                  -                  -
Due after five through ten years .......................             36,884             36,623                  -                  -
Due after ten years ....................................             48,559             47,257                  -                  -
                                                                   --------           --------           --------           --------
                                                                    100,054             98,688                  -                  -
Mortgage-backed securities issued by:
   US Government agencies ..............................              1,626              1,660                  -                  -
   GSEs ................................................             38,858             39,467             10,278             10,588
                                                                   --------           --------           --------           --------
   Total ...............................................           $140,538           $139,815           $ 10,278           $ 10,588
                                                                   ========           ========           ========           ========
</TABLE>

The estimated  fair values and gross  unrealized  losses of all of the Company's
investment  securities whose estimated fair values were less than amortized cost
as of June 30, 2009 which had not been  determined to be  other-than-temporarily
impaired are  presented  below.  The Company  evaluates  all  available-for-sale
securities and all held-to-maturity securities for impairment as of each balance
sheet date.  The  securities  have been  segregated  in the table by  investment
category  and the  length  of time  that  individual  securities  have been in a
continuous unrealized loss position.


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                                June 30, 2009
                                                                                -------------
                                                         Continuously in Unrealized Loss Position for a Period of
                                                         --------------------------------------------------------
                                                Less than 12 Months            12 Months or more                   Total
                                                -------------------            -----------------                   -----
                                              Estimated     Unrealized      Estimated     Unrealized       Estimated     Unrealized
                                             Fair Value        Loss         Fair Value       Loss          Fair Value       Loss
                                             ----------        ----         ----------       ----          ----------       ----
                                                                            (Dollars in thousands)
Available-for-sale
<S>                                             <C>            <C>            <C>            <C>            <C>            <C>
  US Government agencies .................      $     -        $     -        $     -        $     -        $     -        $     -
  Government-sponsored
    enterprises (GSEs) ...................       51,078          1,284              -              -         51,078          1,284
  Mortgage-backed securities
    issued by GSEs .......................        6,849             88              -              -          6,849             88
  State, county and
    municipal securities .................       12,668            568          1,316             62         13,984            630
                                                -------        -------        -------        -------        -------        -------
                  Total ..................      $70,595        $ 1,940        $ 1,316        $    62        $71,911        $ 2,002
                                                =======        =======        =======        =======        =======        =======

Held-to-maturity
  GSEs ...................................      $     -        $     -        $     -        $     -        $     -        $     -
                                                -------        -------        -------        -------        -------        -------
                  Total ..................      $     -        $     -        $     -        $     -        $     -        $     -
                                                =======        =======        =======        =======        =======        =======
</TABLE>

As of June 30, 2009, 71 securities had been  continuously  in an unrealized loss
position for less than 12 months and 4 securities  had been  continuously  in an
unrealized  loss  position for 12 months or more.  The Company does not consider
these investments to be  other-than-temporarily  impaired because the unrealized
losses involve  primarily  issuances of state,  county and municipal  government
issuers and mortgage-backed securities issued by GSEs. The Company also believes
that the impairments resulted from current credit market disruptions,  and notes
that there have been no  failures  by the  issuers  to remit  periodic  interest
payments  as required  nor is the  Company  aware that any such issuer has given
notice that it expects  that it will be unable to make any such  future  payment
according to the terms of the bond indenture.  Although the Company classifies a
majority of its investment securities as available-for-sale,  management has not
determined  that any specific  securities  will be disposed of prior to maturity
and believes  that the Company has both the ability and the intent to hold those
investments   until  a  recovery  of  fair  value,   including  until  maturity.
Substantially all of the issuers of state, county and municipal  securities were
rated at least "investment grade" as of June 30, 2009.

The  Company's  subsidiary  bank is a member  of the  Federal  Home Loan Bank of
Atlanta ("FHLB") and,  accordingly,  is required to own restricted stock in that
institution  in  amounts  that  may  vary  from  time to  time.  Because  of the
restrictions  imposed,  the  stock  may  not be sold to  other  parties,  but is
redeemable by the FHLB at the same price as that at which it was acquired by the
Company's  subsidiary.  The Company evaluates this security for impairment based
on  the  probability  of  ultimate  recoverability  of  the  par  value  of  the
investment. No impairment has been recognized based on this evaluation.

During  the first six  months of 2009,  the  Company  sold 3  available-for-sale
securities  for gross sales proceeds of $5,851.  Gross realized gains  resulting
from these sales  totaled $90.  There were no  transfers  of  available-for-sale
securities to other categories in the 2009 six-month period.

Nonperforming  Loans - As of June 30,  2009,  there were  $17,516 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 2008 per share
information  has  been  retroactively  adjusted  to give  effect  to a 5%  stock
dividend  effective  December 20, 2008.  Net income per share and net income per
share, assuming dilution, were computed as follows:



                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                                         Period Ended June 30,
                                                                                         ---------------------
                                                                           Three Months                          Six Months
                                                                           ------------                          ----------
                                                                       2009               2008              2009              2008
                                                                       ----               ----              ----              ----
                                                                             (Dollars in thousands, except per share amounts)

<S>                                                                 <C>               <C>               <C>               <C>
Net income per share, basic
  Numerator - net income ...................................        $      489        $      845        $      903        $    1,805
                                                                    ==========        ==========        ==========        ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...............................         3,609,811         3,528,229         3,597,298         3,519,916
                                                                    ==========        ==========        ==========        ==========

      Net income per share, basic ..........................        $      .14        $      .24        $      .25        $      .51
                                                                    ==========        ==========        ==========        ==========

Net income per share, assuming dilution
  Numerator - net income ...................................        $      489        $      845        $      903        $    1,805
                                                                    ==========        ==========        ==========        ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...............................         3,609,811         3,528,229         3,597,298         3,519,916
  Effect of dilutive stock options .........................                 -           141,031                 -           166,817
                                                                     ---------         ---------         ---------         ---------
               Total shares ................................         3,609,811         3,669,260         3,597,298         3,686,733
                                                                    ==========        ==========        ==========        ==========
  Net income per share, assuming dilution ..................        $      .14        $      .23        $      .25        $      .49
                                                                    ==========        ==========        ==========        ==========
</TABLE>

Shareholders' Equity

On April 28, 2009, the Corporation's  Board of Directors adopted an amendment to
the Corporation's  Articles of Incorporation for which shareholder  approval was
not required.  As a result of this amendment,  a "Series A" of the Corporation's
Preferred  Stock  with a  liquidation  amount of $1,000  per share was  created.
Series A consists of 5,000 shares of fixed rate cumulative  perpetual  preferred
stock which shares except in certain very limited  circumstances  have no voting
rights. Upon issuance,  such preferred stock would accrue dividends at a rate of
5.00% per annum.  Cumulative dividends would be payable on each February 15, May
15,  August  15 and  November  15, if  declared  by the  Corporation's  Board of
Directors.  No dividends may be declared and paid on other stock issuances,  nor
may the Company  effect any plan to purchase,  redeem or  otherwise  acquire any
issue of stock that is  subordinate to the Series A Preferred  Stock,  including
the Company's  outstanding Common Stock, unless all cumulative  dividends due on
the Series A Preferred Stock have been paid in their entirety.

