<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Subsection 240.14a-11(c) or
Subsection 240.14a-12
[ ] Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
CUMBERLAND MOUNTAIN BANCSHARES, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1. Title of each class of securities to which
transaction applies:
_________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11:
_________________________________________________________________
4. Proposed maximum aggregate value of transaction:
_________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________<PAGE>
<PAGE>
[CUMBERLAND MOUNTAIN BANCSHARES, INC. LETTERHEAD]
September 19, 1997
Dear Stockholder:
We invite you to attend the 1997 Annual Meeting of the
Stockholders of Cumberland Mountain Bancshares, Inc. to be held
at the main office of Middlesboro Federal Bank, Federal Savings
Bank, 1431 Cumberland Avenue, Middlesboro, Kentucky, on
Wednesday, October 15, 1997 at 3:00 p.m., Eastern Time.
The accompanying notice and proxy statement describe the
formal business to be transacted Enclosed with this proxy
statement are a proxy card and an Annual Report to Stockholders
for the 1997 fiscal year. Directors and officers of the Company,
as well as representatives of Marr, Miller & Myers, PSC, the
Company's independent auditors, will be present at the Annual
Meeting to respond to any questions the stockholders may have.
You are cordially invited to attend the Annual Meeting.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN
IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This will
not prevent you from voting in person but will assure that your
vote is counted if you are unable to attend the meeting.
To help us with our planning, please check the box on the
proxy card if you plan to attend the meeting in person.
Sincerely,
/s/ James J. Shoffner
James J. Shoffner
President and Chief Managing Officer
<PAGE>
<PAGE>
_________________________________________________________________
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
(606) 248-4584
_________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 15, 1997
_________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual Meeting") of Cumberland Mountain
Bancshares, Inc. (the "Company"), will be held at the main office
of Middlesboro Federal Bank, Federal Savings Bank, 1431
Cumberland Avenue, Middlesboro, Kentucky 40965 at 3:00 p.m.,
Eastern Time, on Wednesday, October 15, 1997.
The Annual Meeting is for the purpose of considering and
acting upon:
1. The election of two directors;
2. The ratification of auditors; and
3. The transaction of such other matters as may properly
come before the Annual Meeting or any adjournments
thereof.
Any action may be taken on any one of the foregoing pro-
posals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment, the
Annual Meeting may be adjourned. Stockholders of record at the
close of business on September 5, 1997 are the stockholders
entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
The Company's Proxy Statement for the Annual Meeting
accompanies this Notice and a form of proxy is enclosed herewith.
You are requested to fill in and sign the enclosed proxy card
which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used if
you attend and vote at the Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 19, 1997
_________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A
QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
_________________________________________________________________
<PAGE>
<PAGE>
PROXY STATEMENT
OF
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 15, 1997
_________________________________________________________________
GENERAL
_________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cumberland
Mountain Bancshares, Inc. (hereinafter called the "Company") to
be used at the 1997 Annual Meeting of Stockholders of the Company
(hereinafter called the "Annual Meeting"), which will be held at
the main office of Middlesboro Federal Bank, Federal Savings
Bank, 1431 Cumberland Avenue, Middlesboro, Kentucky on Wednesday,
October 15, 1997, at 3:00 p.m., Eastern Time. The accompanying
Notice of Annual Meeting and form of proxy and this Proxy
Statement are being first mailed to stockholders on or about
September 19, 1997.
_________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
_________________________________________________________________
Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein.
Where no instructions are indicated, proxies will be voted forthe nominee
for director named below and for the other proposals
to be presented as described herein. The proxy confers
discretionary authority on the persons named therein to vote with
respect to the election of any person as a director where the
nominee is unable to serve or for good cause will not serve, and
with respect to matters incident to the conduct of the Annual
Meeting. If any other business is presented at the Annual
Meeting, proxies will be voted by those named therein in
accordance with the determination of a majority of the Board of
Directors. Proxies marked as abstentions will not be counted as
votes cast. In addition, shares held in street name which have
been designated by brokers on proxy cards as not voted will not
be counted as votes cast. Proxies marked as abstentions or as
broker no votes, however, will be treated as shares present for
purposes of determining whether a quorum is present.
