SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
_ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____________ to ____________
Commission file number 0-18488
FIRST CHEROKEE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1807887
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9860 Highway 92, Woodstock, Georgia 30188
(Address of principal executive offices)
770-591-9000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
X Yes No
The number of shares outstanding of registrant's common stock par value $1.00
per share at March 31, 1999 was 553,804 shares.
Traditional Small Business Disclosure Format (check one): ___ Yes X No
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Balance Sheet
March 31, 1999
(Unaudited)
Assets
Cash & due from banks, including $6,801,818
bearing interest $10,191,216
Federal funds sold 1,950,000
---------
Total cash & cash equivalents 12,141,216
Investment securities available for sale, at fair value 537,060
Loans, less allowance for loan losses
of $1,599,348 92,421,413
Premises and equipment, net 3,968,170
Accrued interest receivable and other assets 6,070,635
---------
Total Assets $115,138,494
============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Interest-bearing deposits $90,885,865
Noninterest-bearing deposits 15,249,596
----------
Total deposits 106,135,461
Accrued interest payable and other liabilities 1,467,503
---------
Total Liabilities 107,602,964
Stockholders' Equity:
Common stock ($1 par value; 10,000,000
shares authorized, 591,544 shares issued) 591,544
Additional paid-in-capital 5,273,257
Retained earnings 2,272,397
Treasury Stock (37,740 shares acquired
at cost) (602,716)
Accumulated other comprehensive
income, net of tax 1,048
-----
Total Stockholders' Equity 7,535,530
---------
Total Liabilities and Stockholders' Equity $115,138,494
============
See notes to consolidated financial statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Earnings
For the three months ended March 31,
(Unaudited)
Interest income: 1999 1998
---- ----
Interest and fees on loans $2,237,192 $1,860,630
Interest on investment securities 11,116 12,166
Interest on federal funds sold/overnight funds 121,944 44,516
-------- ------
Total interest income 2,370,252 1,917,312
Interest expense on deposits 1,176,675 936,027
---------- -------
Net interest income 1,193,577 981,285
Provision for loan losses 83,368 50,590
------- ------
Net interest income after provision
for loan losses 1,110,209 930,695
---------- -------
Other income:
Gain on sales of loans 251,192 175,230
Service charges on deposit accounts
and other income 285,568 263,189
-------- -------
Total other income 536,760 438,419
-------- -------
Other expense:
Salaries and employee benefits 764,620 580,333
Occupancy 206,552 135,516
Other operating expense 478,350 370,758
-------- -------
Total other expense 1,449,522 1,086,607
---------- ---------
Earnings before income taxes 197,447 282,507
Income Tax expense 79,080 106,800
------- -------
Net earnings $118,367 $175,707
========= ========
Basic earnings per share $0.21 $0.30
====== =====
Diluted earnings per share $0.18 $0.26
====== =====
See notes to consolidated financial statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the three months ended March 31,
(Unaudited)
1999 1998
---- ----
Net earnings $118,367 $175,707
Other comprehensive income, net of tax:
Unrealized gains on securities available for sale:
Unrealized gain (loss) arising during the period, net
of tax of $735 and $105, respectively (1,185) 172
------ ---
Other comprehensive income (1,185) 172
------ ---
Comprehensive income $117,182 $175,879
======== ========
See Notes to Consolidated Financial Statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Cash Flows
For the three months ended March 31,
(Unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net earnings $118,367 $175,707
Adjustments to reconcile net earnings to net cash
provided (used) in operating activities:
Depreciation, amortization and accretion 71,930 35,341
Provision for loan losses 83,368 50,590
Change in accrued interest payable and
other liabilities 54,135 (1,352,283)
Change in accrued interest receivable and
other assets (656,261) (539,834)
--------- ---------
Total adjustments (446,828) (1,806,186)
--------- -----------
Net Cash used by operating activities (328,461) (1,630,479)
Cash flows from investing activities:
Purchases of investment securities 0 (500,000)
Proceeds from maturities and calls of investment 13,122 510,076
securities available for sale
Net change in loans (7,332,878) (894,215)
Purchases of premises and equipment (267,967) (332,899)
--------- ---------
Net Cash used by investing activities (7,587,723) (1,217,038)
Cash flows from financing activities:
Net change in deposits 4,737,664 3,928,817
--------- ---------
Net Cash provided by financing activities 4,737,664 3,928,817
Net change in cash and cash equivalents (3,178,520) 1,081,300
Beginning cash and cash equivalents 15,319,736 5,832,924
----------- ---------
Ending cash and cash equivalents $12,141,216 $6,914,224
=========== ==========
Noncash investing activities:
Change in accumulated other comprehensive
income, net of tax ($1,185) $172
Transfer of loans to other real estate $0 $100,112
Supplemental disclosure of cash flow information:
Interest Paid $1,184,408 $948,833
Income Taxes Paid $0 $0
See notes to consolidated financial statements
<PAGE>
FIRST CHEROKEE BANCSHARES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE (1) - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of First Cherokee
Bancshares, Inc. (the "Company") and its wholly-owned subsidiary, First National
Bank of Cherokee (the "Bank"). All significant accounts have been eliminated in
consolidation. Certain prior period amounts have been reclassified to conform
with current year presentation.