Unless  previously  called for redemption,  each  outstanding  share of Series A
Preferred  Stock would be  convertible  into 100 shares of the Company's  Common
Stock after June 17, 2019. If the Corporation calls the Series A Preferred Stock
for redemption prior to that date, each  outstanding  share would be convertible
into 100 shares of the Corporation's  common stock until the second business day
preceding the redemption  date.  The conversion  ratio would be adjusted for any
stock dividends  declared and payable on the Corporation's  Common Stock and for
any stock splits or reverse stock splits applicable thereto.

No shares of Fixed Rate  Cumulative  Perpetual  Preferred  Stock,  Series A were
issued and outstanding as of June 30, 2009.

Fair  Value  Measurements  - Fair  value is  defined  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. A three-level  hierarchy is
used for fair value  measurements  based upon the  transparency of inputs to the
valuation of an asset or liability as of the  measurement  date.  In  developing
estimates  of the fair values of assets and  liabilities,  no  consideration  of
large position  discounts for financial  instruments quoted in active markets is
allowed.  However,  an entity is required to consider  its own  creditworthiness
when valuing its liabilities.  For disclosure  purposes,  fair values for assets
and liabilities are shown in the level of the hierarchy that correlates with the
lowest  level input that is  significant  to the fair value  measurement  in its
entirety.

The three levels of the fair value input hierarchy are described as follows:

                                       10
<PAGE>

Level 1 inputs reflect  quoted prices in active markets for identical  assets or
liabilities.

Level 2 inputs  reflect  observable  inputs  that may  consist of quoted  market
prices for  similar  assets or  liabilities,  quoted  prices  that are not in an
active  market,  or other  inputs that are  observable  in the market and can be
corroborated by observable  market data for  substantially  the full term of the
assets or liabilities being valued.

Level 3 inputs  reflect the use of pricing  models and/or  discounted  cash flow
methodologies using other than contractual  interest rates or methodologies that
incorporate a significant amount of management judgment, use of the entity's own
data, or other forms of unobservable data.

The following is a summary of the measurement attributes applicable 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, 2009       (Level 1)         (Level 2)          (Level 3)
-----------                      -------------       ---------         ---------          ---------
                                                   (Dollars in thousands)
<S>                                                  <C>               <C>                <C>
Securities available-for-sale                        $      -          $ 139,815          $       -
</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.  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.

In February 2008,  the Financial  Accounting  Standards  Board Staff issued FASB
Staff  Position  No. FAS 157-2  ("FSP  157-2")  which  delayed  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  only  partially  applied  SFAS No. 157 in periods
ending prior to March 31, 2009.  As of June 30, 2009,  the Company had no assets
or liabilities carried on the Consolidated  Balance Sheets for which a change in
fair value was made on a non-recurring  basis during the  three-month  period or
year-to-date  period ended June 30, 2009 and which  remained  outstanding at the
end of the period.

SFAS No. 107,  "Disclosures  about Fair  Values of  Financial  Instruments,"  as
amended,  requires  disclosure of the estimated fair value of certain on-balance
sheet  and  off-balance   sheet  financial   instruments  and  the  methods  and
assumptions  used to  estimate  their fair  values.  A financial  instrument  is
defined by SFAS No. 107 as cash,  evidence of an ownership interest in an entity
or a  contract  that  creates a  contractual  obligation  or right to deliver or
receive cash or another financial instrument from a second entity on potentially
favorable or unfavorable terms.  Financial  instruments within the scope of SFAS
No. 157 that are not carried at fair value on the  Consolidated  Balance  Sheets
are  discussed  below.  Certain  financial   instruments  and  all  nonfinancial
instruments are excluded from the scope of SFAS No. 157.  Accordingly,  the fair
value  disclosures  required by SFAS No. 157 provide only a partial  estimate of
the Company's fair value.

For cash and due from  banks,  interest  bearing  deposits  due from  banks  and
federal funds sold, the carrying  amount  approximates  fair value because these
instruments generally mature in 90 days or less. The carrying amounts of accrued
interest receivable or payable approximate fair values.

The  fair  value  of  held-to-maturity   mortgage-backed  securities  issued  by
Government  sponsored  enterprises is estimated based on dealers' quotes for the
same or similar securities.

The  fair  value  of FHLB  stock  is  estimated  at its  cost  because  the FHLB
historically has redeemed its outstanding stock at that value.

                                       11
<PAGE>

Fair values are estimated for loans using  discounted cash flow analyses,  using
interest  rates  currently  offered  for loans  with  similar  terms and  credit
quality.  The Company  does not engage in  originating,  holding,  guaranteeing,
servicing or investing in loans where the terms of the loan product give rise to
a concentration of credit risk.

The fair value of deposits with no stated maturity  (noninterest bearing demand,
interest  bearing  transaction  accounts and savings) is estimated as the amount
payable on demand,  or carrying  amount,  as required by SFAS No. 157.  The fair
value of time  deposits is estimated  using a discounted  cash flow  calculation
that applies rates currently offered to aggregate expected maturities.

The fair values of the  Company's  short-term  borrowings,  if any,  approximate
their carrying amounts.

The fair values of fixed rate long-term  debt  instruments  are estimated  using
discounted cash flow analyses,  based on the borrowing rates currently in effect
for  similar  borrowings.  The fair  values  of  variable  rate  long-term  debt
instruments are estimated at the carrying amount.

The estimated fair values of  off-balance-sheet  financial  instruments  such as
loan  commitments  and standby  letters of credit are generally  based upon fees
charged to enter into  similar  agreements,  taking into  account the  remaining
terms  of the  agreements  and the  counterparties'  creditworthiness.  The vast
majority  of the  banking  subsidiary's  loan  commitments  do not  involve  the
charging of a fee,  and fees  associated  with  outstanding  standby  letters of
credit are not material. For loan commitments and standby letters of credit, the
committed  interest rates are either  variable or approximate  current  interest
rates offered for similar commitments.  Therefore,  the estimated fair values of
these off-balance-sheet financial instruments are nominal.