Stockholders who execute proxies retain the right to revoke
them at any time. Unless so revoked, the shares represented by
properly executed proxies will be voted at the Annual Meeting and
all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by
the filing of a later dated proxy prior to a vote being taken on
a particular proposal at the Annual Meeting. A proxy will not be
voted if a stockholder attends the Annual Meeting and votes in
person. The presence of a stockholder at the Annual Meeting will
not revoke such stockholder's proxy.
_________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
_________________________________________________________________
The securities entitled to vote at the Annual Meeting
consist of the Company's common stock, $.01 par value per share
(the "Common Stock"). Stockholders of record as of the close of
business on September 5, 1997 (the "Record Date") are entitled to
one vote for each share of Common Stock then held. As of the
Record Date, there were 678,800 shares of Common Stock issued and
outstanding.
<PAGE>
Persons and groups beneficially owning in excess of 5% of
the Common Stock are required to file certain reports with
respect to such ownership pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"). The following table sets forth, as
of the Record Date, certain information as to the Common Stock
beneficially owned by all persons who have filed the reports
required of persons beneficially owning more than 5% of the
Common Stock or who were known to the Company to beneficially own
more than 5% of the Common Stock outstanding at the Record Date
and the shares of Common Stock beneficially owned by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENFICIAL OWNER OWNERSHIP(1) OUTSTANDING
- --------------- ------------ ------------
<S> <C> <C>
James J. Shoffner 42,368 (2) 6.24%
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Cumberland Mountain Bancshares, Inc. 58,727 8.65%
Employee Stock Ownership Plan
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Jeffrey L. Gendell 56,516 8.33%
Tontine Management, L.L.C.
Tontine Financial Partners, L.P.
200 Park Avenue, Suite 3900
New York, New York 10166
All Executive Officers and 142,222 (3) 20.43%
Directors as a group (7 persons)
<FN>
___________
(1) For purposes of this table, a person is deemed to be the
beneficial owner of any shares of Common Stock if he or she
has or shares voting or investment power with respect to
such Common Stock or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date.
As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares.
Except as otherwise noted, ownership is direct, and the
named persons exercise sole voting and investment power over
the shares of the Common Stock.
(2) Includes 523 shares which Mr. Shoffner has the right to
acquire pursuant to the exercise of options.
(3) Includes 7,526 shares which directors and officers have the
right to acquire pursuant to the exercise of options.
</FN>
</TABLE>
_________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
_________________________________________________________________
The Company's Board of Directors is currently composed of
five members. Under the Company's Charter, directors are divided
into three classes and elected for terms of three years each and
until their successors are elected and qualified. At the Annual
Meeting, two directors will be elected for a term expiring at the
Annual Meeting to be held in the year 2000. The Board of
Directors has nominated J. Roy Shoffner and Robert R. Long, each
to serve for an additional term of three years and until their
successors are elected and qualified. Under Tennessee law,
directors are elected by a plurality of the votes present in
person or represented by proxy at the Annual Meeting and entitled
to vote in the election of directors.
-2-<PAGE>
<PAGE>
Unless contrary instruction is given, the persons named in
the proxies solicited by the Board of Directors will vote each
such proxy for the election of the named nominee. If the nominee
is unable to serve, the shares represented by all properly
executed proxies which have not been revoked will be voted for
the election of such substitute as the Board of Directors may
recommend. At this time, the Board knows of no reason why the
nominee might be unavailable to serve.