The accompanying unaudited interim consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the Company's financial position as of March 31, 1999, and the results of its
operations and its cash flows for the three-month period then ended. All such
adjustments are normal and recurring in nature. The financial statements
included herein should be read in conjunction with the consolidated financial
statements and the related notes and the report of independent accountants
included in the Company's 1998 Annual Report on Form 10-KSB.
NOTE (2) - NET EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per share.
The average market price during the year is used to compute equivalent shares.
All net earnings per share amounts have been restated to conform to the
provisions of SFAS No. 128.
Reconciliation of the amounts used in the computation of both "basic earnings
per share" and "diluted earnings per share" for the periods ended March 31, 1999
and 1998 are as follows:
For the three months ended March 31, 1999:
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
-----------------------------------------
Basic earnings per share $118,367 553,804 $0.21
Effect of dilutive securities
Stock options 0 13,943
Warrants 0 83,805
- ------
Diluted earnings per share $118,367 651,552 $0.18
======== ======= =====
For the three months ended March 31, 1998
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share $175,707 582,304 $0.30
Effect of dilutive securities
Stock options 0 11,506
Warrants 0 78,454
-- ------
Diluted earnings per share $175,707 672,264 $0.26
======== ======= =====
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
FORWARD LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-QSB and the
exhibits hereto which are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act (the "Act"). In addition, certain statements in future
filings by the Company with the Securities and Exchange Commission, in press
releases, and in oral and written statements made by or with the approval of the
Company which are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking statements
include, but are not limited to:
(1) projections of revenues, income or loss,earnings or loss per share, the
payment or non-payment of dividends, capital structure and other financial
items;
(2) statements of plans and objectives of the Company or its management or Board
of Directors, including those relating to products or services;
(3) statements of future economic performance; and
(4) statements of assumptions underlying such statements.
Words such as "believes,""anticipates," "expects," "intends," "targeted," and
similar expressions areintended to identify forward-looking statements but are
not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Facts that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to:
(1) the strength of the U.S. economy in general and the strength of the local
economies in which operations are conducted;
(2) the effects of and changes in trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System;
(3) inflation, interest rate, market and monetary fluctuations;
(4) the timely development of and acceptance of new products and services and
perceived overall value of these products and services by users;
(5) changes in consumer spending, borrowing and saving habits;
(6) technological changes;
(7) acquisitions;
(8) the ability to increase market share and control expenses;
(9) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance) with which
the Company and its subsidiary must comply;
(10)the effect of changes in accounting policies and practices, as may be
adopted by the regulatory agencies as well as the Financial Accounting
Standards Board;
(11)changes in the Company's organization, compensation and benefit plans;
(12)the costs and effects of litigation and of unexpected or adverse outcomes
in such litigation; and
(13)the success of the Company at managing the risks involved in the foregoing.
Forward-looking statements speak only as of the date on which they are made, and
the Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which a statement is made to
reflect the occurrence of unanticipated events.
<PAGE>
The following narrative should be read in conjunction with the Company's
consolidated financial statements and the notes thereto.