The following is a summary of the carrying  amounts and estimated fair values of
the Company's financial assets and liabilities:

                                                             June 30, 2009
                                                             -------------
                                                        Carrying       Estimated
                                                        Amount        Fair Value
                                                        ------        ----------
                                                         (Dollars in thousands)
Financial assets
  Cash and due from banks ..........................    $ 8,348         $ 8,348
  Interest bearing deposits due from banks .........     16,872          16,872
  Securities available-for-sale ....................    139,815         139,815
  Securities held-to-maturity ......................     10,278          10,588
  Federal Home Loan Bank stock .....................      1,307           1,307
  Loans ............................................    267,780               *
  Accrued interest receivable ......................      2,528           2,528
Financial liabilities
  Deposits .........................................    414,121               *
  Accrued interest payable .........................      4,177           4,177
  Long-term debt ...................................      9,500               *

*Information not currently available.

The following is a summary of the notional or contractual  amounts and estimated
fair values of the Company's off-balance sheet financial instruments:


                                       12
<PAGE>

                                                        June 30, 2009
                                                        -------------
                                                   Notional/         Estimated
                                                    Contract            Fair
                                                    Amount             Value
                                                    ------             -----
                                                   (Dollars in thousands)
Off-balance sheet commitments
Loan commitments ...............................   $ 25,829           $   -
Standby letters of credit ......................        948               -

Subsequent  Events - The Company has evaluated events  subsequent to the balance
sheet  date  through  August  14,  2009,  which is the date  that the  financial
statements  were issued,  in accordance  with the  requirements  of Statement of
Financial Accounting Standards No. 165, "Subsequent Events."

Subsequent events may either provide  additional  evidence about conditions that
existed at the balance sheet date,  including  estimates inherent in the process
of preparing  financial  statements  (recognized  subsequent events), or provide
evidence about conditions that did not exist at the balance sheet date but arose
after the balance  sheet date but before the  financial  statements  were issued
(nonrecognized  subsequent events). The effects of recognized subsequent events,
if any,  have been  included  in the  financial  statements.  If the  effects of
nonrecognized  subsequent  events,  if any,  are of a nature  that  they must be
disclosed to keep the financial  statements from being  misleading,  the Company
would disclose both the nature of the event, an estimate of its financial effect
or would state that an estimate of the  financial  effect  cannot be made. As of
June 30,  2009,  there were no  nonrecognized  subsequent  events that  required
disclosure.

New Accounting  Pronouncements - Statement of Financial Accounting Standards No.
160 "Noncontrolling Interests in Consolidated Financial Statements, an amendment
of ARB No.  51"  ("SFAS  No.  160") was  effective  as of January 1, 2009 and is
required  to  be  applied  prospectively  with  retrospective  presentation  and
disclosure requirements for comparative financial statements. Early adoption was
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,  the adoption of
SFAS  No.  160 in  January  2009 had no  effect  on the  Company's  consolidated
financial statements.

SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities,"
was effective as of January 1, 2009. This standard requires enhanced  disclosure
about an entity's  derivative and hedging activities to improve the transparency
of financial  reporting.  The Company does not engage in any material derivative
or hedging  activities.  Therefore,  the  implementation  of SFAS No. 161 had no
effect on the Company's consolidated financial statements.

Financial   Accounting  Standards  Board  ("FASB")  Staff  Position  No.  142-3,
"Determination  of the Useful Life of Intangible  Assets" ("FSP 142-3"),  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." This Staff Position
was  effective  for the  Company  on  January  1,  2009 and had no impact 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 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  that will  reflect  the  entity's  nonconvertible  debt
borrowing rate when interest cost is recognized in a subsequent period. This FSP
provides   guidance  for  initial  and   subsequent   measurement   as  well  as
derecognition  provisions.  This FSP was effective for the Company on January 1,
2009  and  had no  effect  on  the  Company's  financial  position,  results  of
operations or cash flows.

FASB Staff Position No. EITF 03-6-1, "Determining Whether Instruments Granted in
Share-Based  Payment  Transactions  are  Participating  Securities"  ("FSP  EITF
03-6-1")  provides  that  unvested   share-based  payment  awards  that  contain
non-forfeitable  rights to dividends or dividend  equivalents are  participating
securities and must be included in the earnings per share computation.  FSP EITF
03-6-1 was effective for the Company on January 1, 2009 and had no effect on the
Company's financial position, results of operations or cash flows.

                                       13
<PAGE>

FASB  Staff  Position  SFAS  133-1  and  FIN  45-4  "Disclosures   about  Credit
Derivatives and Certain  Guarantees:  An Amendment of FASB Statement No. 133 and
FASB  Interpretation  No. 45; and  Clarification  of the Effective  Date of FASB
Statement  No.  161" ("FSP SFAS 133-1 and FIN 45-4")  amends SFAS 133 to require
the  seller  of  credit  derivatives  to  disclose  the  nature  of  the  credit
derivative,  the maximum potential amount of future payments,  the fair value of
the derivative,  and the nature of any recourse provisions.  Disclosures must be
made for entire hybrid  instruments that have embedded credit  derivatives.  FSP
SFAS 133-1 and FIN 45-4 also  amends  FASB  Interpretation  No. 45 ("FIN 45") to
require disclosure of the current status of the payment/performance  risk of the
credit derivative guarantee. If an entity utilizes internal groupings as a basis
for the risk,  disclosure  must also be made of how the groupings are determined
and how the  risks  are  managed.  FSP SFAS  133-1  and FIN 45-4  clarifies  the
effective date of SFAS 161 such that required disclosures should be provided for
any reporting period (annual or interim)  beginning after November 15, 2008. The
adoption  of  this  Staff  Position  had no  material  effect  on the  Company's
financial position, results of operations or cash flows.

FSP SFAS 140-4 and FIN 46(R)-8  "Disclosures  by Public  Entities  (Enterprises)
about Transfers of Financial Assets and Interest in Variable Interest  Entities"
was issued in December 2008 to require public  companies to disclose  additional
information  about  transfers  of  financial  assets  and any  involvement  with
variable interest entities. The FSP also requires certain disclosures for public
entities that are sponsors and servicers of qualifying special purpose entities.
The FSP was effective for the Company as of January 1, 2009. Application of this
FSP had no impact on the financial position, results of operations or cash flows
of the Company.