The following table sets forth, for the nominee and each
continuing director, his name, age as of the Record Date, the
year he first became a director of the Bank, the expiration of
his current term as a director of the Company and the number and
percentage of shares of Common Stock beneficially owned. All of
the Company's current directors were initially appointed as
directors in 1996 in connection with the incorporation and
organization of the Company. Each director of the Company also
is a member of the Board of Directors of the Bank. There are no
arrangements or understandings between the Company and any
director or nominee pursuant to which such person has been
selected as a director or nominee for director of the Company,
and, except for J. Roy Shoffner and James J. Shoffner who are
father and son, no director, nominee or executive officer is
related to any other director, nominee or executive officer by
blood, marriage or adoption.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED BELOW.
<TABLE>
<CAPTION>
SHARES OF
AGE AS YEAR FIRST COMMON STOCK
OF THE ELECTED AS CURRENT BENEFICIALLY
RECORD DIRECTOR OF TERM OWNED AS OF PERCENT
NAME DATE THE BANK TO EXPIRE RECORD DATE(1) OF CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEE FOR TERMS TO EXPIRE
AT THE 2000 ANNUAL MEETING
J. Roy Shoffner 69 1961 1997 41,696 (2) 6.12%
Robert R. Long 76 1965 1997 25,352 (3) 3.72%
DIRECTORS CONTINUING IN OFFICE
James J. Shoffner 36 1988 1999 42,368 (4) 6.24%
Reecie Stagnolia, Jr. 61 1993 1998 14,705 (5) 2.16%
Raymond C. Walker 67 1985 1998 13,470 (6) 1.98%
<FN>
_______________
(1) In calculating percentage ownership for a named individual or group, the number
of shares outstanding is deemed to include shares which the named individual or
group has the right to acquire pursuant to the exercise of options. Does not
include ownership of shares held for the benefit of participants in the 1993
MRP but which have not vested.
(2) Includes 2,826 shares of Common Stock which Mr. Shoffner has the right to
acquire pursuant to options exercisable within 60 days of the Record Date.
Does not include 42,368 shares beneficially owned by Mr. Shoffner's adult
children as to which he disclaims beneficial ownership.
(3) Includes 18,629 shares held jointly with Mr. Long's children. Includes 2,511
shares which Mr. Long has the right to acquire pursuant to the exercise of
options.
(4) Includes 523 shares which Mr. Shoffner has the right to acquire pursuant to the
exercise of options. Mr. Shoffner disclaims beneficial ownership of any shares
held by his father.
(5) Includes 8,708 shares held jointly with Mr. Stagnolia's wife, 3,266 shares held
in Mr. Stagnolia's IRA and 3,065 shares held in his wife's IRA. Includes 666
shares which Mr. Stagnolia has the right to acquire pursuant to the exercise of
options.
6) Includes 10,664 shares held jointly with Mr. Walker's wife. Includes 1,000
shares which Mr. Walker has the right to acquire pursuant to the exercise of
options.
</FN>
</TABLE>
-3-
<PAGE>
<PAGE>
Presented below is certain information concerning the
nominee and directors continuing office. Unless otherwise
stated, all directors and the nominee have held the positions
indicated for at least the past five years.
J. ROY SHOFFNER is currently Chairman of the Board and
Chief Executive Officer of the Company and of Middlesboro
Federal, a position he has held since 1994. He is a graduate of
Lincoln Memorial University and a veteran USAF pilot of four
years. Mr. Shoffner owns and operates Shoffner Realty, a real
estate development company and also owns JRS Restaurant
Corporation. Mr. Shoffner is the past owner of a local plastic
pipe manufacturing company and is active in real estate and
business properties. Mr. Shoffner is the father of James J.
Shoffner.
ROBERT R. LONG currently serves as Vice Chairman of the
Board of Directors. He retired as regional manager of Sterchi
Brothers retail furniture chain in 1983. Mr. Long is a graduate
of Lincoln Memorial University and Northwestern University
Business School. He served in the U.S. Army Air Corps in World
War II as a B-24 Liberator Pilot.