FINANCIAL CONDITION
Total assets as of March 31, 1999 were $115.1 million compared to $110.2 million
as of December 31, 1998. Assets of the Company increased approximately $4.9
million during the first quarter of 1999 as compared to an increase of
approximately $2.8 million during the first quarter of 1998. This growth is due
to normal business transactions.
Loans increased from $72.4 million at March 31, 1998 to $85.2 million at
December 31, 1998 and $92.4 million at March 31, 1999. Management anticipates
loan production will continue to increase during the remainder of the year. The
following table presents major classifications of loans at March 31, 1999:
% of
Total
Total Loan
Loans Portfolio
Commercial $ 7,424,293 7.90%
SBA - unguaranteed 24,151,611 25.69%
Real estate - mortgage 39,755,588 42.28%
Real estate - construction 16,673,911 17.73%
Installment and other consumer 6,015,358 6.40%
------------- -----
Total loans 94,020,761 100.00%
=======
Less: Allowance for loan losses (1,599,348)
-----------
Total net loans $92,421,413
===========
Net premises and equipment were $4.0 million at March 31, 1999 compared to $3.8
million at December 31, 1998. Other assets increased from $5.4 million as of
December 31, 1998 to $6.0 million as of March 31, 1999. The increase is
primarily attributable to the investment in life insurance benefits for certain
officers of the Bank.
Total deposits were $106.1 million at March 31, 1999 compared to $101.4 million
at December 31, 1998. As of March 31, 1999, interest-bearing deposits and non
interest-bearing deposits were $90.9 million and $15.2 million, respectively. As
of December 31, 1998, interest-bearing deposits and non interest-bearing
deposits were $86.5 million and $14.9 million respectively.
A provision of $83,368 was added to the allowance for loan losses during the
first quarter of 1999. The provision is primarily attributable to the increased
level of loans at March 31, 1999 compared to prior periods. The allowance had a
balance of $1,599,348 at March 31, 1999, representing 1.70% of loans. Chargeoffs
were $1,953 while recoveries were $1,228 resulting in net chargeoffs of $725
during the first three months of 1999. Management believes this allowance is
adequate to cover possible loan losses. The following table presents the
activity in the allowance for the first quarter of 1999. At March 31, 1999,
management determined that eight loans required specific reserves totaling
$465,637. For allocation purposes, the Y2K risk factor identified by management
is considered unallocated. The remaining allowance is allocated among the loan
categories based on the relative percentage of the particular category to total
loans and not according to risk.
FIRST CHEROKEE BANCSHARES, INC.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
Balance, December 31, 1998 $1,516,705
Chargeoffs (1,953)
Recoveries 1,228
Provision for Loan Losses 83,368
------
Balance, March 31, 1999 $1,599,348
==========
<PAGE>
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
At March 31, 1999, the Bank had twenty-one loans (made to thirteen borrowers)
classified as nonaccrual totaling $1,351,106, all of which are secured by real
estate, vehicles, equipment or inventory. The Bank's impaired loans consist of
these nonaccrual loans that are either greater than 90 days delinquent as of
March 31, 1999 or are classified as nonaccrual by management because the
collection of interest from the borrower is doubtful. Specific reserves totaling
$465,637 have been allocated on certain nonaccrual loans considered impaired.
Interest income from impaired loans is recognized using a cash basis method of
accounting for the time period during which the loans were impaired.If interest
income on the total nonaccrual loans had been accrued, such income would have
approximated $153,235 as of March 31, 1999. Interest income on such loans,
recorded only when received, was approximately $15,474 for the first three
months of 1999. As of March 31, 1999, the Bank had one property classified as
Other Real Estate Owned, totaling $27,652. The ratio of loans past due 30 days
or more to total loans was 1.97% at March 31, 1999 compared to 1.61% at December
31, 1998. There were no loans past due greater than 90 days that were on accrual
status as of March 31, 1999 compared to one loan totaling $35,466 as of December
31, 1998. There were no restructured loans as of March 31, 1999 or
December 31, 1998.