In April,  2009 FASB issued FSP No. FAS 107-1 and APB 28-1 "Interim  Disclosures
about Fair Value of Financial  Instruments."  This FSP amends FASB  Statement No
107 to require disclosures about fair value of financial instruments for interim
reporting  periods of publicly traded  companies as well as in annual  financial
statements  and  amends  APB  Opinion  No. 28 to require  those  disclosures  in
summarized  financial  information  at interim  reporting  periods.  This FSP is
effective for interim  reporting periods ending after June 15, 2009. The Company
adopted this FSP as of its mandatory adoption date.

In April,  2009 FASB issued FSP No. FAS 157-4  "Determining  Fair Value When the
Volume  and Level of  Activity  for the Asset or  Liability  Have  Significantly
Decreased and Identifying  Transactions That Are Not Orderly." This FSP provides
additional  guidance for estimating fair value in accordance with FASB Statement
No. 157 when the volume and level of activity  for the asset or  liability  have
significantly   decreased.   The  FSP  also  includes  guidance  on  identifying
circumstances  that indicate a transaction is not orderly.  The Company  adopted
this FSP as of June 30, 2009.

In April,  2009 FASB  issued  FSP No. FAS 115-2 and FAS 124-2  "Recognition  and
Presentation  of   Other-Than-Temporary   Impairments."   This  FSP  amends  the
other-than-temporary  guidance in U.S. Generally Accepted Accounting  Principles
for debt  securities  to make the guidance more  operational  and to improve the
presentation  and  disclosure of  other-than-temporary  impairments  on debt and
equity securities in the financial  statements.  The FSP does not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity  securities.  The FSP requires that entities disclose  information for
interim  and  annual  periods to enable  users of its  financial  statements  to
understand the types of available-for-sale  and held-to-maturity debt and equity
securities held,  including  information about investments in an unrealized loss
position  for  which  an  other-than-temporary  impairment  has or has not  been
recognized and information  that enables users to understand the reasons that an
other-than-temporary  impairment  of a  debt  security  was  not  recognized  in
earnings and the  methodology  and inputs used to  calculate  the portion of the
total  other-than-temporary  impairment  that was  recognized  in earnings.  The
Company adopted this FSP as of June 30, 2009.

The FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets - an
amendment of FASB  Statement  No. 140," in June 2009 to address  practices  that
developed  since the original  issuance of SFAS No. 140 that are not  consistent
with the  original  intent and key  requirements  of that  Statement  and due to
concerns  raised by users of  financial  statements  that many of the  financial
assets and related obligations that have been derecognized should continue to be
recognized in the financial statements of transferors.  The Statement eliminates
from accounting literature, as of the Statement's effective date, the concept of
a "qualifying  special-purpose  entity," requires that a transferor recognize at
fair value all assets obtained  (including a transferor's  beneficial  interest)
and  liabilities  incurred  as a result of a  transfer  of  financial  interests
accounted for as a sale and provides for enhanced  disclosures  to provide users
of financial  statements  with more  transparency  about  transfers of financial
assets and a transferor's  continuing  involvement  with  transferred  financial
assets. Companies with interests in formerly qualifying special-purpose entities
under previous  accounting  standards  will be required to  re-evaluate  whether
those  entities   should  be   consolidated   in  accordance   with   applicable
consolidation  guidance.  The  Statement  is  effective  for  interim and annual
reporting  periods  beginning with an entity's first financial  reporting period
that  begins  after  November  15, 2009 and is to be applied to  transfers  that
occurred both before and after the effective date of the Statement.  The Company
believes  that adoption of this  Statement  will have no effect on its financial
condition, results of operations or cash flows.

                                       14
<PAGE>

The FASB issued SFAS No 167,  "Amendments to FASB  Interpretation No. 46(R)," in
June 2009 to improve financial  reporting by enterprises  involved with variable
interest entities.  The Statement addresses the effects on certain provisions of
FASB  Interpretation No. 46 (revised December 2003),  "Consolidation of Variable
Interest  Entities,"  ("FIN  46(R)")  as a  result  of  the  elimination  of the
qualifying  special-purpose  entity  concept  in SFAS  No.  166 and  constituent
concerns  about the  application  of certain key provisions of FIN 46R including
those in which the accounting  and  disclosures  made under that  Interpretation
fail to provide timely and useful information about an enterprise's  involvement
in a variable  interest  entity.  The  Statement  requires  entities to reassess
whether  it is the  primary  beneficiary  of a  variable  interest  entity on an
ongoing basis and eliminates the quantitative  approach  previously  required in
making that  assessment.  It is possible that  application of this Statement may
change an entity's  assessment  of which  entities with which it is involved are
variable  interest  entities.  The Statement is effective for interim and annual
reporting  periods  beginning with an entity's first financial  reporting period
that  begins  after  November  15, 2009 and is to be applied to  transfers  that
occurred both before and after the effective date of the Statement.  The Company
believes  that adoption of this  Statement  will have no effect on its financial
condition, results of operations or cash flows.

          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
forward-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 and  disruptions  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    perceptions 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    ability to weather the current economic downturn;
     o    loss of consumer or investor confidence;
     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;


                                       15
<PAGE>

     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
           (Dollar amounts, except per share data, are in thousands)

Changes in Financial Condition

         During the first six months of 2009, the Company focused its efforts on
monitoring the performance of its portfolio of loans outstanding and maintaining
contact with its loan and deposit  customers.  Loans  outstanding as of June 30,
2009  are  $2,832  more  than  the   December   31,  2008   amount.   Securities
available-for-sale  increased by $13,179,  or 10.4%,  during the 2009  six-month
period.  Many  issuers of  fixed-rate  securities  continue to  refinance  their
outstanding obligations because of the currently available lower interest rates.
As a result,  almost $85,000 of the Company's  securities holdings were redeemed
early  during the first six months of 2009 and the Company  purchased  more than
$103,000 of securities during the 2009 year-to-date  period.  Federal funds sold
decreased by $18,793,  or 100%, since the end of 2008. During the fourth quarter
of 2008,  the Federal  Reserve  Bank began paying  interest on required  reserve
balances held by banks. Additionally,  a correspondent bank which previously was
utilized as the Bank's primary clearing bank, and which was the counterparty for
most of the  Company's  federal  funds  sold,  was  placed  in  receivership  by
government  regulators.  While that event resulted in no loss to the Company, it
created  a need for the  Company  to  identify,  contract  with,  and  establish
internal  procedures  for new  vendors to  provide  clearing  and other  banking
services.