JAMES J. SHOFFNER joined Middlesboro Federal in 1994 as
Vice President and Chief Operating Officer and became President
and Chief Managing Officer in March 1996. He also serves as
President of the Company. He also has served as President of
Home since 1996. Prior to joining the Bank as a full-time
officer, Mr. Shoffner was the General Manager of JRS Restaurant
Corporation, which operates four franchised restaurants in the
Middlesboro area. He graduated from Middlesboro High School and
attended the University of Kentucky. He is on the Board of
Directors of the Bell County Chamber of Commerce, the Bell
County Tourism Commission and is a Deacon in the First Baptist
Church of Middlesboro. Mr. Shoffner is a member of the
Middlesboro Kiwanis Club and serves on the Advisory Board to the
Debusk School of Business at Lincoln Memorial University. He
has also previously served on the Board of the Middlesboro YMCA
and as Chairman for the Bell County Chapter of the March of
Dimes. Mr. Shoffner continues to serve as Chairman and
President of JRS Restaurant Corporation. He has served on the
Board of Directors of Middlesboro Federal since June 6, 1988.
Mr. Shoffner is the son of J. Roy Shoffner.
REECIE STAGNOLIA, JR. is currently Vice President and the
Branch Manager and Loan Officer at the Cumberland Branch (Tri-
City Office), of Middlesboro Federal, a position he has held
since 1989. He previously worked for the Harlan County Board of
Education as a teacher, Assistant Principal and Principal,
Assistant Superintendent and Superintendent from 1962 to 1988.
He attended Cumberland College, University of Kentucky and
Eastern Kentucky University.
RAYMOND C. WALKER served as president of the Mutual Holding
Company's subsidiary, Home Loan Mortgage Corporation from
October, 1991 to October, 1996. He worked for the Middlesboro
Daily News as Advertising Director for 24 years, worked at
National Bank as Business Development Director for seven years
and served five years as manager of 120 units of the Section 8
Federally Funded Housing. Mr. Walker served as mayor of the
city of Middlesboro and served as Vice President and Treasurer
of the Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information including their ages
as of the Record Date with respect to executive officers of the
Company who do not serve on the Board of Directors. Executive
officers are appointed annually by the Board of Directors.
J. D. HOWARD, age 36, has been Vice President of the Bank
since July 1996 and was appointed Chief Financial Officer in
October 1996. He also serves as Secretary/Treasurer for the
Company. Prior to joining the Bank, Mr. Howard was an internal
auditor and compliance officer at Home Federal of Middlesboro
for two years. Prior to that he was Chief Financial Officer of
First Federal Savings Bank, Pineville, Kentucky for 11 years.
-4-
<PAGE>
DIANA MIRACLE, age 35, has been Vice President and Chief
Operating Officer of the Bank since October 1996. Mrs. Miracle
joined the Bank as a compliance officer in August 1995. Prior
to that time, she was employed at Security First Network Bank in
Pineville, Kentucky.
________________________________________________________________
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
________________________________________________________________
The business of the Company is conducted at regular and
special meetings of the full Board and its standing committees.
The standing committees consist of the Executive, Audit,
Compensation, Finance, Insurance, Investment and Loan
Committees.
During fiscal year 1997, the Board of Directors held 12
regular meetings and three special meetings called in accordance
with the bylaws. No director attended less than 75% of said
meetings and the meetings held by all committees of the Board of
Directors on which he served.
The Executive Committee is comprised of any three directors
with one senior officer. The Executive Committee reviews
management decisions during the intervals between the regular
monthly meetings of the Board of Directors and reports to the
full Board of Directors at the regular meetings. The Executive
Committee met 52 times during the fiscal year ended June 30,
1997.
The Audit Committee consists of Directors J. Roy Shoffner
and Raymond C. Walker. This committee regularly meets on a
quarterly basis with the internal auditor to review audit
programs and the results of audits of specific areas as well as
other regulatory compliance issues. In addition, the Audit
Committee meets with the independent certified public
accountants to review the results of the annual audit and other
related matters. The Audit Committee met four times during the
fiscal year ended June 30, 1997.