LIQUIDITY
The Company's primary sources of funds are increases in deposits, loan
repayments, and sales and maturities of investments. Liquidity refers to the
ability of the Company to meet its cash flow requirements and fund its
commitments. The Company manages the levels, types, and maturities of earning
assets in relation to the sources available to fund current and future needs to
ensure that adequate funding will be available at all times. The Company
monitors its compliance with regulatory liquidity requirements and anticipates
that funding requirements will be satisfactorily met.
CAPITAL RESOURCES
At March 31, 1999, consolidated stockholders' equity was $7,535,530 or 6.54% of
total assets compared to $7,239,778 or 8.01% of total assets at March 31, 1998.
The Company's common stock had a book value of $13.61 per share at March 31,
1999 compared to a book value of $12.43 per share at March 31, 1998. At the end
of the first quarter of 1999, the Company had approximately 500 stockholders of
record.
The Bank and the Company are subject to the capital requirements of the Office
of the Comptroller of the Currency ("OCC") and the Federal Reserve Bank (the
"FRB"), respectively. The OCC and FRB have adopted risk-based capital guidelines
for all national banks and bank holding companies, respectively. To be
"adequately capitalized," all national banks are expected to maintain a minimum
ratio of total capital (after deductions) to risk-weighted assets of 8% (of
which at least 4% must consist of Tier 1 Capital, as defined).
The following table sets forth information with respect to the risk-based and
leverage ratios for the Company and Bank at March 31, 1999 and 1998 compared to
minimum ratios required by regulation.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount Ratio Amount Ratio Amount Ratio
As of March 31, 1999:
Total Capital (to Risk-Weighted Assets)
Consolidated $8,608 9.18% 7,498 8.00% 9,373 10.00%
Bank $9,146 9.76% 7,498 8.00% 9,373 10.00%
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $7,431 7.93% 3,749 4.00% 5,624 6.00%
Bank $7,969 8.50% 3,749 4.00% 5,624 6.00%
Tier 1 Capital (to Average Assets)
Consolidated $7,431 6.50% 4,570 4.00% 5,712 5.00%
Bank $7,969 6.98% 4,570 4.00% 5,712 5.00%
As of March 31, 1998:
Total Capital (to Risk-Weighted Assets)
Consolidated $7,689 10.33% 5,952 8.00% 7,444 10.00%
Bank $7,701 10.35% 5,952 8.00% 7,444 10.00%
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $6,756 9.08% 2,952 4.00% 4,466 6.00%
Bank $6,768 9.17% 2,952 4.00% 4,466 6.00%
Tier 1 Capital (to Average Assets)
Consolidated $6,756 7.64% 3,534 4.00% 4,420 5.00%
Bank $6,768 7.66% 3,534 4.00% 4,420 5.00%
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
The Company recognized earnings of $118,367 for the first quarter of 1999. In
comparison, net earnings for the first quarter of 1998 were $175,707.
Net interest income for the first three months of 1999 was $1,193,577 as
compared to $981,285 for the first three months of 1998. The average yield on
earning assets for the first quarter of 1999 decreased to 9.51% as compared to
10.29% for the first quarter of 1998. The decrease is primarily due to the
decrease in the prime lending rate. The average cost of funds on
interest-bearing deposits decreased for the first three months of 1999 to 5.21%,
as compared to 5.44% for the first three months of 1998. The improvement is
primarily a result of the Bank's on-going effort to restructure the deposit base
from higher rate institutional certificates of deposit to core deposits.
Consequently, the net interest spread for the first three months of 1999
decreased to 4.30% compared to 4.85% for the first three months of 1998. The net
interest spread is expected to remain stable for the remainder of the year.
Total other income for the first quarter of 1999 was $536,760 compared to
$438,419 for the first quarter of 1998. This increase is primarily due to
increased volume in loan sales.
The annualized ratio of operating expenses to average assets increased to 5.07%
for the first three months of 1999 from 4.89% for the first three months of
1998. The increase in the number of personnel, primarily due to the addition of
a third branch, and routine performance-based raises accounted for the increase.