         Continued  deterioration of real estate loans resulted in the Company's
foreclosing  and taking  possession of several  properties  during the first six
months of 2009. As of June 30, 2009, the Company's  holdings of foreclosed  real
properties totaled $1,902 comprising 11 properties.  Two of the real properties,
with  carrying  amounts  totaling  $1,070,  are  commercial  properties  and the
remaining  properties  are  residential  properties.  Four  of  the  residential
properties  are completed  housing  units.  To date the Company has  capitalized
costs of $239 and anticipates capitalizing additional costs of approximately $40
to put all properties in marketable condition.  The Company also took possession
of personal  property with a carrying amount of $280 during the first six months
of 2009.

         Interest bearing deposits  decreased by $5,995, or 1.6% and noninterest
bearing  deposits  increased by $4,001,  or 9.5%. The Federal Deposit  Insurance
Corporation's insurance limits for noninterest-bearing  transaction accounts are
temporarily  unlimited.  This policy is believed to be  responsible  in part for
large  depositors  currently  opting to  maintain  their  funds in  non-interest
bearing accounts.

         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, 2009 and 2008

         The  Company  recorded  consolidated  net  income of $489,  or $.14 per
share, for the second quarter of 2009 compared with $845, or $.24 per share, for
the second quarter of 2008. Net income per share, assuming dilution was $.14 for
the 2009 quarter and $.23 for the 2008 period.  Net income per share amounts for
2008 have been  retroactively  adjusted to reflect a five percent stock dividend
effective December 20, 2008.

         Net interest income for the 2009 second quarter was $133, or 4.6%, more
than for the 2008  second  quarter.  Total  interest  income for the 2009 second
quarter  decreased  primarily  because  of  lower  rates  earned  on  loans  and
securities  held. Total interest expense for the 2009 quarter was lower than for
the same period of 2008 due to lower interest rates paid for deposits.

                                       16
<PAGE>

         The provision for loan losses for the second  quarter of 2009 increased
by $420 over the amount for the same period of 2008 due to higher amounts of net
charge-offs,  nonaccrual  loans and  potential  problem  loans.  These  negative
developments  are  believed  to be  due to a  slowing  in  economic  conditions,
especially  with  respect  to  residential  real  estate  and  higher  levels of
unemployment.  The effects of the  deterioration  of the residential real estate
market  initially  were  evidenced by problems  experienced by some builders and
developers.  As the slowdown has lingered,  those  problems have spread to other
businesses that are more indirectly  related to the new construction real estate
market. If the slow conditions  continue or deteriorate  further, it is possible
that  relatively  large  provisions for loan losses may be needed in the future.
Unemployment  in the  Company's  market area  continued  to increase  during the
second  quarter of 2009  reaching  15.1% in Oconee  County and 13.2% in Anderson
County, SC as of June 30, 2009.

         Noninterest income for the second quarter of 2009 increased by $127, or
20.3%,   primarily   due  to  a  $90  gain   realized  on  sales  of  securities
available-for-sale.  Noninterest  expense for the 2009 second quarter  increased
from the amount  recorded  for the same 2008  period,  primarily  as a result of
higher salaries and employee  benefits and a $245 increase in deposit  insurance
expense. As of June 30, 2009, the Federal Deposit Insurance  Corporation charged
a special  assessment  to all insured banks based on a percentage of their total
assets less Tier 1 capital.  For the Company,  this special  assessment  totaled
approximately  $215.  In  addition,  the  assessment  rate charged to banks on a
recurring  basis was increased  during the second  quarter of 2009.  The Company
continues  to  emphasize  efforts to  control  expenses,  but higher  direct and
indirect   expenses  imposed  by  regulatory   authorities   limit  the  overall
effectiveness of the Company's efforts.

<TABLE>
<CAPTION>
                                                                                 Summary Income Statement
                                                                                 ------------------------
                                                                                 (Dollars in thousands)
For the Three Months Ended June 30,                         2009                2008            Dollar Change      Percentage Change
                                                            ----                ----            -------------      -----------------
<S>                                                        <C>                 <C>                 <C>                 <C>
Interest income ...................................        $5,861              $6,037              $ (176)              -2.9%
Interest expense ..................................         2,838               3,147                (309)              -9.8%
                                                           ------              ------              ------
Net interest income ...............................         3,023               2,890                 133                 4.6%
Provision for loan losses .........................           700                 280                 420               150.0%
Noninterest income ................................           752                 625                 127                20.3%
Noninterest expenses ..............................         2,426               2,005                 421                21.0%
Income tax expense ................................           160                 385                (225)              -58.4%
                                                           ------              ------              ------
Net income ........................................        $  489              $  845              $ (356)              -42.1%
                                                           ======              ======              ======
</TABLE>

Six Months Ended June 30, 2009 and 2008

         The Company  recorded  consolidated net income of $903 or .25 per share
for the first half of 2009  compared with $1,805 or $.51 per share for the first
half of 2008. Net income per share,  assuming dilution was $.25 for the 2009 six
month period and $.49 for the 2008 six months.  Net income per share amounts for
2008 have been  retroactively  adjusted to reflect a five percent stock dividend
effective December 20, 2008.

         Net interest  income for the first six months of 2009 increased by $148
or 2.6% over the 2008 amount. Increases in the average amounts of securities and
loans  held  mitigated  some of the  effects  of  lower  yields  earned  on most
categories of earning  assets and resulted in interest  income  decreasing  less
than interest  expenses.  Lower interest  expense was primarily  caused by lower
rates paid for interest bearing deposits.

         Noninterest  income for the first six months of 2009  increased  by $89
primarily  as a  result  of gains  on  sales  of  securities  available-for-sale
totaling $90.

         Noninterest  expenses  for the 2009 period  increased  by $631 or 16.2%
over the amount for the 2008 six-month  period.  Salaries and employee  benefits
increased  by $280,  or 13.1%,  reflecting  an increase of $200 in salaries  and
wages due to increases in the number of employees and normal periodic  increases
in employees' compensation and an increase of $27 in expenses related to certain
deferred  compensation   arrangements.   Expenses  for  FDIC  deposit  insurance
increased by $300 over the prior year period due to a special assessment of $215
and increases in both the assessment rate and the assessment base over the prior
year amounts.