The Compensation Committee is comprised of any three non-
employee directors and one senior officer who does not
participate in deliberations regarding his compensation. The
Compensation Committee annually reviews the compensation of the
officers of the Bank and makes recommendations to the Board of
Directors. The Committee reports to the full Board of Directors
at the regular meetings. The Compensation Committee met four
times during the fiscal year ended June 30, 1997.
The Investment Committee consists of Directors Robert R.
Long, James J. Shoffner and J. Roy Shoffner and meets at least
quarterly. The Investment Committee is charged with oversight
responsibilities of the Bank's investment policies. The
committee met four times during the fiscal year ended June 30,
1997.
The Loan Committee is made up of any two directors and one
senior officer. The committee meets weekly to review and ratify
management's approval of loans made within the scope of its
authority since the last committee meeting and approve mortgage
loans up to $250,000. The committee also approves consumer and
business loans up to $5,000. The Loan Committee met 104 times
during the fiscal year ended June 30, 1997.
Under the Company's Bylaws, the Board of Directors serves
as a nominating committee for selecting management's nominees
for election as directors. While the Board of Directors will
consider nominees recommended by stockholders, it has not
established any procedures for this purpose. The Board of
Directors met twice in its capacity as the nominating committee
during the fiscal year ended June 30, 1997.
-5-<PAGE>
<PAGE>
________________________________________________________________
DIRECTOR COMPENSATION
________________________________________________________________
DIRECTOR FEES. The members of the Board of Directors
receive $800 for regular monthly Board meetings and committee
meetings attended and $100 for each special meeting attended.
The Chairman receives $850 monthly for regularly scheduled Board
meetings and committee meetings and $125 for special meetings.
Each non-employee director is entitled to receive options to
purchase 100 shares of Common Stock at its then-current fair
market value upon joining the Board of Directors.
DIRECTOR RETIREMENT PLAN. The Bank has adopted the
Middlesboro Federal Bank, Federal Savings Bank Retirement Plan
for Non-Employee Directors (the "Directors' Plan") pursuant to
which non-employee directors of the Bank are entitled to
receive, upon retirement, 60 monthly payments in the amount of
75% of the average monthly fees that the respective director
received for service on the Board during the 12-month period
preceding termination of service on the Board, subject to a 20
year vesting schedule. In connection with the adoption of the
Directors' Plan, the Bank incurred an expense of $169,061 which
was recognized during the fiscal year 1997.
In fiscal year 1997, the Bank's Board converted the
Directors' Plan from a defined benefit type of plan to a defined
contribution type. Under the Directors' Plan, as amended, a
bookkeeping account in each participants' name is credited, on
an annual basis with an amount equal to the sum of the accrual
attributable to the participant equal to the investment return
which would have resulted if such deferred amounts had been
invested in either Common Stock or the Bank's highest annual
rate of interest on certificates of deposit having a one-year
term.
Each participant's account has been credited with an amount
equal to the present value of the benefits in which the
participant has a fully vested interest before its amendment.
This amount was determined based on the participant's years of
service and 75% of average fees paid to directors in the year
prior to the participant's retirement. In addition, beginning
July 1, 1996, each participant's account is credited with $1,516
for each year of service until a maximum of 20 years worth of
credits is reached, including past service credits. Benefits
are payable from the Bank's general assets, although the Bank
may establish a grantor trust that will purchase Common Stock
that will be held to help the Bank meet its liabilities
associated with the Directors' Plan.