<PAGE>
Year 2000
The Company recognizes the operational risk from technology as the Year 2000
("Y2k") approaches. The Company has established an internal committee to
identify and address how the century change may affect its operations. A Y2k
Plan has been approved by the Board of Directors detailing the steps the
committee plans to take to comply with regulatory directives. The Company has
developed a tracking report which identifies and monitors the areas that the
century change is expected to impact, including the Company's data processor,
its computer hardware and software, its telephone system, etc. The tracking
report also documents whether the area is "mission-critical", the individual
responsible for confirming compliance, and testing dates. The Y2k Plan also
addresses the potential risk to the Company from the impact of Y2k on Company
customers.
The Company has identified the two most mission-critical information technology
areas to be (1) the core processing system for loans, deposits, and general
ledger, and (2) the wide area computer network. The existing core processing
system was successfully tested by proxy in May 1998 and October 1998 and
directly by the Company in August 1998. The wide area network has been tested
successfully on two occasions, in July 1998 and August 1998, by the Company in a
simulated Y2k environment. Additionally, independent testing by consultants has
been performed.
The Company has identified the most significant non-information technology areas
to be liquidity, customer impact including potential loan losses, and loss of
power, telephone, and water. While the Company currently has a liquidity
contingency plan, management will amend this plan in the future to address Y2k
issues specifically. The Company has established a methodology for defining Y2k
risk in the loan portfolio, including assessing the specific risk of each
commercial customer with total debt in excess of $100,000. Currently, the
allowance for loan losses includes a factor of approximately $46,000. This
factor will be adjusted as necessary as information on the risk assessment of
specific loans is completed. Y2k risk from deposit customers has been determined
to be minimal and will be considered in the liquidity contingency plan. The
Company has received written documentation from its local power, telephone and
water companies assuring successful transition to the Year 2000.
The Company has identified third-parties with which it has a significant
relationship to include its core processor and its correspondent bank. The core
processing system has been successfully tested by proxy and directly by the
Company. The Company's correspondent bank reports that its organization expects
to achieve full Year 2000 compliance by July 1999.
The Company incurred approximately $50,000 in 1998 and has budgeted $50,000 in
1999 for Y2k issues. Based on information currently available, management does
not believe that the Company will incur significant additional costs in
connection with the Y2k issue. Nevertheless, there can be no assurance that all
hardware and software that the Company uses will be Y2k compliant, and the
Company cannot predict with any certainty the costs the Company will incur to
respond to any Y2k issues. Further, the business of the Company's customers and
vendors may be negatively affected by the Y2k issue, and any financial
difficulties incurred by the Company's customers and vendors in solving Y2k
issues could negatively affect their ability to perform their agreements with
the Company. Therefore, even if the Company does not incur additional
significant direct costs in connection with responding to the Y2k issue, there
can be no assurance that the failure or delay of the Company's customers,
vendors, or other third parties in addressing the Y2k issue or the costs
involved in such process will not have a material adverse effect on the
Company's business, financial condition and results of operations.
As a result of the successful completion of the majority of Y2k testing, the
Company believes the risk from areas under its control to be minimal. While the
worst case scenario could include a loss of power and/or loss of communications
with its core processor, the Company is reasonably assured that this will not
occur. The Company's contingency plan, to be completed and adopted shortly, will
address these potential issues.
The Company has decided to change core processors in order to improve
efficiencies from new technology. The decision to change is not associated with
Y2k issues. After extensive investigation, the Company has chosen a new
third-party vendor and anticipates that the conversion will occur during the
second quarter of 1999. The new vendor has represented to the Company that it
complies with Y2k regulatory requirements. The Company will perform required Y2k
testing on the new system during the conversion period and immediately
thereafter and anticipates continued compliance.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Bank was a named Defendant in an Amended and Consolidated Bankruptcy
Adversary Proceeding in the United States Bankruptcy Court, Northern District of
Georgia, Atlanta Division, styled as follows: Issac LeaseCo, Inc. v. L. C. Smith
Sales and Leasing, Inc., James W. Ballew, Lewis C. Smith, Ford Motor Credit, and
First National Bank of Cherokee, USBR Northern District of Georgia Case Number:
96-6734. Issac LeaseCo, Inc. was an automobile wholesaler that did business with
a customer of the Bank, L. C. Smith Sales and Leasing, Inc. ("Sales and
Leasing"). Among other lending to Sales and Leasing and its Principals, the Bank
had a secured floor plan lending arrangement for the financing of Sales and
Leasing automobile inventory. The Consolidated Adversary Proceeding claims that
Issac LeaseCo, Inc. was defrauded by Sales and Leasing and its Principals. The
Bank is named in the litigation to establish the relevant lien rights on
inventory supplied to Sales and Leasing through various arrangements with Issac
LeaseCo, Inc. The Trustee also seeks to impose a Bankruptcy Code preference
and/or State law constructive trust on proceeds that may have been received by
the Bank. The Bank denied that any amounts were received by the Bank from the
customers involved other than for loan payments, standard bank charges, or in
payment for floor plan lending from the Bank.