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Summary Income Statement
                                                                                 ------------------------
                                                                                 (Dollars in thousands)
For the Six Months Ended June 30,                            2009                2008            Dollar Change     Percentage Change
                                                             ----                ----            -------------     -----------------
<S>                                                        <C>                 <C>                 <C>                  <C>
Interest income ....................................       $11,644             $12,393             $  (749)              -6.0%
Interest expense ...................................         5,838               6,735                (897)             -13.3%
                                                           -------             -------             -------
Net interest income ................................         5,806               5,658                 148                2.6%
Provision for loan losses ..........................         1,450                 410               1,040              253.7%
Noninterest income .................................         1,323               1,234                  89                7.2%
Noninterest expenses ...............................         4,523               3,892                 631               16.2%
Income tax expense .................................           253                 785                (532)             -67.8%
                                                           -------             -------             -------
Net income .........................................       $   903             $ 1,805             $  (902)             -50.0%
                                                           =======             =======             =======
</TABLE>

Net Interest Income

         Due to continuing  economic  problems,  including  increasing levels of
real estate foreclosures and higher unemployment  rates,  governmental  economic
policy makers including Congress,  the Federal Reserve and the Department of the
Treasury  have  endeavored  to enact  legislation,  promulgate  regulations  and
implement  strategies  intended  to provide  stimulus to the economy by creating
jobs,  maintaining  interest  rates at low levels and through the  provision  of
other  incentives,  such as tax credits for  first-time  home-buyers  or for the
purchase and  installation of energy efficient  residential  heating and cooling
systems and other energy  efficiency and alternative  energy projects.  To date,
the observable effects of these measures on the broad economy have been minimal.

Three Months Ended June 30, 2009 and 2008

         The average yield on interest earning assets decreased to 5.24% for the
2009 three-month  period from 6.12% for the 2008 three-month  period.  Yields on
all  significant  categories  of earning  assets were lower in the 2009  period.
Similarly,  interest  rates paid for deposits and  borrowings  were lower in the
2009 period. The average rate paid for  interest-bearing  liabilities during the
2009  three-month  period was 2.98%,  compared  with 3.74% in the same period of
2008.  Accordingly,  the average interest rate spread for the 2009 period was 12
basis points lower than for the 2008 period.


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                              Average Balances, Yields and Rates
                                                                                 Three Months Ended June 30,
                                                                                 ---------------------------
                                                                          2009                                  2008
                                                                          ----                                  ----
                                                                        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 ..............     $  13,690     $     6       0.18%      $  1,802     $     5       1.12%
Securities
     Taxable ..........................................       138,021       1,456       4.23%        97,408       1,172       4.84%
     Tax exempt (2) ...................................        19,870         202       4.08%        20,434         208       4.09%
                                                            ---------     -------                  --------     -------
         Total investment securities ..................       157,891       1,658       4.21%       117,842       1,380       4.71%
Other investments .....................................         1,320           -       0.00%           927          12       5.21%
Federal funds sold ....................................             -           -       0.00%        22,117         117       2.13%
Loans (2) (3) (4) .....................................       275,480       4,197       6.11%       254,287       4,523       7.15%
                                                            ---------     -------                  --------     -------
         Total interest earning assets ................       448,381       5,861       5.24%       396,975       6,037       6.12%
Cash and due from banks ...............................         7,079                                 7,373
Allowance for loan losses .............................        (5,527)                               (2,636)
Valuation allowance - available-for-sale securities ...         1,296                                   869
Premises and equipment ................................         8,505                                 8,828
Other assets ..........................................        15,068                                12,296
                                                            ---------                              --------
         Total assets .................................     $ 474,802                              $423,705
                                                            =========                              ========

Liabilities and shareholders' equity
Interest bearing deposits
     Interest bearing transaction accounts ............     $  53,315     $    90       0.68%      $ 57,967     $   258       1.79%
     Savings ..........................................        21,209          20       0.38%        24,752          68       1.10%
     Time deposits $100M and over .....................       127,700         990       3.11%       108,182       1,057       3.93%
     Other time deposits ..............................       170,605       1,647       3.87%       142,437       1,716       4.85%
                                                            ---------     -------                  --------     -------
         Total interest bearing deposits ..............       372,829       2,747       2.96%       333,338       3,099       3.74%
Long-term debt ........................................         9,500          91       3.84%         4,929          48       3.92%
                                                            ---------     -------                  --------     -------
         Total interest bearing liabilities ...........       382,329       2,838       2.98%       338,267       3,147       3.74%
Noninterest bearing demand deposits ...................        46,016                                41,307
Other liabilities .....................................         4,870                                 4,138
Shareholders' equity ..................................        41,587                                39,993
                                                            ---------                              --------
         Total liabilities and shareholders' equity ...     $ 474,802                              $423,705
                                                            =========                              ========
Interest rate spread ..................................                                 2.26%                                 2.38%
Net interest income and net yield
     on earning assets ................................                   $ 3,023       2.70%                   $ 2,890       2.93%
Interest free funds supporting earning
     assets ...........................................     $  66,052                              $ 58,708
</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.


                                       19
<PAGE>

Six Months Ended June 30, 2009 and 2008

         For the first  half of 2009,  the  average  yield on  interest  earning
assets was 5.15%,  compared with 6.19% for the 2008 period. Yields were lower on
substantially  all types of  earning  assets  in the 2009  period.  Loan  yields
decreased because a significant portion of the Company's loan portfolio consists
of variable  rate  instruments.  Such  variable  rate  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.  In  addition,  the  significant
increase in nonaccrual  loans during the 2009 period reduced loan income because
accrued  but  uncollected  interest  income on such  loans is  reversed  against
previously  recognized  loan income at the time the loan is placed in nonaccrual
status and the future accrual of income is discontinued.  Approximately  $329 of
accrued  interest income was reversed during the six months ended June 30, 2009,
including  $155 of such  income  reversed  during the three  months  then ended.
Income 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
2009 period as well, at 3.00% compared with 3.92% in the 2008 six-month  period.
Decreases  in interest  rates paid  resulted  from the  Company's  responses  to
actions taken by the Federal Reserve to maintain at low levels certain  interest
rates within its purview.

         Given the current  economic  environment,  the Company  expects that it
will be unable  profitably to increase its loan portfolio  significantly  in the
near term. As a result,  management  anticipates  that the Company will not grow
significantly until the negative economic trends begin to improve.