Upon a "Change in Control" the present value of each
participant's benefits will become payable in one lump-sum
payment within ten days. "Change in Control" generally refers to
(a) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Bank or the Company
representing twenty percent (20%) or more of the combined voting
power of the Bank's or the Company's outstanding securities
except for any securities of the Bank purchased by the Bank's
employee stock ownership plan and trust; or (b) individuals who
constitute the Board of the Bank or the board of directors of
the Company on the date hereof ("Incumbent Board") cease for any
reason to constitute at least a majority thereof; provided that
any person becoming a director subsequent to the date hereof
whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose
nomination for election by the Company's stockholders was
approved by the same nominating committee serving under an
Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or
(c) the occurrence of a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of
the Bank or the Company or similar transaction in which the Bank
or the Company is not the resulting entity. A Change in Control
will not occur as the result of acquisitions of Common Stock by
Messrs. J. Roy Shoffner and James J. Shoffner.
-6-<PAGE>
<PAGE>
________________________________________________________________
EXECUTIVE COMPENSATION AND OTHER BENEFITS
________________________________________________________________
Summary Compensation Table. The following table sets forth
the cash and noncash compensation for each of the last three
fiscal years awarded to or earned by the Chief Executive Officer
who receives no compensation other than his fees as director and
chairman. No executive officer of the Company earned a salary
and bonus during fiscal year 1997 exceeding $100,000 for
services rendered in all capacities to the Bank.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Annual Compensation -----------------------
Name and ------------------------------- Restricted Securities
Principal Fiscal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Award(s) Options Compensation(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Roy Shoffner 1997 $13,000 (2) $ -- $ -- $ -- $ -- $ 11,425
Chairman 1996 -- -- -- -- -- 10,200
1995 -- -- -- 2,336 (3) 2,120
<FN>
___________
(1) Consists of director's fees.
(2) Mr. Shoffner began receiving a salary from the Company in the fourth quarter of fiscal year 1997.
(3) Consists of 200 shares of restricted stock granted under the Bank's 1993 MRP with a fair market value
of $11.68 per share at the date of grant.
</FN>
</TABLE>
OPTION YEAR-END VALUE TABLE. The following table sets
forth information concerning the value of options held by the
Chief Executive Officer at June 30, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End (1)
-------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. Roy Shoffner 2,826 -- $18,369 $ --
<FN>
____________
(1) Based on aggregate fair market value of the shares of Common Stock
underlying the options at June 30, 1997 less aggregate exercise price.
For purposes of this calculation, the fair market value of the Common
Stock at June 30, 1997 is assumed to be equal to the last known sale
price of $14.00 per share. All options granted to Mr. Shoffner were
granted at an adjusted exercise price of $7.50 per share.
</FN>
</TABLE>
________________________________________________________________
CERTAIN TRANSACTIONS
________________________________________________________________
During the fiscal year ended June 30, 1997, certain loans
made by the Bank were outstanding in an amount exceeding $60,000
to certain directors and executive officers and associates of
directors and executive officers. All of such loans were made
in the ordinary course of business, were made on substantially
the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of
collectibility or present other unfavorable features.
-7-
<PAGE>
<PAGE>
________________________________________________________________
PROPOSAL II -- RATIFICATION OF APPOINTMENT OF AUDITORS
________________________________________________________________
Marr, Miller & Myers, PSC, which was the Company's
independent certified public accounting firm for the 1997 fiscal
year, has been retained by the Board of Directors to be the
Company's auditors for the 1998 fiscal year, subject to
ratification by the Company's stockholders. A representative of
Marr, Miller & Myers, PSC is expected to be present at the
Annual Meeting to respond to stockholders' questions and will
have the opportunity to make a statement if he so desires. The
Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of Marr, Miller & Myers, PSC as
the Company's auditors for the 1998 fiscal year.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described
above in this Proxy Statement and matters incident to the
conduct of the Annual Meeting. If any other matters should pro-
perly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect
thereof in accordance with the determination of a majority of
the Board of Directors.