During the first quarter of 1999, a settlement of this litigation relieving the
Bank of related liability was agreed to by all parties. The Bank's cost for the
settlement of $100,000 was paid in April 1999. It is anticipated that the
settlement cost will be recoverable by the Bank's bond company.
Apart from the foregoing, neither the Company nor the Bank is a party to any
pending legal proceedings which management believes would have a material effect
upon the operations or financial condition of the Company or the Bank.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.1(1) Articles of Incorporation
3.2(2) Bylaws, as amended through March 29, 1994
10.1(3)(4) Employment Agreement (Carl Hames) dated May 11, 1995
10.2(1) Form of Organizers' Stock Warrant Agreement
10.3(1) Agreement for Lease/Purchase of Real Property for Bank Premises
10.4(1)(3) Form of Key Employee Stock Option Plan
10.5(3)(5) Form of Incentive Stock Option Certificate to Purchase Stock of First Cherokee Bancshares, Inc.,
issued under the Key Employee Stock Option Plan effective October 13, 1998
10.6(3)(5) Form of Directors' Non-qualified Stock Option Agreement
27 Financial Data Schedule (for SEC use only) for quarter ended March 31, 1999
- ------------------------
<PAGE>
(1) Incorporated herein by reference to Exhibit of the same
number in the Company's Registration Statement No.
33-25075-A.
(2) Incorporated herein by reference to Exhibit of the same
number in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1994.
(3) The indicated exhibits are management contracts or
compensatory plans or arrangements required to be filed or
incorporated by reference herein.
(4) Incorporated herein by reference to Exhibit of the same
number in the Company's Form 10-QSB for the period ended June
30, 1995.
(5) Incorporated herein by reference to Exhibit of the same
number in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1998.
</TABLE>
b. The Company has not filed any reports on Form 8-K during the three
months ended March 31, 1999.
Item 7. Signatures - attached
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST CHEROKEE BANCSHARES, INC.
(Registrant)
DATE: May 12, 1999 BY: /s/Carl C. Hames, Jr.
------------ ----------------------
Carl C. Hames, Jr.
President & CEO/Principal
Executive Officer
DATE: May 12, 1999 BY: /s/Kitty A. Kendrick
------------ ----------------------
Kitty A. Kendrick
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,389,398
<INT-BEARING-DEPOSITS> 6,801,818
<FED-FUNDS-SOLD> 1,950,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 537,060
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
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<ALLOWANCE> 1,599,348
<TOTAL-ASSETS> 115,138,494
<DEPOSITS> 106,135,461
<SHORT-TERM> 1,467,503
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 591,544
<OTHER-SE> 6,943,986
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<INTEREST-LOAN> 2,237,192
<INTEREST-INVEST> 11,116
<INTEREST-OTHER> 121,944
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<INTEREST-DEPOSIT> 1,176,675
<INTEREST-EXPENSE> 1,176,675
<INTEREST-INCOME-NET> 1,193,577
<LOAN-LOSSES> 83,368
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,449,522
<INCOME-PRETAX> 197,447
<INCOME-PRE-EXTRAORDINARY> 197,447
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118,367
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 9.51
<LOANS-NON> 1,351,106
<LOANS-PAST> 1,872,482
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<CHARGE-OFFS> 1,953
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<ALLOWANCE-CLOSE> 1,599,348
<ALLOWANCE-DOMESTIC> 1,599,348
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,553,137
</TABLE>