                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                              Average Balances, Yields and Rates
                                                                                  Six Months Ended June 30,
                                                                                  -------------------------
                                                                          2009                                  2008
                                                                          ----                                  ----
                                                                        Interest                              Interest
                                                            Average     Income/     Yields/        Average     Income/     Yields/
                                                           Balances     Expense    Rates (1)      Balances     Expense    Rates (1)
                                                           --------     -------    ---------      --------     -------    ---------
                                                                                   (Dollars in thousands)
<S>                                                        <C>           <C>          <C>         <C>           <C>          <C>
Assets
Interest-bearing balances due from banks .............     $  17,810     $    22      0.25%       $   1,108     $     7      1.27%
Securities
     Taxable .........................................       138,972       2,962      4.30%          92,739       2,189      4.75%
     Tax exempt (2) ..................................        20,177         411      4.11%          20,524         414      4.06%
                                                           ---------     -------                  ---------     -------
         Total investment securities .................       159,149       3,373      4.27%         113,263       2,603      4.62%
Other investments ....................................         1,271           -      0.00%             886          25      5.67%
Federal funds sold ...................................         3,995           3      0.15%          35,084         503      2.88%
Loans (2) (3) (4) ....................................       273,938       8,246      6.07%         252,271       9,255      7.38%
                                                           ---------     -------                  ---------     -------
         Total interest earning assets ...............       456,163      11,644      5.15%         402,612      12,393      6.19%
Cash and due from banks ..............................         7,819                                  7,811
Allowance for loan losses ............................        (5,473)                                (2,609)
Valuation allowance - available-for-
     sale securities .................................         1,355                                    823
Premises and equipment ...............................         8,635                                  8,835
Other assets .........................................        14,584                                 12,247
                                                           ---------                              ---------
         Total assets ................................     $ 483,083                              $ 429,719
                                                           =========                              =========

Liabilities and shareholders' equity
Interest bearing deposits
     Interest bearing transaction accounts ...........     $  56,319     $   188      0.67%       $  58,856     $   593      2.03%
     Savings .........................................        25,121          43      0.35%          33,489         277      1.66%
     Time deposits $100M and over ....................       131,580       2,083      3.19%         105,614       2,210      4.21%
     Other time deposits .............................       169,929       3,342      3.97%         142,867       3,568      5.02%
                                                           ---------     -------                  ---------     -------
         Total interest bearing
           deposits ..................................       382,949       5,656      2.98%         340,826       6,648      3.92%
Short-term borrowings ................................            11           -      0.00%               -           -      0.00%
Long-term debt .......................................         9,500         182      3.86%           4,714          87      3.71%
                                                           ---------     -------                  ---------     -------
         Total interest bearing
           liabilities ...............................       392,460       5,838      3.00%         345,540       6,735      3.92%
Noninterest bearing demand deposits ..................        45,109                                 40,542
Other liabilities ....................................         4,428                                  4,233
Shareholders' equity .................................        41,086                                 39,404
                                                           ---------                              ---------
         Total liabilities and shareholders' equity ..     $ 483,083                              $ 429,719
                                                           =========                              =========
Interest rate spread .................................                                2.15%                                  2.27%
Net interest income and net yield
     on earning assets ...............................                   $ 5,806      2.57%                     $ 5,658      2.83%
Interest free funds supporting earning assets ........     $ 63,703                               $  57,072
</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.


                                       21
<PAGE>


Provision and Allowance for Loan Losses

         The provision for loan losses was $700 for the second  quarter of 2009,
compared with $280 for the second  quarter of 2008.  For the first half of 2009,
the provision for loan losses was $1,450,  compared with $410 for the first half
of 2008. At June 30, 2009,  the allowance for loan losses was 2.00% of loans,  a
slight  decrease from 2.02% at December 31, 2008 but  significantly  higher than
the ratio as of June 30, 2008.

         For the  first six  months of 2009,  net  charge-offs  totaled  $1,460,
compared with $236 in net charge offs during the same period of 2008. The higher
levels of  charge-offs  in 2009 reflect the  continuing  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                 December 31             Ended
                                                                          June 30, 2009                              June 30, 2008
                                                                          -------------            -----------       -------------
                                                                                               (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $   5,475             $   2,574             $   2,574
Provision for loan losses ........................................               1,450                 4,550                   410
Net charge-offs ..................................................              (1,460)               (1,649)                 (236)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   5,465             $   5,475             $   2,748
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding
  at period end ..................................................                2.00%                 2.02%                 1.07%
Loans at end of period ...........................................           $ 273,245             $ 270,413             $ 256,818
                                                                             =========             =========             =========
</TABLE>



                                       22
<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, 2008 ....................    $     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%
Net change .........................        2,845                -            2,845                           1,194
                                        ---------        ---------         --------                         -------
September 30, 2008 .................        4,725                -            4,725          1.77%            6,582         2.46%
Net change .........................        7,074                -            7,074                             328
                                        ---------        ---------         --------                         -------
December 31, 2008 ..................       11,799                -           11,799          4.36%            6,910         2.56%
Net change .........................        2,835                -            2,835                           2,367
                                        ---------        ---------         --------                         -------
March 31, 2009 .....................       14,634                -           14,634          5.31%            9,277         3.37%
Net change .........................        2,882                -            2,882                          (1,511)
                                        ---------        ---------         --------                         -------
June 30, 2009 ......................    $  17,516        $       -         $ 17,516          6.41%          $ 7,766         2.84%
                                        =========        =========         ========                         =======
</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, 2009,  collateral for  approximately  95% of the
dollar amount of nonaccrual  loans consisted of real estate.  At that date, real
estate  collateral  was held  for  approximately  80% of the  dollar  amount  of
potential  problem  loans.  Approximately  86% of potential  problem  loans were
secured by real estate as of June 30, 2008.  As of June 30, 2009,  approximately
81% of the Company's  potential  problem loans were included in the least severe
category of such loans, compared with approximately 92% of such loans as of June
30, 2008. Management expects that further deterioration of already weak 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 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.

         The  statewide   unemployment   rate  for  South   Carolina  was  12.1%
(seasonally  adjusted) as of June 30, 2009 compared with 8.8% as of December 31,
2008 and 6.5% as of June 30, 2008. The unemployment rates in Oconee and Anderson
Counties, South Carolina were 15.1% and 13.2%, respectively, as of June 30, 2009
compared with 10.9% and 9.6%, respectively, as of December 31, 2008 and 6.9% and
6.6%, respectively, as of June 30, 2008.

Noninterest Income

         Noninterest income totaled $752 for the second quarter of 2009 compared
with $625 for the second quarter of 2008. The Company realized gains on sales of
securities  available-for-sale  of $90 in the 2009  period.  There  were no such
sales in the 2008  period.  The Company  recognized  fees for  residential  real
estate loans  originated for others  totaling $46 in the 2009 three month period
compared with $2 for the 2008 period.