________________________________________________________________
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the Exchange Act,
the Company's officers, directors and persons who own more than
ten percent of the outstanding Common Stock are required to file
reports detailing their ownership and changes of ownership in
such Common Stock, and to furnish the Company with copies of all
such reports. Based on the Company's review of such reports
which the Company received during the last fiscal year, or
written representations from such persons that no annual report
of change in beneficial ownership was required, the Company
believes that, during the last fiscal year, all persons subject
to such reporting requirements have complied with the reporting
requirements, with the exception of Diana Miracle who failed to
report one transaction on her Initial Statement of Beneficial
Ownership.
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of soliciting proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may
solicit proxies personally or by telegraph or telephone without
additional compensation.
The Company's 1997 Annual Report to Stockholders, including
financial statements, has been mailed to all stockholders of
record as of the close of business on the Record Date. Any
stockholder who has not received a copy of such Annual Report
may obtain a copy by writing to the Secretary of the Company.
Such Annual Report is not to be treated as a part of the proxy
solicitation material or as having been incorporated herein by
reference.
-8-<PAGE>
<PAGE>
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
In order to be eligible for inclusion in the Company's
proxy materials for next year's Annual Meeting of Stockholders,
any stockholder proposal to take action at such meeting must be
received at the Company's executive office at 1431 Cumberland
Avenue, Middlesboro, Kentucky 40961 no later than May 22, 1998.
Any such proposals shall be subject to the requirements of the
proxy rules adopted by the Securities and Exchange Commission
under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J.D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 19, 1997
________________________________________________________________
FORM 10-KSB
________________________________________________________________
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR
ENDED JUNE 30, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS
OF THE RECORD DATE UPON WRITTEN REQUEST TO THE STOCKHOLDER
RELATIONS, CUMBERLAND MOUNTAIN BANCSHARES, INC., 1431 CUMBERLAND
AVENUE, MIDDLESBORO, KENTUCKY 40961.
________________________________________________________________
-9-<PAGE>
<PAGE>
REVOCABLE PROXY
CUMBERLAND MOUNTAIN BANCSHARES, INC.
___________________________________
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 15, 1997
___________________________________
The undersigned hereby appoints James J. Shoffner, Reecie
Stagnolia, Jr. and Raymond C. Walker, with full powers of
substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of Common Stock of Cumberland
Mountain Bancshares, Inc. (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Stockholders (the
"Annual Meeting"), to be held at the main office of Middlesboro
Federal Bank, Federal Savings Bank, 1431 Cumberland Avenue,
Middlesboro, Kentucky on Wednesday, October 15, 1997 at 3:00
p.m., Eastern Time, and at any and all adjournments thereof, as
indicated below and in accordance with the determination of a
majority of the Board of Directors with respect to other matters
which come before the Annual Meeting.
VOTE
FOR WITHHELD
--- --------
1. The election as director of the
nominee listed below (except as
marked to the contrary below). [ ] [ ]
J. Roy Shoffner
Robert R. Long
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL
NOMINEE, INSERT THAT NOMINEE'S NAME ON THE LINE PROVIDED
BELOW.
__________________________
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. Ratification of the appointment of
Marr, Miller & Myers, PSC as auditors for
the 1998 fiscal year. [ ] [ ] [ ]
</TABLE>
The Board of Directors recommends a vote "FOR" each of the
listed propositions.
________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES AND FOR
EACH OF THE OTHER PROPOSALS LISTED ABOVE. IF ANY OTHER BUSINESS
IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE DETERMINATION
OF A MAJORITY OF THE BOARD OF DIRECTORS. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND
MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
________________________________________________________________
<PAGE>
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Annual Meeting or at any adjournment thereof and after notifica-
tion to the Secretary of the Company at the Annual Meeting of
the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given with respect to the
shares of Common Stock held of record by the undersigned.
The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Annual Meeting,
the Company's Proxy Statement for the Annual Meeting and an
Annual Report for the 1997 fiscal year.
Dated: _______________________, 1997
__________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in
which this card was mailed. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
Please check here if
you plan to attend
the Annual Meeting [ ]
________________________________________________________________
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
________________________________________________________________