         For the six months  ended June 30,  2009,  noninterest  income  totaled
$1,323  compared  with $1,234 for the first half of 2008.  Fees for  residential
real estate loans originated for others totaled $70 for the 2009 period compared
with $14 for the 2008 period.  Service charges and fees for deposit accounts are
lower for the 2009 period due to a decrease  in the level of consumer  activity.
Gains on sales of securities  available-for-sale totaled $90 and $0 for the 2009
and 2008 six-month periods, respectively.


                                       23
<PAGE>

Noninterest Expenses

         Noninterest  expenses  totaled  $2,426 for the  second  quarter of 2009
compared with $2,005 for the second quarter of 2008, representing an increase of
$421. Compared with the 2008 period, salaries and employee benefits for the 2009
three-month  period  increased by $136 primarily as a result of increases in the
number of personnel and normal  periodic  adjustments in  compensation.  Deposit
insurance  assessments  increased by $245 over the amount for the second quarter
of 2008 due primarily to a special assessment during the second quarter of 2009.

         For the six months ended June 30, 2009,  salaries and employee benefits
increased  by $280 over the amount for the same  period of 2008  primarily  as a
result of normal  salary  increases  and  increased  numbers of  employees.  The
Company  hired a special  assets  officer  late in the first  quarter of 2009 to
assist in  administering  the higher level of  distressed  loans and  foreclosed
assets.  Deferred compensation expenses were $27 more in the 2009 period than in
the 2008 period.  Deposit  insurance  assessments for the 2009 six-month  period
totaled $370 compared with $70 for the same period of 2008, primarily because of
the special assessment discussed previously.  An increase in the assessment rate
has also been implemented  during 2009 which is expected to result in continuing
increases in the amount of those expenses.

         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 two  offices in
Anderson and one in Williamston.

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,  2009,  the ratio of loans to total  deposits was 66.0%,
compared  with 65.0% as of  December  31,  2008.  Management  believes  that the
Company's liquidity sources are adequate to meet its operating needs.

Capital Resources

         The Company's capital base increased by $599 since December 31, 2008 as
the result of net  income of $903 for the first six months of 2009,  less a $790
change in unrealized gains and losses on available-for-sale  securities,  net of
deferred  income tax effects  and $486  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.  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,  2009 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:


                                       24
<PAGE>

                                                             Total
                                               Tier 1       Capital     Leverage
                                               ------       -------     --------
Community First Bancorporation .............    13.3%        14.6%         8.7%
Community First Bank .......................    12.6%        13.8%         8.2%
Minimum "well-capitalized" requirement .....     6.0%        10.0%         6.0%
Minimum requirement ........................     4.0%         8.0%         5.0%

On April 28, 2009, the Corporation's  Board of Directors adopted an amendment to
the Corporation's  Articles of Incorporation for which shareholder  approval was
not required.  As a result of this amendment,  a "Series A" of the Corporation's
Preferred  Stock  with a  liquidation  amount of $1,000  per share was  created.
Series A consists of 5,000 shares of fixed rate cumulative  perpetual  preferred
stock  which  shares  have no voting  rights  except  in  certain  very  limited
circumstances.  Upon issuance,  such preferred stock would accrue dividends at a
rate of 5.00% per annum.  Cumulative dividends would be payable on each February
15, May 15, August 15 and November 15, if declared by the Corporation's Board of
Directors.  No dividends may be declared and paid on other stock issuances,  nor
may the Company  effect any plan to purchase,  redeem or  otherwise  acquire any
issue of stock that is  subordinate to the Series A Preferred  Stock,  including
the Company's  outstanding Common Stock, unless all cumulative  dividends due on
the Series A Preferred Stock have been paid in their entirety.

Unless  previously  called for redemption,  each  outstanding  share of Series A
Preferred  Stock would be  convertible  into 100 shares of the Company's  Common
Stock after June 17, 2019. If the Corporation calls the Series A Preferred Stock
for redemption prior to that date, each  outstanding  share would be convertible
into 100 shares of the Corporation's  common stock until the second business day
preceding the redemption  date.  The conversion  ratio would be adjusted for any
stock dividends  declared and payable on the Corporation's  Common Stock and for
any stock splits or reverse stock splits applicable thereto.

No shares of Fixed Rate  Cumulative  Perpetual  Preferred  Stock,  Series A were
issued and outstanding as of June 30, 2009.

Off-Balance-Sheet Arrangements

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

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

                                                   June 30, 2009
                                                   -------------
                                                   (Dollars in
                                                    thousands)
Loan commitments .............................        $ 25,829
Standby letters of credit ....................             948

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,
2009.

                                       25
<PAGE>

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 2009, the
model indicates that net interest income would decrease $51 and net income would
decrease  $33 in the next  twelve  months if  interest  rates  rose by 100 basis
points.  Conversely, net interest income would increase $25 and net income would
increase $16 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, 2009,  there was no  significant  change from the  interest  rate
sensitivity  analysis for the various changes in interest rates calculated as of
December 31, 2008.  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 2008 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
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 28,  2009,  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 four directors to hold office for three-year terms:

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

    Larry S. Bowman, M.D. ..........    2,596,294           0          527,007
    William M. Brown ...............    2,596,294           0          527,007
    John R. Hamrick ................    2,596,294           0          527,007
    Frederick D. Shepherd, Jr. .....    2,595,783         511          527,007

                                       26
<PAGE>

         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 2009 annual meeting: Robert H. Edwards - 2010; Blake L. Griffith
- 2010, Gary W. Thrift - 2010, James E. McCoy - 2011, James E. Turner - 2011 and
Charles L. Winchester - 2011.


Item 6. - Exhibits

         Exhibits   3.   Articles of  Amendment  to  Articles  of  Incorporation
                         relating to  authorization  of Series A Preferred Stock
                         (incorporated  by  reference to Form 8-K filed June 22,
                         2009).

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

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





                                       27
<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 14, 2009
-----------------                /s/ Frederick D. Shepherd, Jr.
    Date                        -------------------------------------------
                                Frederick D. Shepherd, Jr., Chief Executive
                                Officer and Chief Financial Officer



                                       28
<PAGE>


                                  EXHIBIT INDEX


          3.  Articles of  Amendment  to Articles of  Incorporation  relating to
              authorization   of  Series  A  Preferred  Stock   incorporated  by
              reference to Form 8-K filed June 22, 2009).

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

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





                                       29